Outdoor financials: Deckers' Ugg brand boasts 65.2 percent Q2 sales increase, plus Columbia, Johnson Outdoors, Jarden, Crocs, Rocky Brands, Exel, Wellman, West Marine, GSI Commerce

Deckers’ Ugg brand boasts 65.2 percent Q2 sales increase
Deckers Outdoor’s (Nasdaq: DECK) second-quarter profit fell 7 percent but still beat analyst expectations, sending its shares surging in aftermarket trading.

The stock jumped $7.54, or 8 percent, to $102.11 in after-hours electronic trading, after it reported better-than-expected earnings and revenue. The stock closed at $94.57, down $4.66, or 4.7 percent, on July 26.

Quarterly earnings dropped to $2.5 million, or $0.20 per share, from $2.7 million, or $0.21 per share, in the prior-year period. Sales grew to $52.7 million from $41.7 million. On average, analysts expected quarterly earnings of $0.11 per share on $49.3 million in revenue.

Total international sales increased 100 percent to $14.7 million compared to $7.3 million last year.

President and CEO Angel Martinez said in a statement that sales for its Ugg brand beat expectations both domestically and overseas.

Ugg’s net sales for the second quarter increased 65.2 percent to $26.3 million compared to $15.9 million in the second quarter of 2006. The company said the year-over-year improvement in sales was attributable to strong sell-through of spring products as well as a strong reorder business. It added that initial shipments of fall styles to international markets were up significantly compared with a year ago.

The company’s Teva brand also improved, with a 5.6 percent increase in net sales —
$24.1 million compared to $22.8 million for the same period last year. Sales were driven by worldwide demand for new products, partially offset by a lower than anticipated level of domestic reorders, Deckers said.

Simple’s net sales were $2.4 million for the second quarter compared to $3.0 million for the same period last year. The brand was negatively affected by a delayed start to the spring selling season, which affected reorder business, as well as a shift of international shipments to the third quarter this year compared to the second quarter last year, the company said.

Sales for the consumer direct business, which are included in the brand sales numbers, increased 54 percent to $6.1 million compared to $4.0 million for the same period a year ago — mostly due to an increase in Ugg brand Internet sales, Deckers noted. In addition, results for the second quarter of 2007 included sales from the company’s new Ugg flagship store in New York City and new retail outlet store in Riverhead, N.Y., which were not in operation in the second quarter of 2006.

Based on better-than-expected second-quarter results, Deckers raised its financial forecast for the year. It now targets earnings-per-share growth of about 25 percent over 2006 before an impairment charge, up from its prior estimate of about 15 percent. The company also expects revenue growth of about 35 percent, up from a prior target of about 25 percent.

It added that it expects third-quarter revenue and earnings per share to rise about 45 percent from a year ago.

Columbia Q2 earnings more than double
Second-quarter earnings for Columbia Sportswear (Nasdaq: COLM) more than doubled due to margin improvement, beating analysts’ earnings forecast.

Second-quarter earnings grew to $10 million, or $0.27 per share, from $4.8 million, or $0.13 per share. Quarterly sales increased 3 percent to $218.6 million from $211.6 million. Analysts forecast earnings of $0.18 per share on sales of $225.2 million.

The company said that sales declines in the U.S. and Canadian markets were more than offset by growth in European and other international sales.

Compared to the second quarter of 2006, other international net sales increased 14 percent to $58.0 million, Europe net sales increased 9 percent to $31.6 million, U.S. net sales decreased 2 percent to $117.1 million, and Canada net sales decreased 5 percent to $11.9 million for the second quarter of 2007

CEO Tim Boyle said in a statement, “Net sales increased to a second-quarter record, but were lower than expectations due to higher-than-expected order cancellations in the U.S. attributable to a challenging retail environment and a shift in timing of international distributor shipments to the third quarter.”

The company said gross margins improved substantially during the quarter due to improvements in sportswear margins, a higher mix of full-price sales and favorable currency exchange rates.

For the second quarter of 2007, sportswear net sales increased 11 percent to $124.4 million, footwear net sales decreased 2 percent to $42.5 million, outerwear net sales decreased 8 percent to $39.8 million and accessories and equipment net sales decreased 8 percent to $11.9 million, compared to the second quarter of 2006.

Compared to the second quarter of 2006, Columbia brand net sales increased 3 percent to $200.1 million, Mountain Hardwear net sales increased 6 percent to $11.5 million, Sorel net sales increased 28 percent to $3.2 million for the second quarter of 2007 and Montrail net sales decreased 8 percent to $3.5 million.

The company noted that the second quarter is typically the slowest of the year, as the company concludes its spring product shipping season and begins shipping fall products late in the quarter.

While Columbia boosted its fiscal 2007 outlook, it predicted third-quarter income below analyst estimates.

For the full year, Columbia predicted earnings of about $3.69 per share with sales growth of about 5.5 percent, implying revenue of about $1.36 billion. Previously, the company forecast earnings of $3.65 per share for the year, with revenue growing 5 percent to about $1.35 billion. Analysts are forecasting earnings of $3.68 per share on revenue of $1.36 billion.

For the third quarter, Columbia expects earnings of $1.58 per share on revenue growth of about 2 percent to 3 percent, implying sales of about $463.2 million to $467.7 million. Analysts predict third-quarter income of $1.74 per share on revenue of $470.3 million.

Additionally, Columbia’s board approved a dividend of $0.14 cents per share.
The dividend is payable on Aug. 30 to shareholders of record on Aug. 16.

Johnson Outdoors Q3 profit rises
Profits for Johnson Outdoors (Nasdaq: JOUT) rose 26 percent in the fiscal third quarter as seasonally strong sales of products for water sports offset a decline in military sales.

The company posted a net profit of $8.3 million, or $0.89 per share, compared with a year-earlier profit of $6.6 million, or $0.72 per share. Net sales rose 11 percent to $150.6 million from $135.5 million the prior year.

Johnson Outdoor said third-quarter sales are historically the highest of the year, reflecting consumer demand during the key retail selling period of the company’s seasonal outdoor recreational products. Significant gains in the marine electronics, diving and watercraft divisions more than offset an anticipated slow down in military sales. Excluding military sales in both the current and the prior year third quarter, total company net sales would have increased $16.7 million, or 13 percent.

For the quarter, net sales by segment were: marine electronics, $71.0 million ($57.5 million in 2006); outdoor equipment, $17.2 million ($20.4 million in 2006); watercraft, $37.1 million ($35.5 million in 2006); and diving, $25.4 million ($22.2 million in 2006).

Total company operating profit in the current quarter increased 6 percent to $14.7 million compared with $13.9 million in the prior year quarter.

Johnson Outdoors’ brands include Old Town, Ocean Kayak, Necky, Lendal, Silva and Eureka.

Jarden Q2 earnings increase 26 percent on sales growth, reduced taxes
Jarden Corp. (NYSE: JAH), parent of Coleman and Campingaz, said that second-quarter earnings increased 26 percent on increased sales and reduced taxes. It is also in the process of acquiring K2 Inc. (NYSE: KTO).

Earnings for the quarter rose to $16.7 million, or $0.23 per share, from $13.3 million, or $0.20 per share, in the prior year. Excluding acquisition-related costs and other one-time items, second-quarter earnings increased to $50.6 million, or $0.70 per share, from $39.5 million, or $0.60 per share, a year ago.

Quarterly sales grew 9 percent to $1.05 billion, from $962 million in the second quarter of 2006.

Jarden’s income tax provision dropped 66 percent to $12.8 million, from $37.8 million in the prior-year period.

Martin Franklin, chairman and CEO, said in a statement, “The second quarter further supported our strategy of focusing on market leading brands and new product development to deliver strong financial results. The Pure Fishing acquisition, new products and cost controls all contributed to considerable gross margin enhancement. As anticipated, this meaningful improvement allowed us to increase our investment in selling and marketing expenses while still expanding segment earnings margin to 12.4 percent in the second quarter of this year compared to 10.9 percent for the second quarter of 2006. Equally satisfying was the significant growth in cash flow from operations with a ten- fold year-over-year increase to over $73 million for the second quarter 2007.”

Jarden expects to close its $765.9 million acquisition of K2 in August, which it said would help boost the Jarden Outdoor Solutions segment.

In regard to the K2 acquisition, K2 has settled in principle pending litigation over its upcoming sale. Terms of the deal, with the City of Roseville Employees Retirement System, include K2 making some disclosures about the acquisition, which it has already made in its proxy materials.

K2 and Jarden will also change the acquisition agreement to reduce the termination fee payable by K2 to Jarden, if the deal ends under certain circumstances, to $24 million, from $27.5 million.

The settlement is subject to approval of the California Superior Court, where the case is pending. A companion case brought by Steamfitters Local 449 Pension & Retirement Security Funds will be dismissed, the company said.

Crocs’ Q2 revenue shoots up 162 percent, buys Bite Footwear
Crocs (Nasdaq: CROX) reported that its second-quarter net income more than tripled, boosted by results in the United States and Europe.

Quarterly net income rose to $48.5 million, or $0.58 per share, from $15.7 million, or $0.19 per share during the same period last year. Results are adjusted for a 2-for-1 stock split in June.

Revenue more than doubled to $224.3 million, from $85.6 million a year ago.

The company said footwear and accessories did well in the United States and Canada and that distribution increased in Europe.

The company raised its yearly outlook due to higher-than-expected orders.

Crocs said because orders are better than expected, it has raised its yearly guidance.
The company expects per share earnings between $1.89 and $1.93 on revenue between $810 million and $820 million. Before a 2-for-1 stock split in June, the company previously forecast earnings of $2.90 to $2.95 per share on sales of $670 million to $680 million.

For the third quarter, Crocs expects earnings between $0.58 per share and $0.62 per share on revenue of $240 million and $250 million.

Also, Crocs said it would introduce a Crocs line of apparel made partially of Croslite for men and children. It cautioned that the apparel line would not produce significant sales this year.

Shares of Crocs rose to a new high on July 27, after it reported second-quarter earnings above expectations and raised yearly guidance.

Shares rose 13.2 percent, or $6.70, to $57.29 during morning trading, after earlier trading to a 52-week high of $59.71. The stock had traded between $12.36 and $51.81 during the past 52 weeks. It had a 2-for-1 stock split in June.

JPMorgan analyst Robert Samuels said consumers would keep buying Crocs. “Despite investor concern about the company’s ability to lap strong sales of classic styles, Crocs delivered over 160 percent sales growth with only 20 percent of the business coming from the Beach and Cayman (classic styles),” he wrote in a client note. “Recent conversations with retailers suggest robust demand for the company’s new fall product, including fleece lined shoes and new licenses.” Samuels rates Crocs’ shares “Overweight.”

Jeff Mintz, a Wedbush Morgan Securities analyst, said in a note to investors that European sales are bolstering business. “In Europe, the 920 percent revenue growth shows a ‘Crocs craze’ reminiscent of the U.S. in 2006,” he wrote. Based on this growth, he predicted South America might be another source of growth for Crocs, which he rates “Strong Buy.”

Mintz raised his 2007 earnings estimate to $2.02 per share, from $1.74 per share raised his price target to $71 from $54. “We expect our estimates to remain above consensus, but given the company’s many growth opportunities and the U.S. growth path, which is now repeating internationally, we believe our estimates remain achievable,” he wrote.

In other company news: Crocs said it has agreed to acquire Bite Footwear for $1.75 million, plus up to $1.75 million more if Bite makes some earnings targets over the next three years. Crocs said it plans to use its proprietary material, Croslite, in Bite’s products. Crocs also said Bite’s OrthoSport product line will add to its RX medical line.

Rocky Brands Q2 loss widens
The second-quarter loss for Rocky Brands (Nasdaq: RCKY) widened due to higher production expenses and a one-time charge related to financing costs. Rocky’s brands include Rocky Outdoor Gear, Georgia Boot and Durango.

The company’s loss widened to $1.4 million, or $0.25 per share, from $215,625, or $0.04 per share, in the year-ago quarter.

The recent quarter includes a one-time charge of about $0.09 per share related to debt refinancing, compared to a similar charge of $0.05 per share in the year-ago period.

Revenue rose 2.6 percent to $58.8 million, from $57.3 million in the 2006 quarter.

The company said its second-quarter performance was negatively impacted by weaker-than-expected wholesale revenues, partially offset by a double-digit sales gain in its retail division.

Additionally, margins suffered due to a decrease in sales of high-margin Western-style footwear, combined with higher production costs and a greater level of closeout sales, the company said.

Despite the loss, Rocky stood by its previous full-year earnings guidance — full-year earnings of about $1.30 per share, on revenue of about $276.7 million. It added that it expects 2007 revenue to rise 5 percent from 2006 levels, and earnings-per-share to rise 35 percent from 2006 levels.

Shares plunged $3.19, or 21.3 percent, to $11.82 in early trading on July 27.

Exel’s Q2 net sales rise 2.9 percent
Exel’s consolidated second-quarter net sales grew by 2.9 percent over the previous year to EUR 28.7 million (USD $39.3 million) versus EUR 27.9 million in 2006. Net sales for the first six months grew by 7.5 percent to EUR 57.5 million (USD $78.9 million) compared to EUR 53.5 million last year.

The company said the major part of the growth is stemming from the acquisition of Pacific Composites, which was included in the consolidated financial statements as of Mar. 1, 2006. The sport division’s cross-country and alpine products suffered from the mild winter, stiff competition and sourcing problems, the company reported.

Exel’s operating profit for the quarter increased to EUR 2.7 million (USD $3.7 million), compared to EUR 0.2 million, including non-recurring items of EUR -0.4 million, the corresponding period last year. Operating profit for the first six months increased to EUR 6.2 million (USD $8.5 million) versus EUR 0.8 million, including non-recurring items of EUR -2.3 million. Operating profit as a percentage of net sales was 10.8 percent compared to 1.4 percent last year.

The company said the improvement of the operating profit has been a result of the restructuring measures taken in the problem units in 2006, especially Mäntyharju, Belgium and the German Sport unit, and the contribution of the Pacific Composites acquisition.

(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 July 25.)

Wellman’s net loss narrows, sells European recycled-based fibers business
Wellman (NYSE: WLM) said its net loss in the second quarter narrowed slightly. It reported a net loss from continuing operations attributable to common stockholders of $11.6 million, or $0.36 per share, for the quarter ended June 30, 2007. This compares to a net loss from continuing operations attributable to common stockholders of $14.5 million, or $0.46 per share, for the same period in 2006. Net sales for 2007 were $333.7 million, down from 2006’s $345.2 million.

Also, Wellman sold its European recycled-based fibers business for approximately $38 million to an affiliate of Aurelius AG. It has the capacity to produce approximately 185 million pounds of polyester fiber primarily using post-consumer recycled materials. The fibers are used in a wide range of applications including personal hygiene, upholstered furniture, loose-filled bed products, car interior trim and industrial uses.

Thomas M. Duff, Wellman’s chairman and CEO, said in a statement, “The sale of this business reflects our strategy to focus on our U.S. chemical-based business.”

West Marine Q2 profit up on cost cuts
West Marine’s (Nasdaq: WMAR) second-quarter profit climbed 42 percent on cost controls as it contends with industrywide retail sales weakness.

It posted earnings of $20.1 million, or $0.92 per share, compared with $14.2 million, or $0.66 per share, in the previous year. The prior-year period included an asset impairment charge of $3.5 million, or $0.09 per share.

Revenue for the quarter dropped to $247.8 million, down 6 percent from $264.5 million a year ago. Same-store sales fell 2.9 percent in the quarter. West Marine lowered its selling, general and administrative costs to $52.2 million from $59.9 million.

The company operated 380 stores during the quarter compared with 410 stores a year ago.

GSI Commerce loss widens in Q2
GSI Commerce’s (Nasdaq: GSIC) second-quarter loss widened as its operating expenses rose nearly 48 percent.

For the quarter, GSI reported a loss of $5 million, or $0.11 per share, compared with a loss of $3.6 million, or $0.08 per share, in the same period last year.

On an adjusted basis, which excludes items like a stock-based compensation expense, GSI’s loss climbed to $3.5 million, or $0.08 per share, compared with a loss of $1.7 million, or $0.04 per share, in the year-ago quarter.

The company’s net revenue grew to $131.3 million, compared with $119.6 million in the year-ago quarter.

The company’s increased gross profit was offset by higher operating expenses, which rose to $74.5 million, from $50.4 million in the same quarter last year. The company’s sales and marketing expenses added $12.4 million year-over-year, to $41.3 million, while GSI’s product development expenses added $6.3 million to $15.1 million.

GSI said it has also raised its outlook for fiscal 2007 earnings and sales. On an adjusted basis, the company anticipates earnings of $15.4 million to $16.6 million, up from a prior forecast of $12 million to $15 million. Sales are now forecast between $721 million and $751 million, compared with an earlier range of $710 million to $760 million.

In its third quarter, GSI said it expects a loss of $7.5 million to $8.1 million, or $5.8 million to $6.4 million on an adjusted basis, on sales of between $133 million and $143 million.

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