Outdoor financials: Kellwood considers unsolicited acquisition offer by Sun Capital Securities, plus Sport Chalet, Big 5, Bausch & Lomb, Johnson Outdoors, Cabela's

Kellwood considers unsolicited acquisition offer by Sun Capital Securities

Kellwood (NYSE: KWD) said it is considering an unsolicited buyout offer valued at about $544 million from Sun Capital Securities Group LLC. Kellwood is the parent of various outdoor brands, including Sierra Designs, Kelty, Royal Robbins, Slumberjack, Ultimate Direction and Wenzel.

Sun Capital, an affiliate of Sun Capital Partners Inc., a private investment firm, sent a letter Sept. 18 offering to buy Kellwood for $21 a share — a 38 percent premium to Tuesday’s price of $15.17 on the New York Stock Exchange.

The offer surprised investors and analysts and sent Kellwood’s stock price up $5.28 to $20.45 in day’s trading on Sept. 19 to close at $19.14. The stock has traded between $14.21 (a new low just posted on Sept. 18) and $34.84 during the past 52 weeks.

Kellwood said in a statement that its board of directors will carefully evaluate the Sun Capital proposal, and other alternatives available to the company, taking into account the potential benefits that may be realized through its previously announced long-term strategic plan.

Kellwood had sales of $1.96 billion in its latest fiscal year. It reported a $65.8 million loss for the second quarter ended Aug. 4, compared with a profit of $7.2 million for the year-earlier period. It also announced a structural overhaul of its apparel operations, consolidating them into three divisions from seven.

Of late, analysts have been speculating about where Kellwood’s headed even before this recent buyout bid.

Morgan Keegan & Co. analyst Brad A. Stephens, who rates Kellwood shares at “Market Perform,” said in a note to investors on Sept. 18 that Kellwood is undergoing significant change. In July, the company announced a major restructuring program to cut costs and focus on consumer lifestyle brands.

“We’re not sure investors fully appreciate the transition the company is undergoing,” he wrote. “Yes, we’re skeptical about the ultimate success of the transition, but we think Kellwood’s at least trying.”

“The general perception is that the brands (Kellwood has) are not that strong,” wrote Stephens. He said Sun Capital can “unlock a lot of value” in the company if it invests in more efficient manufacturing, distribution and marketing of existing Kellwood brands. “Kellwood has really been behind the eight ball, but the brands that are left are brands that are sustainable,” he added.

Sport Chalet Q2 same-store sales to drop

In a business update, Sport Chalet (Nasdaq: SPCHA and SPCHB) said it expects second-quarter same-store sales to decline between 2 percent and 3 percent.

For the quarter ended Sept. 30, the company anticipates second-quarter earnings per diluted share will range between break-even and $0.02 compared to earnings per diluted share of $0.12 in the prior year’s second quarter. The company predicted total revenue for the quarter between $97 million and $98 million, up from $91.3 million in the same period of the prior year.

“We have experienced uneven sales across our store base during the quarter,” Craig Levra, chairman and CEO of Sport Chalet, said in a statement. “As we entered the year, we planned for a certain level of sales pressure on select mature stores as a result of our backfilling strategy as well as from competition entering our markets. However, this sales pressure has been prolonged and exacerbated by softer-than-expected consumer trends, particularly in Southern California.”

Sport Chalet said it is taking a cautious approach in its outlook for the remainder of the fiscal year. Management expects full fiscal year net sales will increase moderately over fiscal 2007, while comparable store sales are expected to be flat to slightly below the prior fiscal year. Net income is expected to be slightly lower than last year as sales growth from new stores is offset by their costs, due to new stores taking time to reach operating efficiency. The company also noted that its third and fourth fiscal quarters include the holiday selling season plus the winter business and can therefore be difficult to predict.

Sport Chalet will report full financial results for the second quarter of fiscal 2008 in early November.

Analyst trims Q3 earnings forecast for Big 5, shares fall

Shares of Big 5 Sporting Goods (Nasdaq: BGFV) declined on Sept. 20, after an analyst trimmed his third-quarter earnings estimate for the company. In August, Big 5 warned third-quarter sales were being hurt by cooler weather on the West Coast, which slowed sales of products that sell better in warmer weather.

SunTrust Robinson Humphrey David Magee said in a client note that he expects weakness in the third quarter, noting that sales were soft in the second quarter. “We believe that macro pressures have likely persisted into the third quarter, which have kept a lid on sales, even after weather normalized in August,” Magee wrote.

Magee also noted that Sports Chalet, another retailer with stores concentrated in California, forecast disappointing results for its quarter ending in September.

Magee noted that about 55 percent of Big 5’s stores are located in California, as well, and lowered his third-quarter earnings estimate to $0.30, which is $0.02 below analyst expectations.

The company previously forecast earnings between $0.27 and $0.35 per share for the quarter.

Big 5 shares fell as much as $2.10 to $20.17 in afternoon trading on Sept 20, and closed at $20.31.

Bausch & Lomb shareholders OK buyout by Warburg Pincus

Bausch & Lomb (NYSE: BOL) shareholders voted in favor of its $3.67 billion takeover by private equity firm Warburg Pincus.

The company’s board agreed to the all-cash, $65-a-share buyout in May, prompting an unsolicited counter bid by rival Advanced Medical Optics. But Advanced Medical withdrew its $4.2 billion cash-and-stock offer in August, saying Bausch & Lomb had put up unrealistic hurdles to a potential deal.

During an eight-minute special meeting of investors, Bausch & Lomb CEO Ron Zarrella said shareholders representing more than two-thirds of the stock backed the takeover by Warburg Pincus, a buyout and venture capital firm in New York.

Last week, four proxy advisory firms recommended that shareholders support the deal.

Johnson Outdoors declares dividend

Johnson Outdoors’ (Nasdaq: JOUT) board of directors of a quarterly cash dividend of $0.055 per Class A share and $0.05 per Class B share. The quarterly cash dividend is payable on Oct. 25, 2007, to shareholders of record at the close of business on Oct. 11, 2007.

Cabela’s senior VP of retail strategy resigns

Cabela’s (NYSE: CAB) said Lynn P. Ferguson will resign as senior vice president of retail strategy and real estate development. Ferguson is resigning due to personal reasons, the company said. Until a replacement is found, Dennis Highby, Cabela’s president and CEO, will assume Ferguson’s responsibilities.

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