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Revenues jump 35 percent for VF’s outdoor segment
VF Corp. (NYSE: VFC) reported a 25 percent rise in first-quarter profit, driven by higher sales of outdoor wear, sportswear and jeans. Its brands include The North Face, JanSport, Eastpak, Napapijri and Vans.
For the quarter, VF reported net income of $128.2 million, or $1.14 per share, versus a prior-year profit of $102.9 million, or $0.89 per share. Revenue rose to $1.67 billion from $1.58 billion in the year earlier period. It beat analyst projections of $1.11 per share on sales of $1.65 billion.
VF said its outdoor team “delivered another outstanding quarter” with a 35 percent increase in total revenues, driven by particularly strong global growth in The North Face, Vans and Napapijri brands. The addition of the Reef brand, acquired in April 2005, also contributed $42 million to revenues in the quarter.
Revenues of The North Face grew approximately 40 percent, while revenues of Vans and Napapijri both achieved mid-teen percentage growth rates. It also said that its packs business grew modestly in the quarter, driven by higher Eastpak brand sales in Europe. But the strong volume gains achieved by The North Face and Vans were the primary drivers behind a 59 percent increase in operating income in the quarter, with total outdoor operating margins rising two full percentage points to 13.1 percent.
During its conference call, VF management said acquisitions would remain a top priority. It also said it planned to use spare cash for dividend payments and share repurchases.
“We’re aggressively on the hunt,” said a company representative in the call with analysts and investors. He declined to comment on whether the company was considering buying outdoor apparel maker Eddie Bauer Holdings, which is rumored to be on the sales block, but said, “We certainly do like the outdoor category.”
The company noted that sales and earnings would be strongest in the second half of the year. “Our results this quarter have given us increased confidence in our ability to deliver even stronger revenues and earnings this year than previously anticipated,” Mackey McDonald, VF’s chairman and CEO, said in a statement.
VF projected 2006 earnings would increase 9 percent to about $4.95 per share, up from a previously expected increase of 6 percent. The company reported earnings of $4.54 per share in 2005. Full-year revenue is expected to increase from 6 percent to 7 percent, aided by stronger than expected jeans sales and outdoor wear, it said.
VF also projected that second-quarter earnings would be roughly unchanged from the $0.85 per share it reported in the year-earlier period, while revenue is expected to rise from 6 percent to 7 percent. For this year’s second half, the company forecast earnings per share would increase 10 percent, and revenue would expand from 7 percent to 8 percent.
Additionally, the board of directors declared a regular quarterly cash dividend of $0.29 per share, payable on June 19, 2006, to shareholders of record as of the close of business on June 9, 2006.
Deckers Q1 profit drops 36 percent, as well as Teva and Ugg sales
First-quarter profit for Deckers Outdoor Corp. (Nasdaq: DECK) fell 36 percent as revenue dropped 13 percent. The company also cut its second-quarter guidance to below Wall Street estimates.
Deckers earned $5.6 million, or $0.44 per share, compared to $8.9 million, or $0.69 per share, for the same quarter in 2005. Revenue fell to $56 million from $64.3 million in the year-ago period. Results did beat analyst expectations: $0.24 cents per share on revenue of $50.3 million.
Teva net sales for the first quarter were down — $34.7 million compared to $39.4 million in the same period last year — as well as Ugg net sales — $17.8 million versus $22.5 million a year ago. The shining star was Simple, which had a 49.6 percent increase in net sales — $3.5 million compared to $2.4 million for the same period last year. Deckers attributed Simple’s nearly 50 percent sales jump to its new Green Toe collection, which has opened several new accounts for the company. All sales figures include both the wholesale divisions and the consumer direct (Internet, catalog and retail outlet division) business.
Sales for the consumer direct business, which are included in the brand sales numbers, increased 31.6 percent to $6.5 million for the first quarter of 2006 compared to $5.0 million in 2005.
Gross margin for the first quarter of 2006 was 44.1 percent, compared to 46.0 percent for the first quarter of 2005, primarily due to higher closeouts and inventory write-downs. Selling, general and administrative expenses were $15.8 million or 28.2 percent of net sales for the first quarter of 2006 compared to $15.2 million or 23.6 percent of net sales in the first quarter of 2005. Overall, inventories decreased to $31.3 million at March 31, 2006, compared to $45.4 million at March 31, 2005.
The company reiterated its previous second-quarter sales guidance of $38 million to $40 million, but said it was reducing its earnings prediction to $0.03 to $0.05 per share from $0.09 to $0.11 per share, as a result of a change in sales mix and a shift of some expenses from the first to the second quarter. Analysts expect second-quarter earnings of $0.11 per share on $38.7 million in sales.
But Deckers increased its guidance for the full-year 2006, saying it now expects to post earnings of $2.21 to $2.29 per share on sales of $268 million to $276 million, up from its previous estimate of $2.05 to $2.15 per share on sales of $260 million to $270 million. The estimate includes about $2.1 in equity compensation expenses, including $700,000 in additional stock compensation expenses. Analysts expect the company to post a full-year profit of $2.14 per share, including all stock compensation expenses, on sales of $268.6 million.
On April 27, it closed at $42.07, down $0.11, on the Nasdaq.
Just days prior to its quarterly report, shares of Deckers were up after Standard & Poor’s, the credit rating and index division of McGraw-Hill Cos., included the stock in their S&P SmallCap 600 index. Deckers shares rose $2.90, or 7.1 percent, to $43.64 in morning trading on the Nasdaq. It closed at $42.82. Shares of Decker have traded between $16.92 and $44.27 over the past 52 weeks.
On the index, Deckers replaces J. Jill Group, which is being acquired by Talbots, taking its spot on May 1. Inclusion into the index gives stocks an immediate catalyst because so many large mutual funds are based on the index’s composition. Once a stock is added to the index, money managers typically must buy shares as they readjust their portfolios.
Columbia shares drop sharply after Q1 earnings report
Columbia Sportswear (Nasdaq: COLM) reported lower quarterly net profit, as profit margins in Europe fell on a competitive climate and on promotional costs.
Net income in the first quarter was $19.5 million, or $0.52 per share, compared with $21.3 million, or $0.52 per share, in the year-ago period. Columbia had fewer outstanding shares in the first quarter of 2006. Analysts, on average, had expected earnings per share of 45 cents, excluding items.
Columbia said that sales rose 6 percent in the quarter to $260.2 million from $245.7 million, with outerwear rising 8 percent and sportswear increasing 7 percent.
The company said that gross profit margins in Europe narrowed because of the “challenging competitive environment, foreign currency hedge rates and costs associated with certain promotional campaigns.” Selling and operating expenses also increased as the company made new hires and paid stock-based compensation.
Consolidated backlog increased 12 percent to $848.9 million at the end of March.
For the second quarter, Columbia said it expects earnings per share of $0.03, including stock-based compensation of about $0.05, on sales growth of 10 percent to 12 percent. Analysts are anticipating earnings per share of $0.15 cents, excluding items. Columbia is also forecasting full-year earnings of $3.18 per share on net sales growth of 10 percent. Analysts are looking for 2006 earnings of $3.35 per share.
Columbia’s shares fell sharply the day after its report, pressured by cautious brokerage after the company reported lower quarterly profit and forecast full-year results below analysts’ expectations. Shares of Columbia Sportswear shed $3.37, or 6 percent, to $51.64 on the Nasdaq. The stock hit a 52-week high of $57.65 on April 21 and is up 8 percent so far this year.
Columbia “created too broad of a product assortment, losing economies of scale, and as competition increased it became more aggressive on pricing to fight for market share,” UBS analysts wrote in a client note in which it raised concerns about the pace of recovery in the company’s gross margins. “Essentially, the Columbia story has become one of margin recovery, which we believe could take longer than originally anticipated to materialize,” it added.
UBS also cut its opinion on the company to “Neutral” from “Buy” and reduced its price target to $52 from $64.
Separately, Susquehanna Financial Group also cited competition and lower prices as concerns. “The U.S. outerwear business continues to be difficult and we do not expect a full turnaround until the fall 2007 selling season,” the brokerage wrote in a note. “We remain particularly concerned about the health of Columbia’s key domestic outerwear business, which now appears to be competing heavily on price in an effort to regain market share,” the brokerage added. It also backed its “Neutral” rating on the company.
K2’s apparel division posts 10.6 percent sales increase
K2 Inc. (NYSE: KTO) posted a 57 percent rise in quarterly net profit and a 9.4 percent rise in sales, boosted by strong sales in its apparel, team sports and marine equipment businesses.
First-quarter net income rose to $3.6 million, or $0.08 per share, from $2.3 million, or $0.05 per share, in the year-ago quarter. Adjusted earnings, which exclude amortization and stock-compensation expenses, rose to $5 million, or $0.10 per share, from $4 million, or $0.08 per share, last year. Analysts said they expected earnings of $0.09 a share. Sales rose 9.4 percent to $348.1 million from $318.3 million last year, beating analysts’ forecast of $329 million.
K2’s gross profit as a percentage of sales in the first quarter of 2006 stayed constant at 32.3 percent compared to the first quarter of 2005. K2’s operating profit, as a percentage of net sales for 2006 increased to 3.6 percent compared to 3.1 percent in the comparable 2005 period. For the first quarter of 2006 consolidated selling, general and administrative expenses, as a percentage of consolidated net sales decreased to 28.7 percent compared to 29.2 percent of net sales for the first quarter of 2005, it said.
K2 noted that the first quarter is a seasonally slow quarter for its action sports division as it reported a 13.4 percent decrease in sales. Sales of winter products and in-line skates were $56.1 million in the first quarter of 2006. The company said the sales hit was partially from licensing bikes to a third party in the third quarter of 2005. The operating loss was $10.9 million, a decrease in the loss of 6.1 percent from the first quarter 2005 loss of $11.6 million primarily due to a decline in selling and general and administrative costs.
K2’s apparel and footwear segment, made up of Earth Products, Ex Officio and Marmot had sales of $36.4 million in the first quarter of 2006, an increase of 10.6 percent over the 2005 period partly due to an increase in sales of Marmot and Ex Officio products. The operating loss for the first quarter of 2006 was $1.8 million compared to an operating profit of $900,000 in the first quarter of 2005. K2 said the decrease in profit was due to start up expenses associated with the opening of a new distribution center in Reno, Nev., and integration expenses for combining design, development, and sourcing for several apparel brands.
Its marine and outdoor segment — made up of Shakespeare fishing tackle and monofilament and Stearns marine and outdoor products — generated sales of $123.1 million in 2006, an increase of 9.5 percent from 2005, and its team sports division had total sales of $132.5 million in the 2006 first quarter, up 22.4 percent from the 2005 period.
K2 reiterated its full-year forecast for adjusted earnings between $0.82 per share and $0.86 per share on sales between $1.33 billion and $1.38 billion.
Rocky Q1 sales slip
The double hit of a decline in footwear sales to the military and lower-than-expected results in outdoor footwear category dragged Rocky Shoes & Boots’ (Nasdaq: RCKY) first-quarter sales down to $57.5 million compared to $61.5 million a year ago. Military sales were $900,000 this quarter compared to $3.7 million in the same period last year.
Net income was also down — $900,000, or $0.16 diluted earnings per share, in 2006 versus $1.1 million, or $0.20 diluted earnings per share last year. Net income for the first quarter of 2006 includes $94,000 in stock compensation expense required by current accounting standards compared with no stock compensation expense last year. Excluding the stock compensation expense, the company said diluted earnings per share for the 2006 first quarter would have been $0.18.
Gross margin in the first quarter of 2006 was $24.9 million, or 43.3 percent of sales, compared to $24.2 million or 39.4 percent of sales, for the same period last year. The 390 basis point increase was primarily due to the decrease in shipments to the U.S. military this year compared to last. Military boots are sold at lower gross margins than branded products, it said.
Selling, general and administrative expenses were $21.8 million, or 37.9 percent of sales for the first quarter compared to $20.7 million, or 33.6 percent of sales, a year ago. The company took a $600,000 hit from the curtailment of its benefit pension plan. Income from operations was $3.1 million or 5.5 percent of net sales for the period from $3.5 million or 5.8 percent of net sales in the prior year.
For 2006, Rocky said it remains comfortable with its previously updated guidance and expects revenues to be in the range of $287 million to $292 million, and diluted earnings per share to be in the range of $2.28 to $2.38, including a non-cash charge of approximately $0.07 per share related to stock option expensing.
Johnson Outdoors receives tent orders from military
Johnson Outdoors (Nasdaq: JOUT) has received two separate orders for the modular general purpose tent systems totaling $5.5 million from the U.S. military. It anticipates delivery of the tents in the second half of calendar 2006.
With the new orders, Johnson Outdoors now has 10 separate tent orders totaling $17.5 million under a multi-vendor, multi-product contract announced Sept. 7, 2005. The company expects fiscal 2006 military tent sales to be in the range of $35 million to $40 million.
Wellman posts loss for quarter
For the quarter ended March 31, 2006, Wellman (NYSE: WLM) said it incurred a quarterly loss amid a surge in resin and polyester imports. Wellman said its net loss for the quarter was $16 million, or $0.61 per share, compared to earnings of $11.6 million, or $0.22 per share for the same period in 2005. Revenue was $342.7 million, down from $386.3 million a year earlier.
The company said the import surge was caused by the increased raw material cost advantage that Asian polyester producers had compared to domestic producers as a result of hurricanes in the Gulf Coast. But it added that it expects sales volumes to increase in the second quarter of 2006 after an expansion at a facility.
Separately, Wellman said that, effective with June 4 shipments, it will increase the price of all polyester staple fiber by $0.03 per pound. This increase is made necessary by the resurgence in petrochemical-based raw material costs, it added.
Prana’s parent company takes a hit in Q1 earnings
Liz Claiborne (NYSE: LIZ), Prana’s new parent company, reported a 34 percent slide in first-quarter profit as a result of slow wholesale clothing sales and costs from a restructuring program it announced in February. Prana is among its many apparel brands.
Net income for the quarter was $46.9 million, or $0.45 per share, versus a prior-year profit of $71.4 million, or $0.65 per share. Without the stock option and restructuring costs, the company reported adjusted earnings of $0.62 per share, versus $0.65 per share in the year-ago period. Revenue was also down 3.4 percent to $1.17 billion from $1.21 billion in the year-earlier period.
Liz Claiborne said the quarter’s results met the company’s expectations, but added it continues to operate in a conservative environment marked by consolidation among its customers and economic challenges. The company also reiterated its strategy in driving growth through acquisitions.
Dick’s receives $18.5 million in financing to expand Indiana facility
W. P. Carey & Co. is giving Dick’s Sporting Goods (NYSE: DKS) $18.5 million in build-to-suit financing to expand its existing distribution facility in Plainfield, Ind. The investment firm will finance the construction of the facility and lease it back to Dick’s under a 15-year triple net lease.
This expansion financing took place subsequent to several transactions between W. P. Carey’s affiliates and Galyan’s Trading Company, which was acquired by Dick’s in 2004. Together with this recent deal, W. P. Carey and its affiliates now own nine Dick’s Sporting Goods retail and distribution facilities located in Kennesaw, Ga.; Lombard, Ill.; Greenwood (2) and Plainfield, Ind.; Leawood, Kan.; Freehold, N.J.; Buffalo, N.Y., and Fairfax, Va.
Phoenix hires executive VP of sourcing
Phoenix Footwear Group (Amex: PXG), with brands that include Royal Robbins and H.S. Trask, has appointed Prasad Reddy — a 30-year veteran in the footwear industry — as executive vice president of sourcing. Prior to joining Phoenix, Reddy worked in the footwear industry, specializing in turnaround and growth situations. For a decade, he was president of K-Swiss International headquartered in Taiwan, handling worldwide sourcing as well as sales and marketing operations for the Asia Pacific Region, including Australia. He also worked for Wolverine World Wide for 15 years and was involved in developing inventory management systems, sourcing, production control and purchasing. He has also worked for Freeman Shoe Co. and Stride Rite in senior positions.
West Marine posts Q1 loss, but increase in sales
Unaudited operating results for West Marine (Nasdaq:WMAR) show a first-quarter net loss of $9.4 million, or $0.44 per share, compared to a net loss of $5.5 million, or $0.26 per share, for the same period a year ago. Despite the loss, the company said the results were inline with expectations.
The retailer said the increase in net loss for the 2006 first quarter was largely due to additional operating costs for 28 new stores that were opened during the latter half of 2005 and first three months of this year. Its new stores typically do not generate a positive earnings contribution before their first full boating season, it added. Also, first-quarter results were impacted by investments in store selling initiatives and the costs of discontinued software development projects.
Net sales for the first quarter were $132.6 million, compared to net sales of $125.3 million for the same period a year ago. Same-store sales increased 4.8 percent for the 13 weeks ended April 1, 2006.
Sportsman’s Guide expects EPS to be at high end
The Sportsman’s Guide (Nasdaq: SGDE) said it expects to report first-quarter revenues of approximately $71 million, above the current average estimate of $69.2 million and over 10 percent above the $64.6 million reported for the same period in 2005. It anticipates fully diluted earnings per share to be at the high end of estimates — $0.31 to $0.32 before the estimated impact of non-cash stock-based compensation. And, after the impact of the stock-based compensation, it anticipates earnings per share will be $0.26 to $0.27. The company’s first-quarter results will be released on May 10.
GSI reports Q1 earnings
GSI Commerce (Nasdaq: GSIC), a provider of e-commerce solutions for retailers and manufacturers, reported first-quarter net revenues of $114.2 million and a net loss of $4.4 million, or $0.10 per share, compared to net revenues of $91.4 million and a net loss of $1.6 million, or $0.04 per share, in 2005. Merchandise sales were $191.0 million, a 40 percent increase compared to $136.2 million last year. Gross profit was $47.2 million, an increase of 40 percent compared to $33.8 million in the same period in 2005. Gross margin was 41.3 percent in the first quarter of fiscal 2006, an increase of 430 basis points from 37.0 percent in the same period in 2005.
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