Fitness financials: FY '08 sales drop for Accell's fitness division, plus Big 5, IHRSA Annual Financial Index, Sport Chalet, Sears, Winmark
FY '08 sales dropped for Accell's fitness division, Q4 profit for Big 5 was down 42 percent, Clubs showed improvement in FY '08, while Q4 profit dropped, Sport Chalet amended a loan agreement, Sears' Q4 profit plummetted more than 50 percent, and Winmark authorized a 500,000-share repurchase.
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FY ’08 sales drop for Accell’s fitness division
Accell Group N.V. said its full-year profit increased 17 percent at the upper end of its forecast on “a good fourth quarter.” While its bike sales were a shining star, the fitness segment, made up of Accell Fitness, Bremshey and Tunturi, took a sales hit.
Net profit for the company rose by 17 percent to EUR 28.6 million (USD $36.2 million) compared to EUR 24.4 million (USD $30.9 million) last year, translating into a 14 percent increase in earnings per share to EUR 2.95 (USD $3.73) over last year’s EUR 2.60 (USD $3.29).
Sales increased 13 percent to EUR 538.0 million (USD $681.7 million) versus 2007’s EUR 476.1 million (USD $603.3 million). The company said 8 percent was organic growth.
Operating costs fell as a percentage of sales to 28 percent versus 29.4 percent in 2007 on lowering personnel costs and relatively lower other operating costs.
Marketing costs were between 3 percent and 4 percent of turnover in 2008, just as in 2007. The operating result before depreciation and amortization (EBITDA) rose by 22 percent to EUR 55.3 million (USD $70.0 million) compared to EUR 45.3 million (USD $57.4 million) last year. Including goodwill impairment of the fitness division, the operating result (EBIT) came in at EUR 46.2 million (USD $58.5 million) versus 2007’s EUR 39.6 million (USD $50.1 million). In percent of sales (operating margin), the operating result rose to 8.6 percent compared to 8.3 percent.
Sales for Accell’s bicycle division were up 16 percent on demand to EUR 498.6 million (USD $631.8 million) versus EUR 431.5 million (USD $546.8 million) last year, the company said.
Accell said a downturn could be felt in fitness equipment as the segment’s sales dropped to EUR 39.9 million (USD $50.5 million) for the year versus EUR 45.0 million (USD $57.0 million) in 2007. The segment represented 7 percent of the total sales of Accell Group.
The company said the final quarter was especially weak because of the rapid deterioration of the economic conditions, with sales experiencing a decline particularly in the UK and countries outside Europe.
The operational segment result for fitness was a loss of EUR 700,000 (USD $887,000 million) in 2008 versus 2007’s EUR 800,000 (USD $1.01 million), excluding restructuring costs and goodwill impairment. Accell said the results in fitness were affected by lower sales and by promotional sales at the end of the year.
Negative currency effects of approximately EUR 1.6 million (USD $2.0 million) also affected the decline in turnover. In 2008, approximately EUR 1.0 million (USD $1.2 million) was recorded as restructuring charges.
Accell said production was cut back in Estonia and purchasing is now fully concentrated in Asia. Also, R&D and purchasing activities in Finland were terminated, and were centralized at the head office in the Netherlands. The sales offices and warehouses in Germany, Switzerland and Austria were closed and stock management was transferred to the local distributors. These markets are now managed centrally from the Netherlands.
Because of redundancy, 25 jobs were cut. Apart from the head office in the Netherlands, Accell said the fitness division still has sales outlets, including warehouses, in Finland, the United Kingdom and North America. It noted that a number of distributors are supplied directly from production locations.
In the short term, the company said the main effect of these measures will be a reduction of the working capital requirement of the fitness division (currently EUR 25 million — USD $31.6 million) for the group as a whole. Further measures will be taken for 2009 to improve both turnover and result. Down the line, it added that all strategic options will be considered.
(Conversion of Euros into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Feb. 27.)
Q4 profit for Big 5 down 42 percent
Big 5 Sporting Goods (Nasdaq: BGFV) said its fourth-quarter profit dropped 42 percent, and same-store sales dropped 8.6 percent during the quarter, as customer traffic fell amid a slowdown in consumer spending.
For the quarter ended Dec. 28, earnings fell to $3.6 million, or $0.17 per share, from $6.2 million, or $0.28 per share, a year ago. Net sales fell 5 percent to $219.6 million, from $232.1 million in the fourth quarter of 2007.
Selling and administrative expenses declined 4 percent to $64.3 million in the quarter. The company said it reduced its employee headcount by 9 percent last year through attrition.
For the full fiscal year, Big 5’s earnings dropped 51 percent to $13.9 million, or $0.64 per share, from $28.1 million, or $1.25 per share, in the prior year. Results for the most recent quarter included a one-time pretax charge of $0.04 per share to correct an error in rent expense.
Full-year net sales fell 4 percent to $864.7 million, from $898.3 million in fiscal 2007. Same-store sales dropped 7 percent.
Also, Big 5 cut its quarterly cash dividend to $0.05 per share for an annual rate of $0.20 per share. The company said it would use the capital to strengthen its balance sheet during the economic downturn.
Looking forward, the company said it would report earnings of $0.01 to $0.07 per share for the first quarter. It expects same-store sales to decline in the high-single digit percentage range.
Big 5 declined to offer guidance for the full year amid the recession.
Clubs show improvement in FY ’08, but Q4 posts drops across the board
Surveying 14 leading U.S. health and sports club companies — representing 183 facilities — the IHRSA 2008 Annual and Fourth Quarter Index found improvements in revenue, membership accounts and earnings on a year-over-year basis, but the fourth-quarter posted downturns in all categories.
Revenue from membership dues increased by 3.4 percent over 2007, while non-dues sales improved by 1.3 percent. Total membership accounts increased by 1.7 percent in 2008, while earnings before interest, taxes, depreciation, amortization and rent (EBITDAR) improved by 3.0 percent. Total revenue was up 0.7 percent, and revenue from same-store membership dues was up 2.9 percent.
“Despite a less-than-stellar performance in the third and fourth quarters of 2008, clubs were able to improve annual results in 2008 over 2007 due to strong performance during the first and second quarters of 2008,” said Katie Rollauer, IHRSA senior manager of research, in a statement.
For the fourth quarter, clubs in the IHRSA Index reported a 0.4 percent increase in total membership accounts over 2007. Total dues revenue dropped 0.7 percent, while total non-dues revenues were down by 5.6 percent. Total revenue was down 2.8 percent and same-store sales revenue was down 3.3 percent.
EBITDAR decreased by 1.6 percent in fourth quarter 2008 compared to 2007. IHRSA said the decrease indicated that clubs must continue to explore expense management options during the current economic climate.
Sport Chalet amends loan agreement
Sport Chalet (Nasdaq: SPCHA and SPCHB) changed its loan agreement to waive some covenants as it battles a difficult retail environment. In February, the company reported a fiscal third-quarter loss and said sales fell 10 percent.
Under terms of the amendment, Bank of America waived the company’s existing event of default and some potential defaults. The amount the company can borrow against its borrowing base under its credit facility has been lowered and the interest rate has increased. The seasonal revolver limits under the credit facility remain unchanged.
“The amended agreement is … more accommodating to our operations in this difficult environment and it will allow us to refocus our attention on improving our top line results, working with our vendors to procure and market compelling merchandise, and launching our sportchalet.com website,” said Craig Levra, chairman and CEO, in a statement.
Also in February, the company announced a strategic review process that was looking into raising additional capital or changing its credit facility, among other alternatives.
“We are also continuing to work closely with FTI Consulting who has played a key role in identifying opportunities to improve our operations by focusing on cost controls while maintaining the high levels of ‘expert’ service that our customers demand,” Levra added.
Sears’ Q4 profit plummets more than 50 percent
Fourth-quarter profit for Sears Holdings (Nasdaq: SHLD) was cut in half as charges weighed down results and shoppers continued to avoid buying pricey appliances.
For the quarter, overall sales fell 12 percent to $13.28 billion, while same-store sales sank 8.3 percent. Sears’ domestic same-store sales dropped 11 percent and Kmart’s same-store sales slipped 5 percent.
For the three months ending Jan. 31, it earned $190 million, or $1.55 per share — down from $426 million, or $3.17 per share, during the same period last year.
Excluding the impact of charges at its Orchard Supply Hardware subsidiary, severance and store closings as well as one-time gains, Sears Holdings earned $360 million, or $2.94 per share.
For the full year, Sears said, net income plunged 94 percent to $53 million, or $0.42 cents per share, from $826 million, or $5.70 per share, in the previous year. Revenue went down 8 percent to $46.77 billion. Same-store sales dropped 8 percent, while Sears domestic same-store sales fell 9.5 percent and Kmart same-store sales declined 6.1 percent.
“Many of our large businesses are highly related to the economy and to housing — appliances, tools, lawn and garden, electronics and fitness,” said Edward Lampert, chairman of Sears Holdings, in a statement. “They are not just economically related, but credit-related as well, as they are all big-ticket items that are typically purchased on credit. … When these sectors rebound, we expect our earnings to rebound as well.”
Winmark authorizes 500,000 share repurchase
The board of directors of Winmark Corp. (Nasdaq: WINA), parent of Play It Again Sports, has authorized the repurchase of 500,000 shares in addition to the 30,000 shares remaining under an existing board authorization. The new authorization is equal to approximately 9 percent of Winmark’s current shares outstanding.
–Compiled by Wendy Geister
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