K2 Inc. swings to Q4 profit
Increased sales of winter sports equipment helped K2 Inc. (NYSE: KTO) swing to a profit in the fourth quarter. Among K2’s brand are Ex Officio, Marmot, Atlas, Tubbs, Volkl and Marker.
Net income for the quarter ending Dec. 31 was $10.4 million, or $0.20 per share, compared to a loss of $232.1 million, or $5.01 per share, in the prior year period. The company’s earnings in late 2005 were affected by a revaluation of company assets. Adjusted income for the latest quarter was $13.4 million, or $0.25 per share, up from $14.7 million, or $0.28 per share, in the 2005 quarter.
Net sales for the quarter grew 9 percent to $388.6 million from $353.5 million in the prior year.
The company attributed the rise in business to new product offerings launched in 2006, including alpine skis and high-performance baseball gloves and bats. The company also restructured its paintball business, which saw a drop in performance during 2005.
The apparel and footwear division had net sales of $45.6 million in the fourth quarter of 2006, a decrease of 10.4% from the 2005 period. The company said the drop was due to reduced sales of Marmot winter outerwear products as a consequence of lower re-orders due to warm winter conditions, and due to declines in sales of skateboard shoes and apparel. The operating profit for the fourth quarter of 2006 was $1.1 million compared to an operating profit of $5.4 million in the fourth quarter of 2005 due to lower gross margins as a percentage of net sales and higher selling, general and administrative expenses as a percentage of net sales.
Net sales of winter products and in-line skates in the action sports segment totaled $178.2 million in the fourth quarter of 2006, an increase of 22.6% from the 2005 fourth quarter, due primarily to increased sales of K2 and Volkl alpine skis and Marker bindings. Operating profit for the quarter was $27.9 million, a 15.5% increase compared to the operating profit in the fourth quarter 2005 of $24.1 million excluding non-cash intangible charges of $108.1 million. The increase in operating profit for the fourth quarter was primarily due to strong sales growth and lower selling, general and administrative expenses as a percentage of net sales, K2 said.
Seasonally the slowest quarter for the marine and outdoor segment, Shakespeare fishing tackle and monofilament and Stearns marine and outdoor products generated net sales of $74.9 million in the fourth quarter of 2006, an increase of 6.5% from the comparable quarter in 2005.
Full-year 2006 income for the entire company was $37.7 million, or $0.74 per share, compared with a loss of $211.6 million, or $4.47 per share, in 2005. Annual sales rose to $1.39 billion from $1.31 billion the year before.
For the full year, division sales for action sports were $421.4 million; marine and outdoor, $407.6 million; and apparel and footwear, $182.3 million.
Analysts noted that future growth for K2 may lie in its non-winter merchandise following strong fourth-quarter results.
SunTrust Robinson Humphrey analyst William Chappell said that despite unseasonably warm weather earlier in the winter, the company was able to have a successful quarter with hardgood ski sales up 23 percent from last year.
Now he said, investors should look ahead to non-winter sports, which account for 70 percent of the company’s sales. “With the ski season virtually over, we believe investors should focus on the solid momentum K2 is building across all of its businesses,” Chappell wrote in an analyst note.
KeyBanc Capital Markets analyst Brian M. Rayle said in a note to investors that although K2 expects another slow ski season in 2007, the company should be able to stay on top of the sporting goods industry with strong future sales.
“We believe K2 should be able to continue expanding sales from acquisitions as well as from further penetration in its existing retail base, particularly among larger customers,” he wrote.
Shares of K2 rose as high as $0.90 to $12.40 in Mar. 8 afternoon trading on the New York Stock Exchange, and closed at $12.
Rocky Brands reverses year-ago profit with Q4 loss on lower sales
Higher costs and the expiration of a large military contract led to a fourth-quarter loss for Rocky Brands (Nasdaq: RCKY), reversing a year-ago profit.
The company reported a loss of $77,875, or a penny per share, compared with profit of $2.6 million, or $0.46 per share, in the fourth quarter of the prior year.
Revenue fell 6 percent to $70.6 million from $74.9 million a year ago, due in part to an $8.7 million footwear sale to the military last year that wasn’t repeated this year. The company said revenue also was depressed due to continued weaknesses in the women’s western footwear category.
Selling, general and administrative expenses rose 29 percent to $25.2 million from $21.2 million a year ago, reflecting higher payroll and health care costs, licensing fees, trade show expenses, distribution expenses and a trademark impairment charge.
Fiscal 2006 net income dropped 63 percent to $4.8 million, or $0.86 per share, from $13 million, or $2.33 per share, in the prior year. Sales fell 11 percent to $263.5 million from $296 million a year ago, as footwear sales to the military dropped to $1.1 million in 2006 from $27.7 million in the prior year.
For fiscal 2007, Rocky Brands predicts earnings per share will increase about 35 percent to $1.16. It also forecast 5 percent sales growth, translating to revenue of $276.7 million compared with $263.5 million in 2006.
Following the company’s earnings release, Rocky Brands shares plunged $3.06, more than 21 percent, to $10.70 in Mar. 7 afternoon trading on the Nasdaq Stock Market, finally closing at $11.09. Shares have traded between $9.73 and $26.70 over the past 52 weeks.
Quicksilver Q1 profit drops due to warm winter
Quiksilver (NYSE: ZQK), parent of Rossignol, posted a sevenfold drop in fiscal first-quarter profit due to unseasonably warm winter weather.
Quarterly earnings for the company totaled $2.5 million, or $0.02 per share, down from $18.6 million, or $0.15 per share in the first quarter of 2006.
Revenue rose 2 percent to $552.5 million from $541.1 million in the prior-year period. Revenue rose 9 percent in the Americas, but fell 3 percent in Europe and 2 percent in the Asia/Pacific region.
President Bernard Mariette said in a statement, “While we are unhappy with our results and near-term outlook, we believe this past season is a clear aberration that resulted from weather. Rossignol’s prospects for growth remain extremely compelling.”
After its first-quarter profit plummeted, Quiksilver revised its fiscal 2007 annual revenue guidance to roughly $2.45 billion and its fiscal 2007 annual diluted earnings per share guidance to approximately $0.53.
Quiksilver shares fell $1.46, or 11.3 percent, in electronic aftermarket trading. During regular trading on Mar. 8, the shares fell $0.46 to close at $12.96 on the New York Stock Exchange.
Piper Jaffray analyst Jeffrey Klinefelter said in a research note that while the company is prepared to transition Rossignol into a global lifestyle brand, the division has been hit hard by weather patterns. Klinefelter downgraded the shares to “market perform” from “outperform” and lowered his price target by $4 to $12.
WR Hambrecht also downgraded the shares to “hold” from “buy,” while Wedbush Morgan downgraded the shares to “sell” from “hold,” with a lower price target of $8.50, versus $11.50 previously.
Big 5’s Q4 earnings up 25 percent
Fourth-quarter sales rose on demand for sporting apparel and costs fell allowing Big 5 Sporting Goods’ (Nasdaq: BGFV) earnings to rise 25 percent.
Net income rose to $9.6 million, or $0.42 per share, from $7.7 million, or $0.34 per share, in the year-earlier period. Sales rose 7 percent to $234.5 million from $218.9 million a year ago.
Same-store sales increased 4.2 percent, representing the company’s 44th consecutive quarter of positive same-store sales comparisons.
For the year, net income rose 12 percent to $30.8 million, or $1.35 per share. Sales rose 8 percent to $876.8 million from net sales of $814.0 million for fiscal 2005. Same-store sales were up 4 percent in the fiscal 2006 full year versus the prior year.
The Company opened nine new stores during the fourth quarter of fiscal 2006, bringing its store count at the end of fiscal 2006 to 343 stores.
Cabela’s offer priced at $24.05 a share
Cabela’s (NYSE: CAB) said a secondary stock offering of 4.7 million of its shares was priced at $24.05 per share. The offering is expected to close on March 14. The shares are being sold by shareholders affiliated with J.P. Morgan Partners and Fulcrum Growth Partners.
Eddie Bauer selects firm to lead CEO search
Eddie Bauer Holdings (Nasdaq: EBHI) has retained Spencer Stuart, an executive search firms, to lead the search for the company’s new CEO. Spencer Stuart will work with a Special Recruitment Committee comprised of board members and established after the company’s former President and CEO Fabian Mansson resigned on Feb. 9. Howard Gross, a member of the board, is serving as interim CEO.
Stride Rite CEO to retire in 2007
Stride Rite (NYSE: SRR), parent of Saucony and Hind, said its chairman and CEO, David Chamberlain, plans to retire in 2007. Chamberlain, 63, said he will continue to serve as chairman and CEO until a replacement has taken office and will remain on the board after his retirement. He has served in those positions since November 1999. The company said it is already searching for a replacement, and is considering both internal and external candidates.
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