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Deckers’ Q3 sales up 40 percent, lowers guidance on Q4 and beyond
Deckers reported a 40 percent jump in third-quarter profit on strong sales, but expects fourth-quarter and next year’s earnings to be below analyst expectations. The company said its strong results were primarily driven by robust sales of UGG footwear, coupled with a significant gross margin improvement and control of operating expenses.
Net earnings came in at $8.2 million, or $0.63 per diluted share, compared to net earnings of $5.8 million, or $0.46 per diluted share, last year. Net sales increased 24 percent to $69.2 million compared to $55.8 million in the same period last year.
Teva sales for the third quarter were $9.7 million compared to $11.9 million in the same period last year, a decrease of 18.4 percent, due to lower domestic closeout sales and lower international sales compared to the third quarter last year.
UGG sales increased 46.2 percent to $57.3 million for the third quarter compared to $39.2 million for the same period last year, driven by strong sales across the board.
Simple third-quarter sales decreased 54.4 percent to $2.1 million compared to $4.6 million last year. Deckers said the third quarter of 2004 included approximately $2.7 million of sales of the Simple sheep offering, a program which it discontinued in late 2004.
Sales for the Internet and catalog retailing business, which are included in the brand sales numbers, aggregated approximately $3.4 million for the third quarter of 2005 compared to $5.4 million for the third quarter of 2004 due to the greater availability of UGG product at local retailers in 2005.
For the fourth quarter, Deckers said earnings are expected to be in the $0.60 to $0.64 per share range, on sales of $72 million to $75 million — significantly lower than analyst expectations of $0.83 per share on revenue of $80.6 million.
Decker’s full-year forecast was also below expectations at $2.13 to $2.17 per share, with sales of $246 million to $249 million. Analysts are looking for annual earnings of $2.33 per share on sales of $254.6 million.
The company also provided 2006 guidance, forecasting earnings of $2 to $2.15 per share on sales of $255 million to $265 million. The forecast is lower than analyst estimates for earnings of $2.58 per share on sales of $274.1 million.
Deckers said its made the strategic decision to reinvest in its business in 2006 in order to better position the company for the long term, including investments in marketing and advertising, development of its international and retail infrastructures, and investment in product development and design.
Deckers stock tumbled $3.77, or nearly 18 percent, to $17.47 in after-hours trading on Nasdaq. Additionally, the day after Deckers’ report, the company was downgraded by both RBC Capital Markets — from “outperform” to “sector perform” — and Lazard Freres — from “buy” to “hold.”
Columbia’s Q3 U.S. sales down 7.4 percent
Third-quarter net income for Columbia Sportswear (Nasdaq: COLM), parent of Mountain Hardwear, was down 3 percent due to lower outerwear and footwear sales, offset by increases in sportswear. Columbia earned $66.5 million, or $1.74 per share, compared with $68.6 million, or $1.68 per share, during the same period last year. Earnings per share in the latest quarter are based on 38.1 million average shares outstanding, down from 40.9 million shares in the year-ago period.
Sales totaled $409.8 million, down about 1 percent from $415.8 million last year. The company said its income taxes for the quarter were reduced by $5.6 million after an audit. Analysts had expected earnings of $1.55 per share on sales of $402.1 million.
Compared to the third quarter of 2004, other international sales increased 16.5 percent to $50.2 million, European sales increased 5.6 percent to $62.1 million, Canadian sales increased 6.3 percent to $52.6 million, and U.S. sales decreased 7.4 percent to $244.9 million for the third quarter of 2005.
For the third quarter of 2005, sportswear sales increased 16.0 percent to $125.7 million, footwear sales increased 1.8 percent to $63.8 million, equipment sales increased 5.9 percent to $1.8 million, accessories sales decreased 8.1 percent to $17.1 million, and outerwear sales decreased 10.2 percent to $201.4 million compared to the third quarter of 2004.
“As expected from the fall sales order backlog reported last April, third quarter outerwear and footwear sales were disappointing, offset by increases in sportswear,” Tim Boyle, Columbia’s president and CEO, said. “The competitive environment in our core U.S. outerwear business is intense, and U.S. retail consolidation continues to impact our business. Also as expected, third quarter European sales were weak in our German and Scandinavian markets. We are making investments in these areas to strengthen the core Columbia brand and improve our performance in these key markets.”
This period’s spring backlog increased 5.8 percent to $359.3 million, compared to $339.5 million at Sept. 30, 2004. Consolidated product backlog was $588.8 million, an increase of 0.5 percent compared to consolidated product backlog of $586.0 million on Sept.30, 2004.
“Orders for spring products increased in all geographic regions, but growth did not meet our expectations. Footwear orders in the U.S. and Europe were the biggest disappointment in the spring order book,” Boyle said. “While the timing of the receipt of some orders crossed into the fourth quarter, footwear orders were primarily impacted by intense competition.”
For the fourth quarter, Columbia is expecting revenue to edge up about 1 percent and net income to decline 18 percent to 21 percent. For the year, the company reaffirmed its prior guidance of sales growth of 5 percent and a decline in net income of 9 percent to 10 percent.
Columbia’s shares dropped as much as $2.46 on the news for a low of $41.97, finally closing at $42.91 on Oct. 27. On Oct. 28, Columbia was downgraded by Prudential from “neutral” to “underweight.”
International sales hold Timberland up, while U.S. revenue declines
Timberland’s (NYSE: TBL) third-quarter profit edged up 1 percent as strong international sales helped offset a decline in local markets, but its shares dropped on disappointing revenue.
Quarterly profit rose to $69.2 million, or $1.02 per share, from $68.6 million, or $0.96 per share, last year. Excluding a $2.5 million pretax charge for restructuring its Caribbean manufacturing operations, the company would have reported earnings of $1.05 per share.
Sales during the third-quarter increased 2.5 percent, to $505.9 million, from $493.9 million, driven by gains in Europe and Asia, the company said. Revenue from operations in the United States declined 6.1 percent due to a drop in sales in women’s casual footwear and boots. Foreign exchange rate changes reduced third quarter 2005 revenue by $0.3 million or 0.1 percent.
“Timberland delivered record revenue and profits in the third quarter as benefits from our global portfolio enabled us to offset pressure in the U.S. with continued strong expansion internationally,” Jeffrey Swartz, Timberland’s president and CEO, said. “While we work through challenges in key businesses, such as U.S. boots, we continue on track toward delivering solid full year financial gains.”
Third-quarter results were supported by global gains in footwear, it said. Global footwear revenues grew 2.8 percent to $399.0 million, driven by growth in kids’, outdoor performance, men’s casual and Timberland PRO series categories. Apparel and accessories revenue increased 0.1 percent to $101.5 million, as gains in international markets offset softer U.S. retail sales results.
Global wholesale revenue expanded 3.1 percent to $420.2 million, supported by strong gains in international markets. Worldwide consumer direct revenue declined 0.8 percent to $85.7 million, reflecting a 3.2 percent decrease in global comparable store sales.
For the fourth quarter of this year, the company said it is targeting flat revenue growth and a high single-digit decline in operating profits, reflecting current trends in the U.S. business, the overall consumer climate and plans to invest in brand building activities for the holiday season.
“We do anticipate continued growth challenges in Timberland’s U.S. business in the first half of 2006, which will contribute to likely pressure on first half 2006 revenue and earnings,” Swartz said.
During the quarter, Timberland bought back 1.5 million shares at a total cost of $50.3 million. In August, its board of directors approved a new 2.0 million share repurchase authorization. Timberland currently has 3.1 million shares remaining under existing share repurchase authorization programs.
Timberland’s stock fell as much as 14 percent to a 52-week low, closing at $27.40 on the New York Stock Exchange.
Amer Sports’s winter division up 2 percent, sports instruments down 5 percent
Amer Sports (AMEAS.HE) net sales increased 4 percent — 5 percent in local currency terms — for the first nine months of 2005. Sales for the sports instruments division which includes Suunto was down 5 percent in local currency, while its winter sports division had a robust third quarter, up 2 percent in local currency during the January to September period.
Amer’s net sales were Euro 805.2 million (USD $977.4 million) for the nine months, compared to last year’s Euro 774.9 million (USD $940.6 million). Earnings before interest and taxes totaled Euro 69.1 million (USD $83.8 million), while earnings before taxes were Euro 65.5 million (USD $79.5 million). Earnings per share were Euro 0.63 (USD $0.76).
For the 2005 three month-period of July to September, consolidated net sales rose by 5 percent in local currency terms and totaled Euro 294.2 million (USD $357.1 million), up from Euro 278.4 million (USD $337.9 million) last year. Earnings before interest and taxes were Euro 35.5 million (USD $43.1 million), and earnings before taxes were Euro 34.7 million (USD $42.1 million).
For the first nine months of 2005, the sports instruments division had net sales of Euro 55.0 million (USD $66.7 million), compared to Euro 57.7 million (USD $70.0 million) last year. Sales declined by 3 percent in Europe, Middle East and Africa, and by 11 percent in the Americas, but were up 11 percent in Asia pacific. EBIT declined by 26 percent to Euro 4.1 million (USD $4.9 million) from 2004’s Euro 5.5 million (USD $6.6 million). Sales of wrist-top computers declined 4 percent.
In the wintersports division, which includes Atomic, the nine-month period had net sales of Euro 128.1 million (USD $155.5 million), compared to Euro 125.1 million (USD $151.8 million) in 2004. Sales rose by 9 percent in Europe, Middle East and Africa. In the Americas, sales fell 21 percent, partly due to poor weather conditions in the first part of year. EBIT came in at Euro 3.2 million (USD $3.8 million), down 65 percent from Euro 9.1 million (USD $11.0 million). Amer said the major reason for the decline was waning sales in North America. Booked orders for the remainder of the year are on par with the corresponding period of the previous year, it said.
In 2005, Amer’s comparable net sales in local currencies — exclusive of recently acquired Salomon — are expected to grow by 5 percent compared with last year. As of Oct. 19, the sale of Salomon was complete and will be consolidated into Amer’s figures as of Oct. 1, 2005. Amer said Salomon will substantially increase its net sales in the last quarter of this year, but estimates Salomon won’t significantly affect its earnings per share for the 2005 fiscal year.
(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 Oct. 28.)
Gander forewarns of lowered guidance, flat comp sales
Citing the uncertainty of the economy, Gander Mountain (Nasdaq: GMTN) reported that it no longer expects to meet its previously disclosed guidance for revenue of at least $850 million, flat comparable store sales and pretax income of at least $16 million for the fiscal year 2005.
Gander said its sales hit is a result of higher energy prices and the persistently warm weather across much of the country. The company expects that same-store sales in the third quarter will decline 9 percent to 10 percent versus the third quarter of fiscal 2004. It noted that its sales and gross margin in the third quarter have been disappointing.
It’s new store opening plans for 2006 are more conservative in light of the economic uncertainty, which it believes has a greater impact on specialty retailers that rely on discretionary consumer spending. “In 2006, as we surpass the 100-store mark, we expect to be in a position to realize more of the benefits of scale inherent in retailing and will focus on leveraging those opportunities for operating improvements, ” said Mark Baker, president and CEO.
The company expects to report third quarter earnings on Nov. 16.
Gander was downgraded on Oct. 26 by Piper Jaffray from “market perform” to “underperform.”
Wellman loss narrows for Q3
Wellman (NYSE: WLM) reported a net loss of $9.6 million, or $0.30 per diluted share, compared to a net loss of $10.7 million, or $0.34 per diluted share for the same quarter in 2004. The third-quarter loss includes previously announced pretax charges of $8.0 million arising from the settlement of lawsuits alleging that the company engaged in price fixing relating to polyester staple fiber and $7.4 million for costs relating to damages caused by hurricane Katrina. The combined after-tax effect of both charges is $10.0 million, or $0.32 per diluted share.
“Our third quarter 2005 results were an improvement over 2nd quarter results despite the disruption to our operations caused by the hurricanes in the Gulf,” said Tom Duff, Wellman’s chairman and CEO. “Our Adjusted EBITDA of $33.9 million in the third quarter 2005 is approximately a $12 million improvement over the second quarter of 2005. PET resin sales had begun improving before hurricane Katrina and we were able to utilize existing inventory and higher than normal production at our Palmetto Plant to offset some of the lost production from the Pearl River Plant.”
It expects to resume PET resin production at the Pearl River facility the week of Oct. 31, 2005, and to have both lines operational by the end of November 2005.
Cabela’s Q3 net income down slightly
Citing higher fuel prices and the effects of Hurricanes Katrina and Rita on sales of its outdoor equipment, Cabela’s (NYSE: CAB) saw a light decrease in third-quarter net income to $16.3 million, or $0.25 per diluted share, compared to $16.5 million, or $0.25 per diluted share, for the same period a year ago. Other factors in the decrease were the timing of promotional events and additional store pre-opening expenses.
Total revenue for the third quarter of fiscal 2005 increased 12 percent to another record for Cabela’s of $429.8 million compared to $383.8 million for the same period last year.
During the third quarter of fiscal 2005, direct revenue was similar to last year at $220.2 million. Total retail revenue increased 23.1% to $173.0 million, while same-store sales decreased 8.7%. Financial services revenue increased 46 percent to $32.5 million for the third quarter of fiscal 2005.
The company said it is confident in modest growth in net income in the fourth quarter, representing a change from its previous annual guidance.
GSI postpones Q3 earnings report, shares drop
GSI Commerce (Nasdaq: GSIC) canceled its planned earnings release on Oct. 26 and forecast a bigger loss for the third quarter than expected, sending its shares tumbling more than 35 percent. The company cited potential accounting discrepancies and a problem in its bookkeeping system for the delay.
Shares of the company dropped as low as $6.55 to $12.50 on the Nasdaq, then settled to close at $16.46 — $2.59 lower than the previous day’s closing. The stock has traded between $9.08 and $21.25 over the past 52 weeks.
GSI’s preliminary results, which don’t include changes it could make in light of its accounting issues, call for a wider-than-expected loss of $4.2 million to $4.5 million, or about $0.10 per share. In July, GSI forecast a loss of $2.5 million to $3 million.
GSI said the estimated profit shortfall stems from higher costs for partner launches than it anticipated, and to a lesser extent, delays in the actual launches. Net revenue for the third quarter is expected to range from $84 million to $85 million, versus an earlier view of $79 million to $84 million. It also lowered its full-year profit to between $5.5 million to $6.5 million, down from previous expectations of $9.5 million to $10.5 million. GSI cautioned that its actual results could turn out differently.
The company said that in August, its internal auditor found potential discrepancies with certain credits the company recorded for its 2004 fourth quarter, but which possibly should have been recorded in 2005. The credits amount to about $283,000. In addition, GSI said it has found a problem in its system for reconciling its accounts payable and couldn’t validate its general ledger as a result. GSI said it could take an estimated charge of up to $300,000, or a gain of up to $1.2 million, related to the issue, depending on how its ongoing review of the issue goes.
GSI said it is aiming to release its third-quarter results by Nov. 10
West Marine Q3 earnings down 71 percent
Slammed by the hurricane season, West Marine (Nasdaq: WMAR) reported a 71 percent drop in third-quarter earnings and lowered its profit outlook for the full year.
Earnings fell to $2 million, or $0.09 per share, down significantly from $6.9 million, or $0.32 per share, last year. Net sales were $188.6 million from $183.1 million. Analysts had expected earnings of $0.15 per share on revenue of $188.7 million. Same-store sales for the third quarter decreased 1.2 percent, versus a decrease in same-store sales of 7.7 percent reported for the same period a year ago.
The company said it was deeply disappointed by its third-quarter results, and the hurricanes in the Southeast this year hurt consumer spending more than expected. It temporarily closed 68 of its stores because of hurricanes Dennis, Katrina, Ophelia and Rita, and four stores are still closed. The company also said higher fuel prices, along with “President Bush’s appeal for lower fuel consumption,” are significantly curtailing boat usage, which has reduced customer traffic at its stores.
West Marine said it expects lower sales this year as a result, of about $685 million, compared with $683 million last year. The company cut its full-year forecast to a range of $0.35 to $0.40, down from its previous estimate of $0.70 to $0.75 per share.
Its shares dropped $2.92, or 18.5 percent, to a new 52-week low of $12.83 in morning trading on the Nasdaq, below a previous low of $13.52 from earlier this month.
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