Outdoor financials: Kellwood Q1 profit drops 20 percent, plus Sport Chalet, Quiksilver, Forzani Group, Eddie Bauer, Wellman, Dick's

Kellwood's Q1 profit dropped 20 percent, Sport Chalet's Q4 profit was cut in half by the dry winter, Quiksilver reported a Q2 loss, Forzani reported its first-quarter results, ISS reversed its position and backed Eddie Bauer's board nominees, Wellman's treasurer left the company,and Dick's added two board members.

Kellwood Q1 profit drops 20 percent
First-quarter profit for Kellwood Co. sunk 20 percent, as the company encountered weak demand for certain clothing lines, and acquisitions pushed its operating expenses higher. Kellwood is parent to Kelty, Sierra Designs, Slumberjack and Wenzel.

Quarterly earnings decreased to $7.4 million, or $0.28 per share, from $9.2 million, or $0.36 per share, during the same period last year.

Earnings from continuing operations, which excludes results from businesses that have been sold, or are in the process of being sold, increased to $5.9 million, or $0.23 per share, from $1.1 million, or $0.04 per share, last year during its restructuring.

Revenue decreased 2 percent to $484.4 million from $493.8 million in the same period a year ago.

Kellwood added that quarterly operating expenses increased 7 percent to $91.3 million from $85.4 million, due mostly to its acquisition of the Vince and Hollywould brands.

Additionally, Kellwood established second-quarter earnings guidance slightly below analysts’ estimates, citing expectations for softer sales of women’s and men’s sportswear.

Kellwood said that for the three months ending Aug. 4, it expects earnings from continuing operations, which would exclude businesses the company has sold or is in the process of selling, of $0.37 per share to $0.39 per share. The company said it expects revenue of $460 million to $470 million. Analysts are forecasting a quarterly profit of $0.40 per share on revenue of $469.1 million.

Kellwood said it expects weaker sales of its core women’s and men’s sportswear with greater strength in other soft goods.

The company also reiterated its fiscal year earnings guidance of between $1.80 per share and $1.89 per share on revenue in the range of $2 billion to $2.03 billion.

Kellwood said it continues to see a shift in customer demand toward creating its own private brands or selling exclusive brands from its wholesale partners. As a result, Kellwood said it will continue its move into higher –profile brands, better brands and above-price-point brands to fuel its growth.

Also, Kellwood declared a regular quarterly dividend of $0.16 per share. The company will pay the dividend on June 29 to shareholders of record on June 18.

Lastly, the company promoted Gregory W. Kleffner to chief financial officer to allow W. Lee Capps III to focus entirely on his responsibilities as chief operating officer.
Kleffner previously served as senior vice president of finance and controller at Kellwood. He joined the company in 2002 from Arthur Andersen LLP. Capps had held the post of CFO since 2000, and took on the additional role of COO in June 2005.

Sport Chalet Q4 profit cut in half by dry winter
One of the driest winters on record in Southern California — as well as in Nevada and Arizona — led to a 50 percent drop in fourth-quarter profits for Sport Chalet (Nasdaq: SPCHA and SPCHB).

Net income declined to $881,000, or $0.06 per diluted share, compared to $1.6 million, or $0.12 per diluted share, for the fourth quarter last year.

“While we made solid progress towards our long-term goals during the fourth quarter, our results did not meet our expectations following our record third quarter,” Craig Levra, chairman and CEO, said in a statement. “Unlike last year’s particularly strong late snowfall, we experienced exceptionally dry weather in California, Nevada and Arizona which impacted sales of winter apparel and equipment. However, we did generate positive growth within our non-winter products and are seeing earlier and improved sales of warm-weather merchandise.”

For the fourth quarter, sales increased 9.1 percent to $97.8 million from $89.7 million in the fourth quarter last year, which included sales from five stores opened in fiscal 2007 and one store opened in the fourth quarter of fiscal 2006 contributing $8 million.

Comparable store sales decreased 1.0 percent. The company, though, said this was more than offset by $1.3 million in additional sales from one extra day being reflected in its 2007 results. Excluding winter-related products, comparable store sales increased 2.5 percent.

Gross profit as a percent of sales decreased to 29.3 percent from 30.2 percent in the fourth quarter of last year. The 90 basis point decrease was primarily due to increased occupancy expense as a percent of sales in new stores, as they require time to reach operating efficiency. Selling, general and administrative expenses as a percent of sales increased to 27.7 percent from 27.0 percent last year, again primarily due to the impact of new stores.

Sales for fiscal year 2007 increased 13.1 percent to $388.2 million from $343.2 million from the prior year. Comparable store sales increased 2.0 percent for the year on top of the prior year’s 1.9 percent gain. Excluding winter related products, comparable store sales increased 2.1 percent.

Net income for fiscal 2007 was $7.1 million, or $0.50 per diluted share, compared to a net loss in fiscal 2006 of $87,000, or $0.01 per diluted share, including an after-tax charge of $7.8 million, or $0.56 per diluted share. Excluding that, net income in fiscal 2006 was $7.8 million, or $0.55 per diluted share.

Five new stores were opened in fiscal 2007 compared to four new store openings in fiscal 2006.

Quiksilver reports Q2 loss
Quiksilver, parent of Rossignol, swung to a fiscal second-quarter loss due to higher costs of goods and expenses.

The company (NYSE: ZQK) reported a loss of $4.8 million, or $0.04 per share, compared with a profit of $3.7 million, or $0.03 per share, a year ago.

Selling, general and administrative costs rose to $262.1 million from $215.8 million. Also, Quiksilver reported a loss of $7 million before a provision for income taxes, compared to the year-earlier quarter when it reported income before income taxes of $5.6 million.

Quarterly revenue climbed 17 percent to $603.8 million from $516.9 million in the prior year.

Net revenues in the Americas increased 12 percent during the second quarter of fiscal 2007 to $279.8 million from $250.0 million in the second quarter of fiscal 2006.

As measured in U.S. dollars, European net revenues increased 24 percent during the second quarter of fiscal 2007 to $268.8 million from $217.1 million in the second quarter of fiscal 2006. As measured in euros, European net revenues increased 13 percent for those same periods.

Asia/Pacific net revenues increased 12 percent to $54.0 million in the second quarter of fiscal 2007 from $48.2 million in the second quarter of fiscal 2006. Measured in Australian dollars, Asia/Pacific net revenues increased 3 percent for those same periods.

The company maintained its fiscal full-year earnings outlook at $0.53 per share on sales of about $2.5 billion. The company’s fiscal year ends Oct. 31.

Forzani reports first-quarter results
Forzani Group (FGL.TO), Canada’s largest sporting goods retailer, reported a higher first-quarter profit helped, it said, by a 5-percent rise in revenue. Its banners include Sport Chek, Sports Experts and Coast Mountain Sports.

It earned CDN $739,000 (USD $698,100), or 2 Canadian cents a share, for the period ended April 29, up from CDN $294,000, or 1 Canadian cent, in the same quarter a year earlier.

It said the 2007 results included a one-time loss of CDN $900,000 (USD $849,987) on the sale of an investment in a trademark licensing company. Excluding this, Forzani earned CDN $1.3 million (USD $1.2 million) or 4 Canadian cents a share.

Forzani said total revenue for the quarter, which includes corporate store sales, wholesale sales, service income, equipment rentals, franchise fees and franchise royalties was CDN $294.6 million (USD $278.2 million), up from CDN $280.4 million for the same time last year.

Same-store sales in corporate locations rose 0.4 percent in the quarter, while same store sales for franchises were up 9.6 percent.

(Conversion of Canadian dollars into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of June 5.)

ISS reverses position and backs Eddie Bauer board nominees
Eddie Bauer Holdings (Nasdaq: EBHI) reported that Institutional Shareholders Services (ISS), a leading independent proxy voting advisory firm, has changed its previous recommendation and is now advising its clients to approve the election of all nine members of the board of directors for one-year terms and to ratify the appointment of the company’s independent registered accounting firm. ISS continues to recommend approval of the 2007 amendment and restatement of the 2005 Eddie Bauer Holdings Inc. Stock Incentive Plan.

On June 6, Eddie Bauer sent a letter to ISS clarifying the nature of the tax fees paid by the company to its independent registered public accounting firm in 2006.

In its recommendation dated June 7, ISS concluded, “Previously, ISS did not support the ratification of the company’s auditors because other fees, given the disclosure available, represented more than 50 percent of total fees. Given the new disclosure, we are changing our vote recommendation to support the ratification of BDO Seidman as the company’s auditors for the current fiscal year. For similar reasons, ISS is changing its WITHHOLD vote recommendation of the Audit Committee members, and recommend a vote FOR independent outsiders John C. Brouillard, Laurie M. Shahon, and Kenneth M. Reiss.”

Wellman treasurer leaves company
In a filing with the SEC, Wellman (NYSE: WLM) said Vice President and Treasurer Audrey Goodman left the company, effective May 31.

It added that Goodman decided to leave the company in connection with the closing of its Shrewsbury office. The office was closed as part of the company’s plan to streamline operations and control costs.

Vice President and CFO Keith Phillips will assume treasurer responsibilities.

Dick’s adds two board members
Brian J. Dunn and Larry D. Stone have been elected to the board of directors of Dick’s Sporting Goods (NYSE: DKS). Dunn currently serves as president and chief operating officer of Best Buy Co. and has worked there for 22 years. Stone is president and chief operating officer at Lowe’s Companies and is a 37-year Lowe’s veteran.

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