Fitness financials: Hibbett Sports earnings down 21 percent, hits new two-year low, plus Nautilus, Dick's, Forzani, Crocs, Foot Locker

Hibbett Sports earnings down 21 percent, hits new two-year low

Third-quarter earnings for Hibbett Sports (Nasdaq: HIBB) dropped 21 percent with flat sales and higher operating and administrative costs.

For the quarter ended Nov. 3, profit was $7.8 million, or $0.25 per share, versus $9.9 million, or $0.31 per share, in the comparable period a year ago.

Sales were flat at $129.6 million. Same-store sales declined 6.6 percent from the comparable fiscal period a year ago.

Expenses related to store operations, selling and administrative costs increased 9 percent from the year-ago period to $26.9 million from $24.8 million.

Additionally, the company expects to report earnings between $0.36 and $0.44 per share during its 2008 fiscal fourth quarter, which ends Feb. 2, 2008. It also anticipates a mid-single digit increase same store sales in the fourth quarter compared with the similar quarter a year ago.

For fiscal 2008, Hibbett expects earnings to range between $1.07 and $1.15 per share.

Shares of Hibbett dropped to a two-year low on Nov. 21 after the disappointing profit forecast for its fiscal fourth quarter. Shares fell $1.47, or 6.9 percent, to $19.71 in midday trading, and fell as far as $18.69. That was the stock’s lowest price since May 2005. It closed the day at $19.80.

In a client note, CIBC World Markets analyst Vivian Ma, who downgraded shares to “Sector Performer” from “Sector Outperformer,” said that in addition to its disappointing older-store sales, Hibbett’s newer stores are becoming less productive.

Ma removed her price target of $27 per share, and trimmed her profit estimates for the fourth quarter and full year. She lowered her fourth quarter earnings per share estimate to $0.40 from $0.45 and her full year fiscal 2007 estimate to $1.11 from $1.17.

The analyst noted that Hibbett’s same-store results have been slowing for the last few years, and the company is having trouble attracting customers because of broader economic issues and a lack of hot new products.

Nautilus continues to seek shareholder support, appoints new executives

As a special shareholder meeting on Dec. 18 approaches, Nautilus continues to urge shareholders to vote in favor of its proposals rather than accepting those of Sherborne Investors LP, an investment firm that owns 7.4 million shares of Nautilus, and is looking to oust Nautilus CEO and snag multiple seats on the company’s board.

Nautilus said it has been working with Sherborne to come to a consensus on its requests. The company previously offered Sherborne board representation in proportion to Sherborne’s ownership in Nautilus, as well as representation on a new board committee, which would be formed to help oversee its turnaround efforts. Sherborne has turned the offers down, according to Nautilus.

In the most recent letter from Bob Falcone, president, CEO and chairman of Nautilus, to shareholders, he said: “Based upon the strategy previously outlined by Sherborne, giving Bramson and his nominees control of (the) Board could result in the reversal of many of the actions already undertaken by (the) Board and management to increase the value of your investment. In addition, approval of Sherborne’s proposals would leave control of (the) company in the hands of individuals with no apparent fitness industry experience and individuals who have not provided any new ideas that (the) Board believes would build shareholder value.”

Nautilus said if it is successful in preventing Sherborne from taking control of its board, it will offer board representation to both Sherborne and its next largest shareholder, Sun Capital Securities.”

Also, if Sherborne’s nominees are elected, Sherborne expects Nautilus to pay for the expenses it incurred for calling the special meeting — and Sherborne “does not intend to submit the question of such reimbursement to a vote of Nautilus’ security holders.”



In other company news: As part of its restructuring plan, Nautilus has appointed two marketing leaders and two general business managers. The new marketing appointments will help direct marketing for the company’s portfolio of fitness brands, including the company’s next generation of Bowflex direct response advertising.

James Heidenreich has joined the company as senior vice president, global marketing and chief marketing officer. Since 2004, he was vice president of marketing for Riddell Sports Group (renamed Easton-Bell Sports). The company also appointed Aaron Brotherton as director, direct response TV and creative development, beginning Dec. 10. Brotherton was vice president of creative development for Razor & Tie Entertainment in New York.

The company also appointed two newly created positions of general business manager. Their role will be the management of product portfolios through the entire lifecycle of those products, a function that had not previously existed at the company. Both appointees will start Dec. 3 and are Caroline “CJ” Howe, formerly of American Sporting Goods Corp. where she led the reinvention of Ryka, a 20-year-old women’s footwear and apparel brand, and Kenneth Fish, currently the company’s vice president, global finance.

Dick’s earnings rise 57 percent

Dick’s Sporting Goods (NYSE: DKS) said third-quarter earnings rose 57 percent due to growing sales at new stores and the acquisition of Golf Galaxy.

Net income rose to $12.2 million, or $0.10 per share, from $7.8 million, or $0.07 per share, during same period a year ago.

Sales rose to $838.8 million during the quarter, an 18 percent increase from $708.3 million during the same period a year ago.

Same-store sales decreased 2.5 percent — or a decrease of 1.0 percent adjusting for the shifted retail calendar. The company said same-store sales at Dick’s stores were in-line with its guidance and compared to an 8.9 percent increase in Q3 last year.

Net interest expense during the quarter fell 34 percent to $1.73 million.

The company said it also received a boost in sales and earnings in the fiscal quarter from the acquisition of Golf Galaxy. It closed on the acquisition in February, so quarterly earnings include sales and earnings from the chain, while the comparable year-ago period does not.

Because of this boost, the company said it expects full-year profit of $1.29 per share. It previously estimated full-year earnings between $1.24 and $1.25 per share.

The company opened 25 stores during the quarter, and has added 46 during the first three quarters of the year, helping to increase sales.

Forzani to buy Athletes World

Forzani Group (FGL.TO), Canada’s largest sporting good retailer, said it is buying privately held Athletes World, a national retailer of athletic and recreational footwear and apparel, for an undisclosed price.

Forzani said the purchase would be financed through existing credit facilities.

Athletes World, which generated revenue of CDN $186 million (USD $188 million) and a loss of CDN $7.4 million (USD $7.48 million) in its most recent fiscal year, obtained creditor protection on Oct. 30, facing tight competition and the impact of a rising Canadian dollar.

Athletes World will seek court go-ahead for the transaction this week, and if approved, the deal should close at the end of November, Forzani said. It’s been reported that Athletes World, which operates 138 stores, will benefit from Forzani’s buying power and operational expertise.

(Conversion of Canadian dollars into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Nov. 1.)

Crocs shareholders allege executives misled investors about operations

Crocs (Nasdaq: CROX) executives have been accused of misleading shareholders about operations while they sold at least $58 million in stock before the price plummeted on the third-quarter earnings report.

According to allegations in two lawsuits filed by shareholders, CEO Ron Snyder and CFO Peter Case withheld key information about distribution problems in Europe and Japan that cost the company about $30 million in sales during the third quarter,

Shareholders also contend in the lawsuits that they were not told until after the third quarter ended that Crocs was building inventory of its products as sales began to slow due to cooler weather.

Company “statements and omissions were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the company, its business and operations,” wrote attorney Jeffrey Berens.

Between July 27 and Oct. 31, top-level company executives and board members sold a combined 963,162 shares for proceeds of at least $58 million.

On Oct. 31, Crocs reported third-quarter earnings that beat analyst expectations, but sales fell short of predictions. The company raised earnings and revenue guidance for 2007, but those figures fell short of analyst estimates. Crocs shares fell 36 percent on the news.

The stock price has recovered slightly but dropped $3.07, or 7.3 percent, to $39.22 on Nov. 19. That compares with its 52-week range between $20.45 and $75.21 a share.

Foot Locker reports Q3 loss

Foot Locker (NYSE: FL) swung to a third-quarter loss on a large charge and weak sales, it said. The company reported a loss of $33 million, or $0.22 per share, compared with profit of $65 million, or $0.42 per share, during the same period a year earlier.

The recent quarter included a non-cash, after-tax charge of $66 million, or $0.43 per share, to write down some of the company’s U.S. operations. Excluding that adjustment and costs to close certain stores, Foot Locker said it earned $33 million, or $0.21 per share.

Revenue dipped to $1.36 billion, from $1.43 billion a year ago. Same-store sales fell 5 percent during the quarter, the company said.

Foot Locker said it has opened 112 new stores this year, and remodeled or relocated 179 others. The company said it expects to open eight new stores and close up to 142 unproductive ones during the fourth quarter.

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