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Outdoor financials: Kellwood swings to Q2 loss, lowers 2007 outlook, plus Quiksilver, Forzani, Crocs, Dick's

Kellwood swings to Q2 loss and lowers 2007 outlook, Quiksilver posts Q3 loss on one-time charges, Forzani Group's Q2 profit rises, Crocs' shares up as analyst praises continued growth, and Dick's president exercises options.

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Kellwood swings to Q2 loss, lowers 2007 outlook

Kellwood (NYSE: KWD) said it swung to a loss in its second quarter due to heavy charges and slightly lower sales in both the women’s and men’s sportswear divisions. The company owns a multitude of mainstream and outdoor brands including Sierra Designs, Kelty, Royal Robbins, Slumberjack, Ultimate Direction and Wenzel.

For the quarter ended Aug. 4, the company reported a loss of $65.8 million, or $2.54 per share, versus a profit of $7.2 million, or $0.28 per share, in the prior year quarter.

The results included charges of 1 cent per share from closing a California distribution center and impairment charges of $2.94 per share related to goodwill and intangible assets of certain women’s brands. Excluding those charges, the company earned $0.41 per share.

Revenue rose 1 percent to $465.4 million from $459.7 million in the second quarter of 2006.

Sales of women’s sportswear — the company’s largest division — and men’s sportswear both fell 2 percent while sales of other soft goods rose 14 percent.

The company lowered its 2007 earnings guidance due to a softer consumer spending environment. Kellwood said it expects ongoing earnings between $1.30 per share and $1.40 per share for the year with sales between $1.95 billion and $2 billion. The company had previously said its fiscal year earnings would be between $1.80 per share and $1.89 per share on revenue in the range of $2 billion to $2.03 billion.

“Based upon our results through the first half of the year as well as our more conservative stance due to the overall consumer spending environment, we have reduced our guidance for 2007,” said CEO Robert C. Skinner Jr. in a statement.

For the third quarter, the company said it would earn between $0.30 per share to $0.35 per share from ongoing operations with sales between $520 million and $535 million.

The company also said it would reorganize its women’s sportswear business to reduce its seven operating divisions to three and will close its Chico, Calif., distribution center. The company said it will realize annual cost savings for the changes between $25 million and $35 million starting in the fourth quarter. But the changes will also incur restructuring charges between $0.70 and $0.93 per share from the third quarter through 2008.

Quiksilver posts Q3 loss on one-time charges

Quiksilver (NYSE: ZQK), parent of Rossignol, swung to a fiscal third-quarter loss on one-time charges.

For the quarter ended July 31, Quiksilver posted a loss of $7.9 million, or $0.06 per share, compared with $5.3 million, or $0.04 per share, for the same quarter in 2006.

The recent quarter’s results included special charges of about $10.5 million from its planned acquisition of the minority interest in its Roger Cleveland Golf Co. subsidiary. Adjusted to exclude those special charges, the company said it posted profit of 2 cents per share.

Revenue rose 17 percent to $612.8 million from $525.9 million in the year-ago period.

“Our apparel and footwear and related businesses performed at a high level during the third quarter with gains coming from each region and brand in both our wholesale and retail businesses,” said Robert McKnight, chairman and CEO of Quiksilver, in a statement. “And as we enter the winter season, our order book for Rossignol, although below last year’s, continues to hold.”

Americas revenue increased 21 percent to $335.0 million, while European revenue rose 11 percent to $212.7 million and Asia/Pacific revenue increased 13 percent to $63.9 million.

Consolidated inventories increased 6% to $545.5 million at July 31, 2007, from $516.4 million at July 31, 2006. Consolidated trade accounts receivable increased 24% to $611.0 million at July 31, 2007, from $492.4 million at July 31, 2006.

In other company news: Quiksilver said it is developing a women’s line under the Quiksilver brand that “will offer the global 18- to 24-year-old women’s market a year-round range that is inspired by the spirit of Quiksilver, but interpreted from a timeless feminine perspective.” The project has been in development by a team of experienced designers, merchandisers and marketers who plan to unveil the fall 2008 collection in January.

Forzani Group’s Q2 profit rises

Forzani Group Ltd. (TSX: FGL), Canada’s largest sporting goods retailer whose banners include Sport Chek, Sports Experts and Coast Mountain Sports, reported a higher second-quarter profit.

The company earned CDN $5.4 million (USD $5.1 million), or CDN $0.16 a share (USD $0.15), in the three months ended July 29. That’s up from CDN $1.9 million (USD $1.8 million), or CDN $0.06 (USD $0.05) a share in the year-earlier period. Cash flow from operations increased to CDN $13.8 million (USD $13.0 million), or CDN $0.41 (USD $0.38) per share, from CDN $11.8 million (USD $11.2 million), or CDN $0.36 (USD $0.34) per share, in the prior year.

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 $292.4 million (USD $277.5 million), up from CDN $284 million (USD $269 million) for the same time last year.

Retail system sales for the quarter were CDN $351.3 million (USD $333.4 million), a 4-percent increase from the comparable 13-week sales of CDN $337.9 million (USD $320.7 million). Same-store sales in corporate locations rose 0.4 percent in the quarter, while same store sales for franchises were up 6.1 percent.

Combined gross margin for the quarter was 34.9 percent of revenue, or CDN $102.1 million (USD $96.9 million), compared to 34.0 percent, or CDN $96.7 million (USD $91.7 million) in the previous year. Both retail and wholesale margins improved over the prior year.

Store operating expenses, as a percent of corporate store revenue, were 27.8 percent against the prior year of 27.4 percent. Same-store operating costs were 26.5 percent of corporate store revenue, 26.2 percent in the prior year. Same-store costs, in absolute dollars, increased CDN $1.0 million (USD $950,000) or 2.0 percent.

General and administrative expenses were 7.6 percent of total revenue versus the prior year’s 8.3 percent. The absolute dollar decrease of CDN $1.4 million (USD $1.3 million) was a combination of standard year over year increases, offset by reduced accruals for performance-based compensation and reduced advertising expenses.

Earnings before interest, taxes and amortization were CDN $20.9 million (USD $19.8 million), compared to CDN $16.1 million (USD $15.2 million) for the 13-week period last year.

At the end of the second quarter, the company had 260 corporate stores and 228 franchise locations. This was a net increase of 86,923 square feet of retail selling space, a 1.5 percent increase versus the previous quarter. The company now has 488 stores from coast to coast versus 470 stores at this time last year.

The company also declared an annual dividend of CDN $0.30 per share (USD $0.28), payable quarterly, beginning in the fourth quarter of this fiscal year.

(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 Sept. 5.)

Crocs’ shares up as analyst praises continued growth

Shares of Crocs (Nasdaq: CROX) climbed Sept. 6 after an analyst lauded the company on its continued growth and better-than-expected results from its Mammoth product line.

Jeff Mintz of Wedbush Morgan Securities relayed in a client note that he was pleased with CFO Peter Case’s assessment of the company’s operations in a management call. Business is accelerating across Europe, with strength in Japan coming from its Jibbitz accessories line. The United States is benefiting from strong Internet sales and adult sports licensing, according to the company.

The Mammoth, a lined clog, has exceeded order expectations, with adult orders nearing 1 million pairs. “We believe the Mammoth could become the ‘must have’ item of this holiday season, and expect the company will have a difficult time meeting demand for the product,” Mintz wrote in a note to clients.

He maintained the company’s “Strong Buy” rating and $71 price target.

On Sept. 6, shares of Crocs added $2.52 to $58.45 in afternoon trading and closed at $58.40. The stock has traded in a 52-week range of $13.35 to $61.99.

Dick’s president exercises options

William Colombo, the president and chief operating officer of Dick’s Sporting Goods (NYSE: DKS), exercised options for 100,000 shares of common stock, according to a SEC filing.

In a Form 4 filed with the SEC on Sept. 4, Colombo reported he exercised the options for shares on Aug. 31 for $6 apiece, and then sold them the same day for $65 apiece.

Insiders file Form 4s with the SEC to report transactions in their companies’ shares. Open market purchases and sales must be reported within two business days of the transaction.

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