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Outdoor financials: Prana acquires Scapegoat and Timberland net loss widens in Q2, plus K2, Jarden, Garmin buys Italian distributor, Sport Chalet, VF, Cabela's, Liz Claiborne, Big 5

Prana acquires Scapegoat technical outerwear, Timberland net loss widens in Q2, Jarden and K2 reduce termination fee, Garmin buys Italian distributor Synergy, Sport Chalet reports Q1 '08 net loss, VF forms joint venture in Japan, Cabela's 2Q profit rises on strong revenue gains, Prana-parent Liz Claiborne Q2 income plummets 65 percent, K2 prices tender offer for senior notes, and Big 5 Q2 profit falls.

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Prana acquires Scapegoat technical outerwear
Prana has acquired Scapegoat, a technical outerwear manufacturer that launched its first line in January 2007. The line will now be called Scapegoat by prAna. Scapegoat founders Jason Olden and Eric Lyon and prAna. Prana acquired the Scapegoat brand to help the company begin to fulfill a long-standing desire to develop and extend the Prana brand into new category areas according to Prana founder and CEO Beaver Theodosakis.

In its official press release announcing the acquisition, Prana stated, “Scapegoat addresses the savvy male consumer who values a seamless combination of purposeful function with classic form. The collection is a modern interpretation on mountain outerwear, urban style and classic American work wear and features the highest quality technical fabrics and innovative construction techniques.”

Under separate multi-year agreements, Olden and Lyon will be working with prAna on ongoing design and development for Prana’s outerwear, sportswear and other performance categories.

Timberland net loss widens in Q2

Timberland (NYSE: TBL) said its second-quarter loss widened, hurt by revenue declines in its boots, kids and apparel categories.

Quarterly loss totaled $19.2 million, or $0.31 per share, from a loss of $16.6 million, or $0.26 per share in the year ago period. Revenue fell 1 percent to $224.1 million from $226.6 million. A weaker dollar helped revenue by $4.3 million, or 1.9 percent.

The company said sales of its casual footwear and Timberland PRO professional work shoes were offset by declines in its boots and kids business as well as declines in its apparel business.

International revenue grew 7.5 percent, or 3.4 percent on a constant dollar basis, supported by growth in the casual footwear and outdoor businesses, which offset declines in the apparel business. U.S. revenues decreased 8.5 percent, due to declines in boots, kids’ sales and apparel business, offsetting growth in Timberland PRO series footwear and gains in SmartWool brand apparel and accessories.

Second-quarter results reflected global gains in casual footwear, SmartWool and Timberland PRO series businesses. Global footwear revenues of $154.5 million were up 2.5 percent compared to the prior year period as strong sales in casual footwear and in Timberland PRO series offset declines in boots and kids’ products. Apparel and accessories revenue decreased 7.0 percent to $66.5 million driven by declines in Timberland apparel, which were partially offset by strong growth in SmartWool.

Global wholesale revenue decreased by 3.3 percent to $150.9 million. Worldwide consumer direct revenue increased 3.8 percent to $73.2 million reflecting strong sales in Asia and gains in foreign currency. Overall, global comparable store sales declined 6.2 percent reflecting decreases in the United States, Europe and Asia.

The operating loss for the quarter was $31.5 million, compared to a loss of $20.2 million in the prior year period. The operating loss excluding some restructuring costs was $30.5 million.

Timberland said its boots and kids products are likely to lose $100 million of sales globally in 2007. The company said revenue will likely decline by low single digits compared to the prior year.

Lower sales, more promotional activity and higher product costs will hurt operating margins, likely to fall 3.5 percent from last year, excluding restructuring costs, Timberland said.

For the third quarter, Timberland expects revenue to fall in the mid- to high-single digit range. For the fourth quarter, it expects flat revenue and a flat operating margin, partly from cost-cutting earlier in the second half of the year.

In addition to the Timberland brand, the company markets products under the SmartWool, Mion and GoLite.

Jarden and K2 reduce termination fee

According to filings with the SEC, Jarden (NYSE: JAH) and K2 Inc. (NYSE: KTO) have reduced the fee Jarden will receive if its acquisition of K2 is cancelled. In separate filings, Jarden and K2 reported they have cut the termination fee to $24 million, from $27.5 million.

K2 said it settled in principle pending litigation over the upcoming acquisition with the City of Roseville Employees Retirement System. The terms of the settlement required the companies to lower the fee.

In April, Jarden said it would buy K2 in a cash and stock deal valued at about $15.50 per share, or $765.9 million.

Garmin buys Italian distributor Synergy
Garmin has announced the company has signed a letter of intent to buy Synergy, the company’s Italian distributor. Terms of the transaction were not announced.

The company indicated in its official release that it would be retaining all 40 of the Italian management, sales and marketing team.

Synergy will change its name to Garmin Italia S.p.A once the deal is approved and it closes.

This move is the latest by Garmin in Europe this year, as the company seeks to strengthen its position against Tom Tom, a Dutch company that is currently the dominant player in Europe for handheld GPS and navigation devices.

Earlier in 2007, Garmin made similar deals to acquire its French, German and Spanish distributors.

Sport Chalet reports Q1 ’08 net loss
Sport Chalet (Nasdaq: SPCHA and SPCHB) posted a first-quarter net loss, saying it reflected a more challenging sales environment given current economic concerns as well as the ramp up of its new stores

Net loss for the first quarter was $664,000, or $0.05 per diluted share, compared to net income of $530,000, $0.04 per diluted share, for the same period of fiscal 2007.

Sales increased $7.1 million, or 8.5 percent, to $91.6 million for the first quarter of fiscal 2008 from $84.4 million for the same period last year. Sales from seven new stores opened in the last year contributed $7.9 million in sales on a same day basis. Same-store sales increased 1.3 percent compared to the first quarter of fiscal 2007.

Gross profit as a percent of sales decreased 70 basis points to 28.6 percent from 29.3 percent in the first quarter of last year.

VF forms joint venture in Japan

VF Corp. (NYSE: VFC) has formed a joint venture with Mitsui & Co. Ltd. to market sportswear products in Japan. The two companies will oversee distribution and advertising of the Napapijri brand. VF said the joint venture will open additional stand alone stores and increase distribution to specialty and department stores. Masato Fujino will oversee the joint venture, called Napapijri Japan Co., which will be based in Japan.

Cabela’s 2Q profit rises on strong revenue gains
Second-quarter profit for Cabela’s (NYSE: CAB) increased 35 percent as revenue gains outpaced an uptick in expenses.

The company reported net income of $11.3 million, or $0.17 per share, compared with $8.4 million, or $0.13 per share, last year.

Revenue rose to $452 million from $387.3 million in the second quarter of 2006 and all business segments posted gains.

Shares of Cabela’s jumped more than 15 percent to hit a new year high in Aug. 3 trading, following the second-quarter earnings report and an upgrade from Wachovia Securities.

Shares rose $3.23, or 15.6 percent, to $23.97 in morning trading. Earlier in the session, shares traded as high as $28.80, eclipsing a previous 52-week high of $26.49.

Ralph Jean, a research analyst at Wachovia Securities, upgraded Cabela’s to “Outperform” from “Market Perform” in a client note, saying the company should be able to sustain continued improvements in the second half of 2007, including strong same-store sales.

Jean also raised his earnings-per-share estimates for the full year to $1.50 from $1.47, adding that the revised estimate is “conservative.”

Prana-parent Liz Claiborne Q2 income plummets 65 percent

Liz Claiborne (NYSE: LIZ), parent of Prana, said second-quarter net income fell 65 percent as wholesale revenue continued to be weak and the company took charges for restructuring.

Net income in the April-June period fell to $13.6 million, or $0.13 per share, from $39.4 million, or $0.38 per share, in the year-ago period. Adjusted to exclude restructuring costs, net income declined $0.26 per share compared to the prior-year period’s adjusted earnings of $0.45 per share.

Revenue edged up less than 1 percent to $1.13 billion. A weaker dollar helped international sales by about $18 million, it said.

The company said sales at its direct brands segment rose 26 percent to $494 million. Sales at its partnered brands segment fell 13 percent to $637 million, hurt by weak wholesale results.

The quarterly report came as Liz Claiborne is undergoing a makeover, reducing its holdings to fewer but more powerful brands. Facing a declining department store business and changing consumer tastes, it said it will cut as many as 800 jobs, or up to 9 percent of its work force, and is considering whether to sell, license or shut down 16 brands.

K2 prices tender offer for senior notes
K2 Inc. (NYSE: KTO) said it has determined the pricing for its previously announced cash tender offer to purchase any and all of its outstanding 7 3/8 percent Senior Notes due 2014.

The total consideration for the notes was determined using the yield of the 3.625 percent U.S. Treasury Note due July 15, 2009, plus a fixed spread of 50 basis points and based on the scheduled initial payment date, as defined in the offer to purchase, of Aug. 8, 2007. The yield on the reference security was 4.628 percent and the tender offer yield was 5.128 percent.

Accordingly, the total consideration, excluding accrued and unpaid interest, for each $1,000 principal amount of notes is $1,073.56, which includes a consent payment of $30.00 per $1,000 principal amount of the Notes. The tender offer consideration, excluding accrued and unpaid interest, for each $1,000 principal amount of notes validly tendered after the consent date but at or prior to the expiration date is $1,043.56.

In addition, K2 announced that approximately $198.96 million of outstanding notes, or approximately 99.5 percent of the aggregate principal amount of notes outstanding, had been validly tendered and not validly withdrawn on or prior to the consent date.

Big 5 Q2 profit falls
Big 5 Sporting Goods’ (Nasdaq: BGFV) fiscal second-quarter earnings fell 20 percent as sales at established stores fell slightly for the first time in more than 11 years.

Quarterly net income fell to $5.9 million, or $0.26 per share, from $7.4 million, or $0.33 per share in the year-ago period. Revenue rose 3 percent to $217.8 million from $211.8 million last year. Same-store sales edged down 0.2 percent during the quarter.

The company said footwear and apparel category sales were down while sales of other products rose.

Additionally, the company said third-quarter sales are being hurt by a “challenging” retail environment and unfavorable weather on the West Coast. It expects earnings between $0.27 and $0.35 per share for the quarter. And, it anticipates same-store sales growth to be in the negative low single digits to the positive low single digits.

For fiscal 2007, the company expects earnings between $1.22 to $1.42 per share. The company expects same-store sales growth in the same range as the third quarter.

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