Outdoor financials: Sun Capital takes Kellwood bid to shareholders, plus Quiksilver, Under Armour, Dick's Sporting Goods, Jarden, Cabela's, Hibbett Sports, Crocs
Sun Capital takes Kellwood bid to shareholders, Quiksilver expects wider Q1 loss and analyst predicts Rossignol heading for sales block, Under Armour's '08 projections below analyst estimates and stock drops, Dick's Sporting Goods raises Q4 outlook and names vice chair, Jarden shares wintersports update, Cabela's closes offering of $57 million of senior notes, Hibbett Sports drops to new low after cutting Q4 profit outlook, Crocs announces management changes.
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Sun Capital takes Kellwood bid to shareholders
Investment firm Sun Capital Securities Group said it is now taking its $542.3 million cash bid offer for Kellwood (NYSE: KWD) straight to the company’s shareholders. Kellwood has already rejected Sun Capital’s overtures twice in recent months.
In a letter to shareholders, Sun Capital offered $21 per share for the company — the same offer Kellwood’s board has rejected. The offer represents a 21-percent premium over the stock’s closing price of $16.51 on Jan. 14.
Sun Capital, which owns a 9.9 percent stake in Kellwood, values its offer at about $762 million, including debt. The deal hinges on Kellwood ending its $60 million debt tender offer, which Sun Capital urged Kellwood to drop last week, saying it would destroy the company’s value. Otherwise, the firm’s buyout price will drop to $19.50 per share.
The investment firm said it will nominate its own slate of directors for election to Kellwood’s board at the 2008 annual meeting, if the companies fail to reach an agreement soon.
It added that it is also requesting certain records so it can investigate the impact of Kellwood’s debt tender offer on shareholder value and determine whether the board of directors breached its fiduciary duties.
“Your continued unwillingness to enter into a constructive dialogue with us regarding our interest in acquiring control of Kellwood has left us no choice but to take our proposal directly to your shareholders,” said Jason Bernzweig, vice president of Sun Capital, in a letter to Kellwood.
Sun Capital first made its buyout offer in September, then again in November. Both times, Kellwood rejected it, saying it believes its own plan will be better for shareholders.
Sun Capital said Kellwood’s refusal to talk forced Sun to take its offer straight to shareholders — enabling them to choose between Sun’s offer and Kellwood’s “highly speculative strategic plan.”
Kellwood, meanwhile, advised shareholders against taking action on the Sun Capital proposal, saying the board of directors will review the offer and make a recommendation later.
Kellwood’s stock got a considerable bump from the news and closed on Jan. 15 at $18.12, up $1.61 from the previous day. It has been on a steady ascent since — closing at $18.53 on Jan. 16 and $18.65 on Jan. 17.
Money manager Discovery Group LLC, which owns 391,100 Kellwood shares, or a 1.5 percent stake in the company, reported that it plans to support the takeover and sent a letter to Kellwood’s board of directors, saying it plans to submit its shares to Sun Capital’s $21-per-share tender offer.
Discovery called the Sun offer “a handsome premium to shareholders at a fair valuation to the company.” It added that if the board does not agree to the takeover, it should rescind its poison pill and other takeover defenses in order to let shareholders decide for themselves whether to accept the Sun offer.
Quiksilver expects wider Q1 loss, analyst predicts Rossignol heading for sales block
Quiksilver (NYSE: ZQK), parent of Rossignol, predicted a wider first-quarter loss than previously expected due to soft reorders for equipment and a slowdown in consumer spending.
The company said it now expects to report a loss of between $0.09 per share and $0.12 per share. In December, the company said it expected a “small loss.”
Following the news, Quiksilver’s stock lost $1.13, or 15.2 percent, to $6.30, following a finish at $7.43 on Tuesday.
CEO Robert McKnight Jr. said in a statement. “Our first quarter is proving to be more difficult than anticipated. The holiday season has demonstrated broad-based weakness at retail which has affected our wider business, including our company-owned stores both in the United States and in Europe.”
The company said retailers of wintersports equipment were clearing their stores of all existing gear to take advantage of good ski conditions, and were delaying reorders. It also blamed the consumer spending environment as consumers cut back on discretionary items.
Quiksilver added it is reviewing alternatives for its equipment businesses, including possible sales. It has hired JPMorgan to help with the process.
Wachovia Capital Markets analyst John Rouleau said in a client note that he thinks Rossignol, the French ski maker that Quiksilver bought in 2005, may be heading for the auction block. Rouleau said most of Quiksilver’s troubles, in addition to a weakening economy, are related to its equipment segment and thinks management may try to sell the business. “Consumers are not investing in new ski gear,” Rouleau wrote.
Rouleau said sales of outerwear and snowboards have been weak, even though ski conditions have been favorable this year. “We think this is pretty widespread between different product categories and brands, and is not isolated to just Rossignol,” Rouleau wrote.
Baird analyst Mitch Kummetz said selling Rossignol will be a catalyst for the company and its stock. In the two years that Quiksilver has owned Rossignol, Kummetz said, Quiksilver’s stock hasn’t performed particularly well. “Rossignol has yet to contribute to Quiksilver’s earnings growth,” Kummetz wrote.
Under Armour’s ’08 projections below analyst estimates, stock drops
Despite anticipation of growth in 2008, Under Armour’s (NYSE: UA) stock took a nosedive as it noted a major footwear launch will cause it to shift “substantial” marketing expenses to the first half of the year, and a forecast below analyst expectations.
Under Armour’s stock lost as much as $8.05 during day’s trading sinking to a low of $34.80 to close at $37.06 on Jan. 17. Shares sank another $5.36, or 14.5 percent, to $31.70 in aftermarket electronic trading.
Based on the timing of the Performance Training footwear launch, the company anticipates earnings per share in the first half of 2008 between $0.03 per share and $0.05 per share. The company did not break down its projection for the first and second quarters. On average, analysts expect the company to earn $0.26 per share for the first quarter, and $0.13 for the second quarter of 2008.
The company plans a year-long brand campaign, which will be used as the platform for its footwear launch and include a 60-second television ad spot during the Super Bowl on Feb. 3.
The company, though, still expects 2008 net income and revenue will exceed its long-term annual growth targets of 20 percent to 25 percent.
For 2007, the company expects full-year profit above analyst expectations, due to continued strong customer demand. The company expects to earn $1.03 per share to $1.04 per share for the year. Under Armour predicts full-year revenue will increase 40 percent to $650 million. The company had previously projected revenue between $590 million to $600 million.
Analysts expect the company to post earnings of $1.01 per share on revenue of $60.3.6 million for 2007.
The company will release fourth-quarter and full-year results on Jan. 31.
Dick’s Sporting Goods raises Q4 outlook, names vice chair
Dick’s Sporting Goods (NYSE: DKS) raised its guidance based on strong same-store sales during the quarter.
The company said it now expects fourth-quarter profit of $0.60 or $0.61, from previous guidance in November of $0.59 per share.
Dick’s expects to at least meet its same-store sales guidance of 2 percent or 2.5 percent adjusted for a calendar shift.
In other company news: President and Chief Operating Officer William Colombo will become vice chairman, effective Feb. 2.
Colombo’s duties will be taken over by Joseph Schmidt, executive vice president of operations; Timothy Kullman, executive vice president of finance and administration and CFO; and Edward Stack, chairman and CEO.
Colombo began at Dick’s in 1988 and became executive vice president and COO in 1995. He was named president in 2002.
Jarden shares wintersports update
Jarden Corp. (NYSE: JAH) said based on its current outlook and initial performance for the first quarter of 2008, it anticipates a healthy finish to the 2007/2008 wintersports season and overall organic revenue growth in its Outdoor Solutions segment in the first quarter of 2008. Jarden is the parent of various outdoor and wintersports brands, which includes Coleman, Campingaz, K2, Marker, Volkl and Marmot.
Martin Franklin, Jarden’s chairman and CEO, said in a statement, “We continue to believe our portfolio of market leading brands throughout Jarden creates opportunities for growth, even in the face of tougher macro economic conditions. The strong early snow conditions, particularly in North America where we have our largest market share, in addition to our innovative product lines, have created the positive momentum in our wintersports business. In the same way that the poor 2006/2007 snow conditions created an overall reduction in 2007/2008 wintersports sales, we believe that the positive momentum in our business for the 2007/2008 season bodes well for the sell-in for the 2008/2009 season.”
The company will announce earnings on Feb. 14.
Cabela’s closes offering of $57 million of senior notes
Cabela’s (NYSE: CAB) raised $57 million in the private sale of senior notes to investors. The company said the 7.2 percent notes have a final maturity of 10 years and an average maturity of seven years. It plans to use proceeds to pay down debt and for general corporate purposes, it added.
Hibbett Sports drops to new low after cutting Q4 profit outlook
Shares of Hibbett Sports (Nasdaq: HIBB) set a new low on Jan. 15, after it lowered its fourth-quarter profit outlook and an analyst downgraded the stock.
The stock dropped $2.58 to close at $13.38, and set a three-year low of $12.30 earlier in the session.
After the closing bell on Jan. 14, Hibbett Sports cut its fourth-quarter earnings outlook to between $0.20 and $0.26 from its previous $0.40 per share estimate.
Friedman, Billings, Ramsey analyst Jeff Sonnek downgraded the stock to “Market Perform” from “Outperform” and forecast same-store sales weakness in the first half of 2008 and softness in the company’s shoe segment.
“We are aware that we are late in changing our thesis on Hibbett Sports, but in light of the continued deterioration in the broader retail market, we feel it is prudent to adjust our rating to better reflect our more bearish macro thesis on the consumer,” Sonnek wrote in a client note.
Crocs announces management changes
Crocs (Nasdaq: CROX) named CFO Peter Case to the newly created position of senior vice president of the retail division. He will be succeeded as CFO by Russ Hammer, who was also appointed senior vice president-finance and treasurer.
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