Outdoor financials: Salomon boosts adidas-Salomon sales, stock falls based on 2005 forecast, plus LaCrosse, Sport Chalet, Sportsman's Guide, Wellman

adidas-Salomon sales up, stock falls based on 2005 forecast
Despite strong sales for the third quarter, adidas-Salomon (ADSG.DE) saw its stock drop after forecasting its sales will be flat in the first half of 2005. Sales for its Salomon division increased 6 percent in currency-neutral terms in the third quarter aided by strong performance in its winter and summer categories.

Overall, third-quarter net sales for the entire company increased 9 percent on a currency-neutral basis with improvements coming from all brands and regions. This represents growth of 5 percent in Euro terms to Euro 1.953 billion (USD $2.532 billion) in 2004 from Euro 1.853 billion (USD $2.402 billion) in the third quarter of 2003. Gross margin improved 2.8 percentage points to 47.8 percent of sales from 45.0 percent in the prior year. Third-quarter operating profit grew 16 percent to Euro 313 million (USD $405.8 million) in 2004 from Euro 270 million (USD $350.1 million) in the prior year. Net income was up 19 percent reaching Euro 179 million (USD $232.1 million) versus Euro 150 million (USD $194.5 million) in 2003, driven by strong growth in Asia and a turnaround in the U.S. market. This equates to basic earnings per share of Euro 3.92 (USD $5.08) and represents an increase of 18 percent versus the prior year of Euro 3.31 per share (USD $4.29).

Currency-neutral sales for the company rose 6 percent in the first nine months of 2004. In Euro terms, revenues increased 3 percent to Euro 5.044 billion (USD $6.540 billion) in 2004 from Euro 4.913 billion (USD $6.370 billion) in the first nine months of 2003.

For the Salomon division, sales increased 6 percent in currency-neutral terms in the third quarter. In euros, Salomon’s third-quarter sales improved 3 percent, reaching Euro 205 million (USD $265 million) from 2003’s Euro 199 million (USD $258 million). According to the company, Salomon sales increased 5 percent on a currency-neutral basis for the first nine months of 2004 and was attributed to “solid developments in winter and summer categories, particularly in the apparel, cycling and Nordic categories.” All regions except Asia contributed to the increase. In euros, revenue increased by 2 percent to Euro 399 million (USD $517.3 million) in 2004 from Euro 390 million (USD $505.7 million) in the first nine months of 2003.

The company was tripped up by its main adidas brand. For the first time in 10 quarters, orders for the brand fell 4 percent in Europe. adidas attributed it to struggling retailers KarstadtQuelle, Germany’s leading department store operator, and Giacomelli, once Italy’s leading sporting goods retailer which is now insolvent.

CEO Herbert Hainer told a conference call that overall orders were expected to be flat in the first half of 2005. Also, for 2005, the company predicted slower earnings growth, up only 10 percent to 15 percent, with sales seen up to 9 percent. As a result, shares in adidas-Salomon fell 2.21 percent to Euro 111.73, or USD $143.35, on Nov. 4 — the third biggest decliner in DAX, which is one of the index groups of the German stock exchange.

(Conversion of Euros into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Nov. 4.)

LaCrosse profit up 82 percent for quarter
Third-quarter profit for LaCrosse Footwear, Inc. (Nasdaq: BOOT), parent of Danner, rose 82 percent to $3.9 million, or $0.64 per share, compared to $2.1 million, or $0.36 per share last year. Net sales for the quarter ended Sept. 25, 2004, were $34.5 million, up 15 percent from 2003’s $29.9 million. LaCrosse said it has successfully increased sales of both its occupational and recreational footwear, benefiting from the occupational market’s year-round demand to partially offset the seasonality of its recreational sales, which are usually stronger in the second half of the year. For the third quarter, occupational sales were $15.8 million, while recreational sales were $18.7 million. LaCrosse continued to improve its overall gross margin, which was 35.1 percent of net sales for the third quarter of 2004, up from 2003’s 31.4 percent, an increase of 370 basis points. The continued margin improvement reflects the increased sales of the company’s new, higher margin products and improved factory utilization.

Sport Chalet to expand into Arizona market
Second-quarter sales were up 17. 2 percent at Sport Chalet (Nasdaq: SPCH) — $72.5 million compared to last year’s $61.8 million — as a result of opening three new stores in the late fall and two new stores in 2Q. Also, same-store sales increased 5.2 percent for the quarter ended Sept. 30, 2004. The retailer said gross profit margin increased from 2003’s 29.9 percent to 31.0 percent for the same quarter this year, due to reduced costs from more efficient inbound logistics as well as continued improvements in inventory procurement, which lowered markdowns as a percent of sales. Selling, general and administrative expenses, as a percentage of sales, increased slightly to 26.8 percent from 25.2 percent last year. Even with new store opening expenses, net income increased $76,000, from $1.7 million, or $0.25 per diluted share, in the second quarter last year to $1.8 million, or $0.25 per diluted share, for the same quarter this year. Sport Chalet is planning to expand into Arizona with an initial opening of four locations in the Phoenix area in fiscal 2005-2006.

Internet sales boost Sportsman’s Guide’s bottom line
With a June acquisition and strong Internet-related sales, The Sportsman’s Guide’s (Nasdaq: SGDE) third-quarter sales were $56.6 million, a 37 percent increase over the $41.2 million reported for the same period one year ago. Its net earnings were $1.1 million, or $0.20 per diluted share, compared to last year’s $710,000, or $0.13 per fully diluted share. Sales at the base business grew 8 percent and its Internet-related sales were in excess of 41 percent of total sales in the quarter, compared to 36 percent of total sales in 2003. “The strong results for the quarter were driven by two key factors,” Gregory Binkley, president and CEO, said. “The first is our early summer acquisition of The Golf Warehouse (TGW). It performed extremely well in the period. In addition, we have also seen year over year improvements in sales and in Internet-related sales in our base business that are encouraging.” He added that the addition of TGW has changed the company’s profile to more of an online retailer. The Sportsman’s Guide offers value-priced outdoor gear and general merchandise, with a special emphasis on outdoor clothing, equipment and footwear, through direct mail catalogs and two Internet sites.

Wellman declares dividend
Wellman’s (NYSE: WLM) board of directors declared a quarterly dividend of $0.05 per share on the outstanding shares of the company’s common stock. Its payable on Dec. 15, 2004, to stockholders of record as of Dec. 1, 2004.

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