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adidas-Salomon reports net income up 39 percent and gross margin at record level
adidas-Salomon reported its second-quarter numbers on Aug. 4 with financials that had the company CEO Herbert Hainer practically giddy during a conference call. Sales rose 7 percent on a currency-neutral basis. The company reported that currency fluctuations did affect sales negatively, but that the gap is beginning to narrow. Reported actual sales growth in the second quarter was 1.5 billion Euro (USD $1.842 billion), a 5 percent increase over last year. YTD sales were up 1 percent to 3.1 billion Euros (USD $3.808 billion). The company reported that while revenues were up in all brands, the adidas segment performed the best during the first half of 2004, with sales up 2 percent YTD and 6 percent in Q2. Salomon sales were up 7 percent in Q2 and 2 percent YTD. The company reported that sales increased for Salomon in all parts of the globe, with apparel and cycling leading the way as success stories. Strong sales from the introduction of Salomon-branded Nordic skis also contributed to the sales jump. What made adidas-Salomon executives most excited, though, was the leap in gross margin for the company, up 370 basis points versus last year to 48.4 percent in 2Q. YTD gross margin was also up 360 basis points to 47.1 percent with adidas once again the golden child boasting a nearly 500 basis point increase YTD. As a result of the margin increase, gross profit also rose 9 percent to 1.456 billion Euro YTD (USD $1.788 billion).
(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. 4.)
Warnaco to acquire OP
Warnaco Group announced on Aug. 4 that it has agreed to acquire Ocean Pacific Apparel Corp. for $40 million in cash from Burlingame, Calif.-based, private equity fund Doyle & Boissiere Fund I LLC. New York-based Warnaco will assume $1 million in debt, and there is an earnout provision, but the spokesman declined to release further details. The deal is expected to close in the third quarter. Ocean Pacific, which operates through a network of licensees, sells a broad range of apparel and accessories for men, women, young adults and children under its OP, Ocean Pacific, OP Classics and Seven 2 labels. Professional surfers such as Kelly Slater, Lisa Andersen, Tom Curren and Taylor Knox have sported its fashions. Doyle & Boissiere acquired Ocean Pacific in 1998 for an undisclosed sum from Berkeley International Capital Corp. Doyle declined to comment on the firm’s profit from the sale. Warnaco shares fell slightly to $18.29 by midday from Tuesday’s close of $18.31.
Internet sales set 2Q record for Sportsman’s Guide
The Sportsman’s Guide (NasdaqNM: SGDE) reported second-quarter results with sales for the quarter rising slightly to $38.9 million compared to last year’s $38.0 million. The company reported net earnings of $797,000, or $0.15 per fully diluted share for the quarter ended June 30, 2004, a 23 percent increase when compared to the $646,000, or $0.12 per fully diluted share, last year. The increase in net earnings and earnings per share from last year’s second quarter was due primarily to higher Internet-related sales, which were just over 43 percent of total catalog and Internet sales, setting an all-time record. Internet-related sales as a percentage of total catalog and Internet sales were approximately 36.5 percent for the second quarter of 2003. Total catalog circulation for the second quarter was 9.9 million catalogs, compared to 9.2 million during the second quarter of 2003.
LaCrosse reports 2Q earnings
Boot-maker LaCrosse Footwear (NasdaqNM: BOOT) reported consolidated net sales of $18.6 million for its second quarter, up slightly from 2003’s $18.58 million. Net sales for the quarter ended June 26, 2004, were $42.3 million, up from $38.5 million in the same period of 2003. The consolidated net loss was $237,000, or $0.04 loss per share, in the second quarter of 2004, compared to net income of $4,000, or zero income per share, in the same period of 2003. For the first half of 2004, consolidated net income was $858,000, or $0.14 income per share, up from a consolidated net loss of $645,000, or $0.11 loss per share, in the same period in 2003. LaCrosse continued to improve its overall gross margin, which was 32.1 percent of net sales for the second quarter of 2004, up from 2003’s 30.2 percent. Operating expenses increased modestly during the second quarter, reflecting the company’s decision to invest additional resources in its product development and marketing efforts. Inventory decreased by $3.4 million from the second quarter of 2003 as a result of asset management improvements. Due to improved profitability and operating cash flows, it reduced overall bank debt by $7.9 million.
Acquisitions boost Phoenix’s bottom line
Second-quarter net sales for the Phoenix Footwear Group (AMEX: PXG) increased 83.7 percent to $13.9 million for the quarter ended June 26, 2004, from last year’s $7.6 million. Of this increase $5.9 million is attributable to acquired brand revenue associated with the H.S. Trask, Ducks Unlimited and Royal Robbins brand acquisitions, which occurred during the second half of 2003.
Net sales for the Trotters, SoftWalk and Royal Robbins brands increased 11.2 percent during the current quarter as compared to pro forma net sales for the prior year quarter. This sales percentage increase was offset by decreased sales from H.S. Trask and Ducks Unlimited brands, resulting from a sourcing restructuring and product repositioning program which was completed during the quarter. Gross margin in the second quarter was 45.3 percent of net sales, compared to 42.2 percent in the second quarter of 2003. The increase in gross margin was primarily related to 2003 brand acquisitions and an improved product sales mix, according to the company.
“Our second-quarter results reflect our success in integrating recent acquisitions and driving sales growth across our expanded portfolio of niche brands,” Chairman James Riedman said. “By aggressively leveraging a shared infrastructure and maintaining a focus on strict cost controls and inventory management, we have continued to generate profitable returns for our shareholders. Our operating income and net income surged during the quarter, highlighting our profit-driven business model.”
“During the past 12 months, we have taken significant steps to expand our portfolio and position Phoenix Footwear for growth and value creation,” Riedman added. “We closed on the acquisition of Altama Footwear on July 19, representing our third major transaction in the past year. Altama further diversified our revenue stream and enhanced our profitability.”
Phoenix also appointed five brand managers during the past year and upgraded its senior management team and board of directors. It also said it streamlined its infrastructure, completed the repositioning of H.S. Trask’s product line and launched several brand extensions. The company now expects overall revenues of $79 million to $89 million for 2004.
Fed’s anecdotal snapshot shows mixed results
Consumer spending in June and early July was mostly moderate across much of the country, according to the Federal Reserve’ s recent Beige Book report. The Fed noted the economy overall continued to expand, with particular growth seen in manufacturing, but in several regions growth was also moderating. Since the spring, the Fed said seven of its 12 district banks cited a “softening” of spending in the bank’s regions anchored by New York, Philadelphia, Cleveland, Atlanta, Chicago, Dallas and San Francisco. Consumer purchases account for two-thirds of U.S. economic activity. In the remaining Fed districts, Boston reported consumer spending as “mixed,” while in Kansas City it was “largely flat in recent weeks” and Richmond-area merchants reported overall spending was “flat or was lower.” In other areas covered by the Richmond bank, “a normally busy Washington, D.C., beltway anchor store told us mall traffic was down and the manager of a clothing store in central West Virginia said apparel sales were in the doldrums,'” the Fed said.
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