Outdoor financials: Kellwood's 4Q income drops, plus REI, Gander, Phoenix Footwear, L.L. Bean, adidas-Salomon

Kellwood’s 4Q income drops to $6.5 million
Kellwood Company (NYSE: KWD), parent of Sierra Designs and Kelty, reported that its fourth-quarter income slipped to $6.5 million, or $0.23 per share, from $13.3 million, or $0.48, last year. Net sales totaled $592.3 million, a gain of 14 percent from $521.1 million a year earlier.

The company said gross profit margin declined to 21.9 percent of sales last quarter from 20.2 percent the year before, hurt by weak demand and increased promotional activity in its women’s business, as well as from fashion and merchandise problems.

FY 2004 earnings fell to $70.1 million, or $2.50 per share, from $72.6 million, or $2.68 per share, in 2003. Net sales were 9 percent higher at $2.56 billion, up from $2.35 billion last year.

Based on orders for spring delivery, Kellwood’s sales in the first quarter of 2005 are expected to decrease by $46 million, or 7 percent and be in the range of $640 million versus $686 million last year. Sales for fiscal year 2005, which ends in January 2006, are expected to be in the range of $2.5 billion versus $2.556 billion in fiscal year 2004.

“We are obviously very disappointed with our fourth quarter fiscal 2004 and expected first quarter fiscal year 2005 results. It typically takes two seasons to get back on track in the fashion business. We got off track this past fall and holiday selling seasons and, as a result, the retailers have reduced their open-to-buy for some of our moderate priced brands for spring 2005. The company has taken the necessary corrective actions including upgrading design and merchandising talent to get back on track by fall 2005 which will begin shipping in July,” said Hal Upbin, Kellwood’s chairman and CEO.

Kellwood’s board of directors declared a regular quarterly dividend of $0.16 per common share, payable April 1, 2005, to shareholders of record March 21, 2005.

REI posts sales results of $887 million for 2004
REI reported 2004 sales of $887 million, up more than 10 percent from 2003’s $805 million. Its operating income increased from $56 million to $72 million, with $25.3 million in net income — up from $19.1 million in 2003. Comp store growth for 2004 was 5.3 percent versus 2.9 percent in 2003. Direct sales posted an overall gain of 11.3 percent, led by online sales growth from REI.com and REI-Outlet.com.

Also, nearly 2.5 million active REI co-op members will receive 10 percent refunds — totaling $44 million — on their eligible 2004 purchases. Based on 2004 results, the outdoor retailer also increased its financial support of environmental stewardship efforts to $2.5 million for 2005.

“In addition to paying a sizeable member refund and setting aside a record amount for donations, our strong 2004 results allow us to continue to invest in efforts that support both our continued business success and our members and employees,” said REI CFO Brad Johnson in a statement. “The strength of 2004 enables us to add retail stores, remodel existing stores, further develop REI Gear and Apparel products, expand distribution capacity and invest in our employee team.”  

In 2004, REI opened seven new stores in Hingham, Mass.; Henderson, Nev.; Hillsboro, Ore.; Encinitas and Rancho Cucamonga, Calif.; Rockville, Md.; and Houston’s Willowbrook community. It also relocated its Lynnwood, Wash., store and its Portland, Ore., store to the downtown Pearl District.

Gander ends 2004 on a rocky note
Despite a 30 percent rise in fourth-quarter sales, Gander Mountain Co. (Nasdaq: GMTN) also reported a 5.4 percent decline in comparable store sales, citing cannibalism and competition as contributing factors.

For the fourth quarter, sales were $237.2 million, an increase of $55.2 million over 2003. Comparable store sales were down 5.4 percent compared to an increase of 12.2 percent in 2003. Net income was $17.6 million, an increase of 42 percent over the $12.4 million in 2003.

Total sales for FY 2004 were up 31.2 percent to $642.1 million compared to $489.4 million in fiscal 2003. Comparable store sales decreased 2.5 percent, after an 11.5 percent increase in fiscal 2003. The company reported net income for the year of $800,000, compared with net income of $700,000 in fiscal 2003. The company opened 19 stores in fiscal 2004 versus 10 in fiscal 2003, incurring pre-opening expenses of $9.1 million in fiscal 2004 compared to $5.7 million in fiscal 2003.

Like many other companies, Gander is restating its reported financial statements to reflect a change in its accounting treatment for leases based on feedback from the SEC. The changes will reduce previously reported results by about $8 million before taxes, and result in a $1.7 million charge for fiscal 2004. Excluding the impact of the lease-related accounting adjustments, the company reported net income for the year of $2.5 million, compared with net income of $1.5 million in fiscal 2003.

“We certainly are not satisfied with our bottom-line results in 2004. However, we remain confident in our ability to grow this business profitably in 2005 and beyond,” said Mark Baker, president and CEO.

Gander Mountain said it expects total sales to exceed $850 million in 2005 — an increase of at least 32 percent — and same-store sales to rise by at least 2 percent. Income before taxes is expected to rise to more than $16 million this year, up from $800,000 a year ago. In fiscal 2005, the company added that it anticipates opening 18 to 20 stores, including store relocations and consolidations.

Phoenix reports 4Q, FY ’04 results
Phoenix Footwear Group (Amex: PXG), parent of Royal Robbins, H.S. Trask, Trotters, SoftWalk and Altama, said that net sales for the fourth quarter increased 83 percent totaling $20.7 million compared to $11.3 million in 2003. It also reported a fourth-quarter net loss of $624,000 or $0.08 per diluted share compared to net income of $108,000 or $0.02 per diluted share for the fourth quarter of 2003.

The fourth-quarter net sales increase includes $6.9 million of new revenue associated with the Altama brand acquisition, completed during the third quarter of 2004. Excluding Altama, Phoenix’s Trotters, SoftWalk, H.S. Trask and Royal Robbins brands generated organic growth of 12.9 percent during the fourth quarter as compared to pro forma net sales for these brands during the prior year quarter.

Gross margin for the 2004 fourth quarter was 35.4 percent, compared to 2003’s 43.1 percent. Phoenix said the decrease in gross margin percent was primarily related to increased mark downs and close-out activity associated with retail market conditions and the its liquidation of slow moving inventory. It added that its gross margins were negatively affected by the inclusion of the Altama brand gross margins which generate lower gross margins than our other branded products.

For FY 2004, net sales increased 95 percent totaling $76.4 million versus $39.1 million in 2003. Net income was $3.0 million, compared to net income of $941,000 in 2003. Net income per diluted share for the full year 2004 was $0.48, as compared to $0.22 for the comparable prior year period. Gross margin for the full year 2004 was 41.3 percent, compared to last year’s 42.5 percent.

Chairman James Riedman, Chairman said in a statement, “We posted strong revenue growth and profitability in 2004, doubling the size of our business. While we are disappointed with our sales results, namely at our Altama and Trotters units, we are actively managing these brands to improve their results through investments in new products and increased sales support, and early returns are encouraging.”

The per share amounts for the fourth quarter and full year ended January 1, 2005 include the effect of 2.9 million shares issued during fiscal 2004.

L.L. Bean nets $1.4 billion in 2004
L.L. Bean reported that its FY 2004 net sales were $1.4 billion, up 9 percent over 2003’s $1.3 billion. Also, its board of directors approved a 12.5-percent cash bonus to eligible employees and a $150 cash award to seasonal employees, recognizing their contributions to the retailer’s sales success. All sales channels — catalog, web and retail — delivered positive year-over-year results, it said. It was L.L. Bean’s single largest year ever for new customer acquisition. Also, 2004 same-store retail sales posted a 7-percent gain over 2003. For 2005, the company plans to invest in retail expansion and technology initiatives. Budgeting six retail stores in the 2005 to 2007 period in the New England/Mid-Atlantic region, it will begin with a factory store conversion in West Lebanon, N.H., in 2005, followed by two new stores in 2006 and three in 2007. It also plans to upgrade its website, its fastest growing channel, and invest in customer service technology, retail point-of-service systems and customer database capabilities.

adidas-Salomon raises dividend, plans buyback
adidas-Salomon (ADSG.DE) has raised its annual dividend by 30 percent and plans to buy back up to 10 percent of its stock. The company said it would pay 1.30 euros per share for 2004, up from 1 euro in 2003, and aimed to increase its long-term payout to 15 percent to 25 percent of net income from 15 percent to 20 percent at present. Orders in Europe, where adidas generates half of its sales, stood flat at the end of 2004 after a 4 percent drop in the third quarter amid a subdued consumer climate. Despite a difficult European market, it said orders should pick up in the second half from sales from the 2006 World Soccer Cup in Germany. Global orders at adidas were up 7 percent at the end of 2004. European orders are still much weaker than at the end of 2003, when the backlog was up 6 percent. In North America, orders were up 7 percent on a currency-neutral basis at the end of 2004, while orders in the booming Asian region were up 44 percent. adidas said operating margin will reach a record level in 2005. Its gross margin grew 2.3 percent percentage points to 47.2 percent in 2004. adidas said it still expects 2005 net income to grow by 10 percent to 15 percent. adidas shares rose 6.1 percent to Euro 119.26 (USD $159.68) on March 9, making it the top gainer in Germany’s DAX . (Conversion of Euros or other foreign currency into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of March 9.)

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