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Fitness financials: Precor and parent Amer sales hit by weak U.S. dollar, plus Gaiam, Iconix, adidas

Fitness financials: Precor and parent Amer sales hit by weak U.S. dollar. Gaiam reports Q2 revenue growth. Iconix posts double-digit increases in Q2 revenue, profit. adidas posts 12-percent rise in net income.

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Precor and parent Amer sales hit by weak U.S. dollar

The weakening U.S. dollar slammed Amer Sports group’s net sales for the second quarter and six-month period and knocked its Precor fitness segment with double-digit percentage point sales declines for the same periods.

Amer Sports’ net sales decreased 6 percent to EUR 648.1 million (USD $1.005 billion), compared to last year’s EUR 692.1 million (USD $1.073 billion), for the six-month period. In local currencies, net sales increased 1 percent.

Earnings before interest and taxes (EBIT) improved to a loss of EUR 7.8 million (USD $12.1 million) from 2007’s loss of EUR 20.6 million (USD $31.9 million), including a capital gain of EUR 13 million (USD $20.1 million) from selling the company’s corporate headquarters building.

Its loss in earnings before taxes narrowed to EUR 22.1 million (USD $34.2 million) compared to a loss of EUR 28.4 million (USD $44.0 million) the year before. Its earnings per share loss came in at EUR 0.23 (USD $0.35) versus a loss of EUR 0.30 (USD $0.46) last year.

For the second quarter, Amer Sports’ net sales dropped 8 percent to EUR 285.1 million (USD $442.3 million) versus EUR 310.3 million (USD $481.4 million). Net sales in local currency terms were at last year’s level. The group’s EBIT amounted to a loss of EUR 7.8 million (USD $12.1 million) versus last year’s loss of EUR 12.8 million (USD $19.8 million).

The company’s second-quarter earnings before taxes posted a wider loss of EUR 15.2 million (USD $23.5 million) compared to last year’s loss of EUR 13.9 million (USD $21.5 million). Earnings per share came in at loss of EUR 0.16 (USD $0.24) versus last year’s second-quarter loss of EUR 0.15 (USD $0.23).

For the first six months of the year, net sales for the Precor fitness segment were down 20 percent to EUR 106.6 million (USD $165.3 million) versus EUR 133.5 million (USD $207.1 million) for the same period in 2007. The decline was 9 percent in local currencies. The Americas accounted for 72 percent, EMEA for 19 percent, and Asia Pacific for 9 percent of net sales. In local currency terms, sales were up 10 percent in EMEA and down 7 percent in Asia Pacific and 13 percent in the Americas.

EBIT decreased to EUR 3.3 million (USD $5.1 million) from EUR 16.1 million (USD $24.9 million) last year due to the significant fall in sales and lower gross margins resulting from increased raw material costs. In the second quarter, one-off quality issues amounting to EUR 3 million (USD $4.6 million) also had a negative impact on results.

For the second quarter, sales fell 17 percent to EUR 49.6 million (USD $76.9 million) compared to EUR 59.7 million (USD $92.6 million) in the same period a year before. In local currencies, the decline was 5 percent. Second-quarter EBIT swung to a loss of EUR 400,000 (USD $620,600) compared to EUR 6.2 million (USD $9.6 million) in 2007.

Amer Sports said Precor’s commercial business, with sales to major club and fitness facility customers, remained solid. Global sales increased 8 percent and sales in EMEA region increased 10 percent.

Although the second quarter is a slow season for home equipment, Amer Sports said, consumer demand dropped far below expectations, walloped by poor sales in the North American market.

“The weak North American economic environment had the biggest impact on our fitness segment,” CEO Roger Talermo said in a statement. “The commercial category is performing well, but the demand for consumer products has dropped significantly. We are adapting Precor’s operations and adjusting its cost base to correspond with declining sales. These changes will have a positive impact on Precor’s profitability during the second half of the current year.”

Of the company overall, he added, “As a consequence of the more difficult macro-economic environment, we believe that our full-year earnings growth will be slower than we anticipated at the start of the year.”

For the year, the company now estimates that its EBIT, excluding the capital gain of EUR 13 million (USD $20.1 million), will amount to EUR 90 million (USD $139.6 million) to EUR 105 million (USD $162.9 million). Previous guidance was EUR 100 million (USD $155.1 million) to EUR 130 million (USD $201.6 million).

(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 Aug. 6.)

Gaiam reports Q2 revenue growth

Revenue for Gaiam’s (Nasdaq: GAIA) second quarter increased 9.3 percent over last year. The company, which acquired Spri Products in March, said it achieved top line growth by strengthening its market position and diversifying its retail portfolio through increased shelf space, its category management strategy and store-within-a-store concept.

For the quarter ended June 30, revenue was $57.2 million from $52.4 million last year. Excluding international revenues, which were effected by the transition to licensing, the internal growth for the second quarter was 19 percent.

Income per share for the quarter improved to $0.00 per share, from a $0.01 loss per share in the second quarter of 2007. Depreciation and amortization for the second quarter of 2008 was $2.3 million.

Gross profit increased to $36.2 million, or 63.2 percent of revenue for the second quarter of 2008, from $33.6 million, or 64.2 percent of revenue, in the comparable quarter last year. It said the change in gross margin reflected the company’s investment in the lower margin solar business. Excluding the solar business, gross margin increased to 69.3 percent from 66.6 percent a year ago.

Operating expenses declined 390 basis points to 64.0 percent of revenue from 67.9 percent in the same quarter last year, as Gaiam said it continued to leverage its infrastructure and corporate resources across higher sales.

Operating results improved to a loss of $0.5 million, or 0.8 percent of revenue, from a loss of $1.9 million, or 3.7 percent of revenue for the second quarter of 2007.

Interest and other income declined to $0.3 million for the second quarter of 2008 compared to $1.1 million during the second quarter last year. This reflects the decline in average interest rates received on Gaiam’s cash investments from 5.16 percent as of June 30, 2007, to 2.37 percent at June 30, 2008, and the repurchase of 1.3 million shares or over 5 percent of Gaiam’s outstanding common stock at an average price of $14.75 per share.

In May 2008, Gaiam’s solar subsidiary, Real Goods Solar, consummated its initial public offering raising net offering proceeds of $48.2 million, after underwriters commission and offering expenses. Approximately $20 million of the net proceeds was repaid to Gaiam for loans provided to its solar business. Post-offering, Gaiam owns 10 million shares or approximately 65 percent of Real Goods Solar’s outstanding shares and in excess of 80 percent of Real Goods’ voting power.

Iconix posts double-digit increases in Q2 revenue, profit

Iconix Brand Group (Nasdaq: ICON), parent of Danskin Fitness, posted a 32-percent increase in second-quarter revenue.

2008 revenue was $51.7 million compared to approximately $39.1 million in the second quarter of 2007.

Net income for the second quarter increased 11 percent to approximately $16.5 million, as compared to $14.8 million the prior year quarter and GAAP diluted earnings per share increased to $0.27 versus $0.24 in the prior year quarter.

EBITDA for the second quarter increased 13 percent to $35.2 million versus $31.2 million in the prior year quarter. Free cash flow for the quarter increased to $26.3 million, as compared to $25.8 million in the prior year quarter.

Iconix reaffirmed its previously issued 2008 revenue guidance of $215 million to $220 million and diluted earnings per share of between $1.15 and $1.20. The company is forecasting free cash flow for 2008 to be in a range of $116 million to $119 million.

Neil Cole, chairman and CEO of Iconix Brand Group, said in a statement, “Longer-term we will have growth from a number of international initiatives that we are working on. While we have taken acquisition revenue out of our guidance it remains an important part of our growth strategy and we believe we will continue to acquire additional iconic brands.”

adidas posts 12-percent rise in net income

adidas (ADSG.DE) reported a 12-percent rise in second-quarter net income despite continued weakness at Reebok, helped by strong sales growth in Asia, Europe and Latin America, and lower taxes.

In the three months ended June 30, net income rose to EUR 116 million (USD $179.9 million) from EUR 104 million (USD $161.3 million) a year earlier.

Revenue rose 5 percent to EUR 2.52 billion (USD $3.90 billion) from EUR 2.4 billion (USD $3.72 billion), partly hit by the strength of the euro against the dollar. On a currency neutral basis, sales were up 14 percent, with increases across all brands. Second-quarter sales rose 34 percent in Latin America, 16 percent in Asia and 14 percent in Europe, but fell 20 percent in North America.

“Our performance is nothing short of exceptional, especially in the light of the tougher macroeconomic environment,” CEO Herbert Hainer said in a statement. “adidas and TaylorMade-adidas Golf continue to show strong momentum and we have laid the foundation at Reebok for continued improvement in the second half.”

The group’s strongest performer was the adidas brand, whose sales rose 11 percent in the second quarter. Reebok’s second-quarter sales slipped 8.8 percent, while its order backlog fell 13 percent on a currency neutral basis, mainly due to a shortfall in apparel backlogs.

Operating profit rose 10 percent to EUR 208 million (USD $322 million), while the operating margin increased 0.4 percentage points to 8.2 percent. The company said it now expects the 2008 operating margin to approach 10 percent, from the previous above 9.5 percent.

The company increased its full-year sales guidance for the adidas brand. It said it now expects sales to grow at a low double-digit rate, compared with the previous forecast of a high single-digit rate. Reebok sales are projected to grow at a mid- to high-single-digit rate. Group sales are expected to grow at a high single-digit rate.

(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 Aug. 5.)

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