Outdoor financials: L.L. Bean records 3rd year of growth, K2 reports Q4 loss, plus Consoltex, Kellwood, Dick's, Sports Authority, Quiksilver, Gander Mountain, Big 5, Deckers, Oakley, Sportsman's Guide, Stride Rite
L.L. Bean records third consecutive year of sales growth, K2 reports Q4 loss on one-time $250 million charge, Consoltex sold to investment firm, Kellwood's sales down for Q4 and FY '05, Dick's fourth-quarter profit rises 28 percent, Same-store sales increases boost Sports Authority's bottom line, Quiksilver's FY '06 gets off to a shaky start, Gander Mountain shares jump on Q4 profit, Big 5 lowers 2006 guidance and shares sink to new low, Teva parent hires new CFO, Accounting snafus force Oakley to amend financial statements, Sportsman's Guide reports record results, and Saucony and Hind parent appoints senior staff.
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L.L. Bean records third consecutive year of sales growth
L.L. Bean reported net sales for 2005 increased for a third consecutive year, rising to $1.47 billion compared to $1.41 billion in 2004 â€“ a 4 percent jump. Though not as great an increase as the 9 percent jump from $1.3 billion in 2003 reported last year, Leon Gorman, L.L. Bean’s Chairman of the Board was very pleased and stated, “2005 was challenging for all retailers and yet L.L. Bean posted very solid results. We have a solid growth strategy in place, and once again we are pleased to be in the position of rewarding Bean people for their achievements.”
The company Board of Directors approved a cash award of 8 percent of annual pay to eligible employees.
Bean revealed that e-commerce grew 28 percent for the year, and for the first time ever emerged as the company’s dominant sales channel in the month of December. In addition, 2005 was the single largest year ever for new customer acquisition for the company, eclipsing the previous record established in 2004.Â Bean’s audited six year net sales history as reported by the company is (in billions): $1.17 in 2000; $1.2 in 2001; $1.17 in 2002; $1.3 in 2003; $1.41 in 2004; and $1.47 in 2005.
The company also announced that it contributed $2.8 million toward conservation, recreation, health and human services, education, and the arts.
A privately held company, L.L. Bean does not publicly disclose financials.
K2 reports Q4 loss on one-time $250 million charge
K2 Inc. (NYSE: KTO) reported a loss on fourth-quarter earnings as a result of a $250 million charge related to reassessing the value of certain intangible assets carried on the company’s books.
The fourth-quarter losses totaled $232.1 million, or $5.01 per share, including the charge, compared with a profit of $8.8 million, or $0.18 per share, a year ago. Revenue was up 4.3 percent to $353.5 million from $338.9 million in 2004.
Richard Heckmann, K2’s chairman and CEO, said the company wrote down the “goodwill and certain intangible assets” on its books because K2’s book value “significantly exceeded our market capitalization on the date of our annual impairment test.”
He added, “Due to the current accounting standards and valuation techniques used for measuring the value of intangible assets, a significant charge was necessary. As a result of the charges, our book value per share is now lower than the recent trading price of our stock. I would emphasize that this charge is non-cash, and does not have any impact on operations, or any material effect on any debt agreement or material contract at the company.”
Excluding the one-time charge, earnings were $0.28 per share, above analyst estimates of $0.26 cents a share, on sales of $342 million.
Net sales for fiscal year 2005 were $1.3 billion versus $1.2 billion in the prior year, an increase of 9.4 percent. Adjusted net income for fiscal year 2005 was $39.0 million, or $0.78 diluted earnings per share, compared to adjusted net income of $31.9 million, or $0.65 diluted earnings per share, for 2004.
In K2’s action sports segment, sales of winter products, in-line skates and paintball products totaled $173.8 million in the fourth quarter of 2005, a decrease of 2.5 percent from the 2004 fourth quarter, due primarily to the decline in paintball sales. For fiscal year 2005, excluding sales and operating profit from paintball products, non-cash intangible charges of $168.2 million and restructuring charges of $4.0 million, sales in the Action Sports segment were $400.2 million and operating profits were $26.9 million, including normal seasonal operating losses for Volkl and Marker of $9.1 million in the first and second quarters of 2005. Sales decline in 2005 was driven by paintball products, in-line skates and bike products (which were licensed in the third quarter of 2005) offset by growth in alpine skis, bindings and snowshoes, K2 reported.
In its apparel and footwear category, Earth Products, Ex Officio and Marmot had sales of $50.9 million in the fourth quarter of 2005, an increase of 15.8 percent over the 2004 period. For fiscal year 2005, operating profits declined to 9.0 percent from 10.0 percent of sales in 2004 due primarily to normal seasonal operating losses for Marmot of $1 million in the first quarter of 2005. K2 said sales growth was driven primarily by skate footwear and apparel, and winter and outdoor apparel.
Analysts praised the report, citing improved sales in a number of its sporting goods lines. Among the biggest boosts to quarterly profit was a better-than-expected ski season for the company, which is behind the K2 and Olin brands.
“The ski season was much better than anticipated, and K2 managed to grab market share in the United States and Europe,” said Roth Capital Partners analyst Russell Hoss in a report. “The company had solid sell-through leading to stronger reorder rates. With little inventory at retail, we believe next season could be higher by 5 percent to 10 percent.”
For fiscal year 2006, K2 forecasts 2006 sales in the range of $1.33 to $1.38 billion, with GAAP diluted earnings per share in the range of $0.73 to $0.76 and adjusted diluted earnings per share in the range of $0.82 to $0.86.
On March 8, K2’s stock opened at $10.75, traded as high as $11.19, and closed the day at $10.97. It jumped $1.23 on March 9 closing on the New York Stock Exchange at $12.20.
Consoltex sold to investment firm
Consoltex has been picked up by an affiliate of Sun Capital Partners, a private investment firm specializing in leveraged buyouts of market-leading companies, from American Industrial Partners.
Consoltex is a vertically integrated North American manufacturer, importer and distributor of woven, man-made technical fabrics, and is the largest textile manufacturer in Canada. Companies within the outdoor industry that use its textiles are Patagonia, GoLite, Isis Victorinox and EMS.
“We believe that Sun Capital is an excellent fit for Consoltex given its considerable experience in the manufacturing sector, including the home furnishings, retail, and fiber manufacturing industries,” said Marcel Thibault, CEO of Consoltex. “The combination of expertise and financial resources of Sun Capital and its affiliate will be invaluable to Consoltex as we continue to implement our strategic growth model and our international initiatives. With our focus on customer service, we intend to leverage our competitive advantages to expand market share.”
Sun Capital Partners said the Consoltex management team has done an excellent job in transitioning the business to compete with overall textile outsourcing trends, adding that it plans to grow sales and margins.
Kellwood’s sales down for Q4 and FY ’05
While fourth-quarter sales fell 4.5 percent, Kellwood Company’s (NYSE: KWD) profit skyrocketed 77 percent due to a $6.6 million one-time reversal of accrued restructuring costs. Among the company’s many brands are Sierra Designs and Kelty.
Net earnings for the fourth quarter were $12.5 million, or $0.49 per diluted share, versus $7.1 million, or $0.25 per diluted share, last year. Net sales for the fourth quarter totaled $473.4 million, as compared to $495.5 million last year.
“Our fourth-quarter results were ahead of our expectations and demonstrate meaningful progress toward meeting our restructuring, brand refocusing and balance sheet initiatives,” said Robert Skinner Jr., Kellwood chairman, president and CEO, in a statement. “During the quarter, we substantially completed our restructuring program. The total cost of the program will be below budget by approximately $70 million before tax, and $45 million after tax.”
Sales for fiscal 2005 declined 6 percent to $2.062 billion as compared to $2.200 in fiscal 2004. The net loss for the year was $38.4 million, or $1.42 per diluted share, compared to net earnings of $66.3 million, or $2.37 per diluted share in fiscal 2004. Included in the net loss for fiscal 2005 were restructuring and impairment charges of $86.0 million, or $3.17 per share, partially offset by a one-time tax benefit of $13 million for the repatriation of foreign earnings, according to the release.
Looking ahead to 2006, Kellwood said it continues to expect sales to be in the range of $2.0 billion, with net earnings estimated in the $44 million to $45 million range, essentially flat with fiscal 2005 net earnings from ongoing operations.
During fiscal 2005, Kellwood repurchased 2.2 million shares under its stock repurchase program at an average price of $24.99 per share completing approximately 80 percent of the board-approved program. There remains the lesser of $19.5 million, or 565,000 shares, available for repurchase under the original $75 million stock repurchase authorization.
Also, the company’s board declared a quarterly dividend of $0.16 per common share, payable March 31, 2006, to shareholders of record March 20, 2006.
Dick’s fourth-quarter profit rises 28 percent
Now that its Galyan’s acquisition is settling in, Dick’s Sporting Goods’ (NYSE:DKS) fourth-quarter earnings grew 28 percent, helped by a modest upswing in same-store sales and fewer charges from store closings and the acquisition.
Fourth-quarter profit rose to $54 million, or $1 per share, from $42.3 million, or 79 cents, the year before. Sales for the period totaled $849.5 million, an 8 percent increase from $788 million a year earlier. Same-store sales were up 4.1 percent.
For the year, Dick’s had net income of nearly $73 million, on revenue of more than $2.6 billion. That was up from income of $68.9 million, on revenue of $2.1 billion in 2004. Year-over-year earnings per diluted share were up 5 cents, to $1.35.
Dick’s said it continues to make the transition of integrating 48 Galyan’s stores, after acquiring the chain in 2004. The company expects to begin reporting its converted Galyan’s locations among its same-store sales earnings in the second quarter of 2006.
Edward Stack, chairman and CEO of Dick’s, called the last 18 months the most active in the company’s history. During that span, Dick’s opened 45 of its own new stores, in addition to the Galyan’s acquisition. He believes Dick’s handled the major new growth and change successfully.
“Meaningful comp store sales gains and earnings improvement signify that the Galyan’s conversion is completed,” Stack said. “We are well positioned to enter 2006, executing a plan of strong organic growth.”
Looking forward, Dick’s forecast first-quarter profit of $0.15 cents to $0.17 per share — including $0.07 of stock-option costs and $0.04 of store relocation expenses — and same-store sales growth of 3 percent to 5 percent. For all of 2006, the company also targeted profit of $1.77 to $1.81 per share and same-store sales growth at about 3 percent.
Same-store sales increases boost Sports Authority’s bottom line
Fourth-quarter earnings for The Sports Authority (NYSE:TSA) rose 18 percent — $29.8 million, or $1.10 per diluted share, compared with $25.3 million, or $0.96 per diluted share in the prior year’s fourth quarter — aided by higher sales, cost controls and better margins.
Total sales for the fourth quarter were $741.1 million compared with $713.8 million last year, a 3.8 percent increase. Same-store sales increased 2.4 percent.
“We exceeded our comparable sales expectations for the fourth quarter due to strong sales performances in active and outdoor apparel, fitness and team sports,” CEO Doug Morton said in a statement. “The favorable sales combined with improved gross margins and continued expense controls resulted in earnings exceeding our previous guidance.”
Net income for the full year was $55.4 million, or $2.06 per diluted share, compared with net income of $33.5 million, or $1.27 per diluted share, including merger integration costs, in the prior year. Excluding the effect of after-tax merger integration costs of $13.2 million, or $0.50 per diluted share, net income for the prior year was $46.7 million, or $1.77 per diluted share. Total sales for the fiscal year increased 3 percent to $2.509 billion compared with $2.436 billion in the prior fiscal year. Same-store sales for the year increased 1.5 percent.
The Sports Authority announced Jan. 23 that it had entered into a definitive agreement to be acquired by an investor group led by Leonard Green & Partners, L.P., and including members of The Sports Authority’s senior management team. They would take the company private for $37.25 per share, in a cash and debt deal worth about $1.3 billion. It’s expected to close in the second fiscal quarter.
Looking ahead, The Sports Authority forecast fiscal 2006 earnings of $2.35 to $2.40 per share, on a 2 percent gain in same-store sales. The forecast doesn’t include the impact of Sports Authority’s plans to go private in a management-led buyout.
The company, operating under The Sports Authority, Gart Sports, Sportmart and Oshman’s names, opened two new stores, relocated one store and closed one store during the fourth quarter to arrive at a total number of stores in operation as of Jan. 28, 2006, of 398 stores in 45 states.
Quiksilver’s FY ’06 gets off to a shaky start
Despite a 31 percent jump in profit, shares of Quiksilver (NYSE: ZQK) fell a day after its earnings report based on its revised 2006 quarterly guidance.
On March 9, Quiksilver shares closed down $0.13 at $14.14 on the New York Stock Exchange. But in midday trading on March 10, its shares fell $0.63 cents, or 4.5 percent, to $13.51, and fell as low as $13.02 in the morning session. It closed at xxx.
For the first quarter ended Jan. 31, 2006, Quiksilver earned $18.6 million, or $0.15 per share, compared with $14.2 million, or $0.12 per share, for the prior-year period. Revenue grew to $541.1 million from $342.9 million. Excluding stock option expenses, Quiksilver earned 18 cents per share.
Net revenues from the company’s newly acquired Rossignol and Cleveland Golf businesses totaled $192 million during the first quarter.
Net revenues in the Americas increased 39 percent during the quarter to $220.7 million from $159.3 million in the first quarter of fiscal 2005. European net revenues increased 97 percent to $261.2 million from $132.6 million last year. As measured in euros, European net revenues increased 118 percent for those same periods. Asia/Pacific net revenues increased 16 percent to $58.3 million from last year’s $50.5 million.
Quiksilver’s fourth-quarter results were in line with Wall Street estimates, but the company reduced its second-quarter outlook, citing improved estimates for expenses and revenue related to its Rossignol and Cleveland Golf businesses. The guidance also accounts for a challenging Asian market.
The company lowered its profit guidance to $0.06 cents per share from $0.17 cents per share, before stock compensation expenses. It also cut its revenue outlook by 2 percent to a range of $525 million to $530 million. Analysts forecast earnings of $0.17 per share on sales of $540.3 million for the quarter.
But Quiksilver also increased its third- and fourth-quarter guidance and revenue estimates to levels above Wall Street predictions, while maintaining its full-year 2006 guidance.
An analyst at Morgan Keegan & Co. issued a report maintaining an “Outperform” rating, saying that the shift in guidance shows the company is getting a better handle on Rossignol.
CIBC World Markets’ analyst maintained a “Sector Outperformer” rating, saying that while the earnings shift may cause some concern for investors, the company remains solid.
“We remain confident in our thesis that Quiksilver can make Rossignol work better, without sacrificing the core brands and we see great opportunity in the as yet undeveloped Rossignol apparel,” CIBC World Markets wrote in a note to investors. “Quiksilver remains our top idea for 2006, believing investors will be well rewarded for their patience.”
Gander Mountain shares jump on Q4 profit
Fourth-quarter profit for Gander Mountain (Nasdaq: GMTN) rose 26 percent, aided by strong holiday sales and robust equipment and fieldwear sales during hunting season, it said. Surpassing analysts’ average estimates, its shares jumped $2.16, or 33 percent, to $8.88 in premarket activity.
For the quarter, Gander Mountain reported net income of $22.2 million, or $1.45 per share, versus a prior-year profit of $17.5 million, or $1.21 per share. Revenue rose 18 percent to $280.8 million from $239 million a year ago. Analysts had forecast a profit of 87 cents per share on projected sales of $287.8 million. Same-store sales slid 7.4 percent during the quarter.
For the fiscal year ended January 28, 2006, sales increased 25 percent to $804.5 million. The net loss for the fiscal year was $13.3 million, compared with net income of $1.6 million for fiscal 2004. Comparable store sales decreased 6.0 percent for the fiscal year.
Gander Mountain said it plans to open six to eight new stores in 2006, including two relocations. The company currently operates 98 stores in 18 states.
Big 5 lowers 2006 guidance, shares sink to new low
Warmer weather in California and parts of the Southwest knocked Big 5 Sporting Goods’ (Nasdaq: BGFV) fourth-quarter profit down. Additionally, the retailer issued 2006 earnings guidance well below analysts’ expectations, ultimately causing its shares to tumble to a new 52-week low.
Big 5 stock was down $1.29 or 6.4 percent, to $18.94 in heavy morning trading March 10 on the Nasdaq. Shares earlier changed hands as low as $16.91, a new 52-week low, eclipsing the prior low of $19.98 reached in January.
For the fourth quarter, net income was $7.7 million, or $0.34 per diluted share, compared with net income of $9.5 million, or $0.42 per diluted share, for the fiscal 2004 fourth quarter. Net sales were $218.9 million versus net sales of $217.6 million in 2004. Net sales for the quarter increased by $12.4 million, or 6.0 percent, and same store sales increased 1.5 — its 40th consecutive quarter of positive same store sales comparisons.
In addition to unfavorable winter weather, the quarter included the impact of about $4.5 million of expenses linked to a transition to a new distribution center, which lowered quarterly profit by $0.12 per share. Sales of non-winter-related products were generally in line with the company’s expectations for the quarter.
Analysts, on average, projected fourth-quarter profit of $0.33 per share, including $0.06 to $0.07 per share in expenses for the distribution center, on $218.4 million of revenue.
For the 52 weeks ended Jan. 1, 2006, net sales increased by $31.8 million, or 4.1 percent, to $814.0 million from $782.2 million for the corresponding 53-week 2004 fiscal year. Net sales for the year increased by $45.9 million, or 6.0 percent, and same store sales increased 2.4 percent. Net income for fiscal 2005 was $27.5 million, or $1.21 per diluted share, versus net income for fiscal 2004 of $33.5 million, or $1.47 per diluted share.
Looking ahead, Big 5 projected earnings between $1.23 to $1.33 for the year, including stock option expenses and charges related to the new distribution center and other costs, compared with Wall Street expectations of $1.62 per share. Analysts’ estimates typically do not include one-time charges. The company expects to realize same store sales growth in the low to mid-single digit range for the first quarter and full year of fiscal 2006.
Analysts were reportedly alarmed by the fourth-quarter pretax charge of $4.5 million from its new distribution center. Big 5 also cited expenses related to its efforts to comply with Sarbanes-Oxley in 2005. The retailer expects those expenses to continue into 2006, giving Wall Street another cause for concern.
“Big 5 Sporting Goods continues to be hampered by distribution center inefficiencies and higher accounting/auditing costs. It remains unclear when distribution center problems will be corrected,” Stephens Inc. analyst Rick Nelson wrote in a research note. Stephens maintained its “Equal-Weight,” or “Hold,” rating of Big 5 Sporting Goods.
Big 5 opened 10 new stores during the fiscal 2005 fourth quarter, bringing its year-end store count to 324 stores. The company said it anticipates opening two new stores during the first quarter of 2006, and opening a total of approximately 20 new stores during fiscal 2006.
Teva parent hires new CFO
Deckers Outdoor Corp. (Nasdaq: DECK) has hired Zohar Ziv as chief financial officer and executive vice president of finance and administration, replacing Scott Ash who resigned from the position. Ziv reportedly has more than 25 years of experience in finance and accounting, serving in senior level positions with several large and mid-size public and private companies. Most recently, he was CFO for Emak Worldwide, a global marketing services firm with over $220 million in annual sales. He has also worked for Stravina Operating Company, Joico Laboratories, Intellisys Group, Inovison Holding L.P. and Flowserve Corp.
Accounting snafus force Oakley to amend financial statements
Oakley (NYSE:OO) said it will correct its accounting for derivatives, is revising its financial reports for 2004 to 2000 and is lowering its 2006 outlook. The company uses financial hedging instruments to manage its exposures to foreign currency. It said the accounting changes reduce its 2006 earnings estimate to $0.68 per share, down from its previous forecast of $0.73 per share. For 2004 to 2000, the accounting revisions increase Oakley’s earnings in some years but decrease them in others. The changes don’t effect Oakley’s sales, cash flows, cash position, loan compliance or dividends. Oakley plans to ask the SEC for more time to file its 2005 annual report, which it expects to do by March 31. The company said it considers the accounting lapse to be a serious problem that existed in its internal control over financial reporting as of Dec. 31, 2004. Oakley added that the revisions don’t affect its 2007 outlook, which reflected compound growth of at least 10 percent per year from the preliminary 2005 results.
Sportsman’s Guide reports record results
Net sales for the Sportsman’s Guide’s (Nasdaq: SGDE) fourth quarter were up nearly 10 percent to $95.2 million. Net earnings were $4.5 million, or $0.53 per fully diluted share for the fourth quarter of 2005, compared with $3.7 million, or $0.46 per share, reported in 2004. Earnings per share for 2004 reflect the 3-for-2 stock split, distributed April 15, 2005.
For full year 2005, consolidated net sales were $285.1 million, a 23 percent increase over the $232.5 million reported for 2004. It recorded net earnings of $11.5 million, or $1.38 per fully diluted share, for the year, an increase of 51 percent when compared with net earnings of $7.6 million, or $0.95 per share, for 2004.
Saucony and Hind parent appoints senior staff
The Stride Rite Corp. (NYSE: SRR) has promoted Michael Metcalfe to general manager of Saucony, and Shawn Neville to group president of Saucony and Keds, effective immediately. Also, the parent company has appointed Todd Dalhausser as Hind’s general manager, effective March 13. Other appointments include the promotion of Hind industry veteran Patty Kelly to director of product and the appointment of Thom Gridley as senior designer.
Most recently, Metcalfe was senior vice president of sales for Saucony since the technical running brand’s acquisition by Stride Rite in September 2005. As Saucony’s GM, he will oversee all major functions including operations, product development, marketing and sales.
Shawn Neville, president of Keds since 2004, is an industry veteran who brings a wealth of general management, sales and marketing experience to Saucony. His career consists of executive leadership roles, including president and CEO ofÂ Footstar’s athletic division and positions at Reebok, Visa USA and Procter & Gamble.
As Hind’s general manager, Dalhausser will oversee all major functions including operations, product development, marketing and sales. Prior to joining Hind, Dalhausser served as director of Eastpak North America, and before that as global product manager of apparel and accessories for Reebok International.
Kelly steps into her new role as director of product with an in-depth knowledge of the performance apparel industry. While working for eight years with Saucony’s Canadian division, Kelly oversaw the global launch of Saucony apparel in the spring of 2005. Gridley, Hind’s new senior designer, is the brand’s first in-house designer. He joins Hind after previous roles with Reebok, and most recently, as head of apparel design for New Balance.
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