Outdoor financials: Timberland Q1 earnings nearly double, plus Cabela's, Exel sells outdoor business to Karhu Sports, Garmin

Timberland Q1 earnings nearly doubled, Cabela's posted a 40-percent jump in profit, Exel sold its outdoor business to Karhu Sports and Garmin said it would buy distributors in Austria and Portugal.

Timberland Q1 earnings nearly double

Timberland (NYSE: TBL) said its first-quarter profit nearly doubled on a decline in operating expenses and strong European sales growth.

For the three months ended March 28, the company reported income of $18 million, or $0.30 per share, compared with $9.3 million, or $0.15 per share, in the year-ago period.

On an adjusted basis, excluding restructuring and related costs, Timberland reported income of $18.4 million, or $0.31 per share, compared with $13.5 million, or $0.22 per share, in the first quarter of last year.

Revenue rose slightly to $340.4 million from $336.3 million, as European sales growth offset a decline in North American sales. Same-store sales grew 1.9 percent domestically. Global same-store sales rose 5.7 percent in the quarter.

Total European sales grew 7 percent to $164.8 million, while North American sales slipped 5 percent to $137.7 million, on soft consumer spending in both the U.S and Canada. Foreign exchange rate changes increased first-quarter revenue by about $16 million, or 5 percent, due to the strength of the euro and the British pound, the company said.

Total operating expenses decreased 9 percent to $134.4 million from $148 million in the prior-year quarter.

Citi Investment Research analyst Kate McShane wrote in a client note that first-quarter results might signal the company is nearing the bottom.

“We see limited downside risk from current levels,” she wrote. “Though still in the early stages, Timberland reported its first quarterly margin expansion in three years this quarter, as the company reduced off-price wholesale sales in the U.S. and benefited from (the weaker dollar) as well as cost-cutting initiatives.”

McShane raised her rating to “Hold” from “Sell” but said the company’s outlook is still challenging. While Timberland expects a continuing benefit from the weaker dollar, “management noted that the retail environment remains difficult and the company continues to see promotional pressure outside the U.S.,” she added.

Shares rose $2.62, or 18 percent, to close at $17.22 on May 1. The stock has traded between $12.83 and $27.76 during the past 52 weeks.

Cabela’s posts 40-percent jump in profit

Cabela’s (NYSE: CAB) said its first-quarter profit climbed 40 percent as merchandise sales improved.

For the quarter ended March 29, Cabela’s earned $10 million, or $0.15 per share, compared with $7.1 million, or $0.11 per share, in the same quarter last year.

Revenue grew 16 percent to $535.5 million from $462.1 million in the year-ago quarter, the company said. The company said retail store revenue, which accounted for almost half of total revenue, grew 38 percent to $254.4 million. Same-store sales dropped 8.4 percent.

On the news of the higher-than-expected quarterly profit, Cabela’s saw its shares jump May 2. The stock rose $0.83, or 5.9 percent, to close at $15.03. The stock has lost 40 percent of its value in the past 52 weeks.

Stephens Inc. analyst Rick Nelson wrote in a client note that management attributed the growth in operating margins — which increased 120 basis points — to fewer discounts, vendor support and targeted advertising.

“We are not sure how sustainable this improvement might be, and indeed, the company’s guidance continues to incorporate lower gross margins over the remainder of the year,” he also wrote.

He rated the stock “Overweight,” noting that while the broader economic slowdown is likely to continue pressuring the company, Cabela’s “brand strength, customer loyalty and multichannel marketing advantages” will benefit it in the long term.

Christopher Svezia of Susquehanna Financial Group maintained a “Neutral” rating on Cabela’s shares, warning that tightening credit markets will continue to hurt Cabela’s financial service revenue in the second and third quarters. “We believe the sluggish traffic environment thus far in the second quarter, in addition to higher inventory levels (up 23 percent), has increased the level of promotional activity,” the analyst wrote.

Exel sells outdoor business to Karhu Sports, reports Q1 earnings

Exel said it is dividing its Exel Sports Brand segment into two businesses — floorball and outdoor — and selling the outdoor business to Karhu Sports, a Finnish sports equipment manufacturer. Terms of the deal, which is expected to close in June, were not disclosed.

The outdoor business going to Karhu includes cross-country, alpine, Nordic walking, trekking and blading poles. It’s acquiring the inventory and order backlog related to the outdoor business through an asset deal. The transaction also includes a long-term licensing agreement of the Exel brand, as well as Nordic Walker and Nordic Blader for selected product groups. Twenty-seven employees of the outdoor business in Finland and Germany will be transferred to Karhu Sports as existing employees.

The company said Exel Sports Brands was no longer a core activity within Exel Group and had been actively looking for structural alternatives for the segment, seeking a strategic partner with an interest in developing the sports equipment business.

Exel said provisions for the restructuring costs will be made in the second quarter of 2008 and are estimated to be around EUR 7 million (USD $10.8 million). Due to these provisions, the profit before taxes for the second quarter is expected to be negative.

Exel said the floorball business will be operated as a separate unit and its operations streamlined. In 2007, the business had a turnover of EUR 5 million (USD $7.7 million) and it has a leading market position in the Nordic floorball market. Exel will conduct a strategic review and evaluate different structural alternatives for the business.

In other company news: Exel reported that first-quarter net sales dropped 16 percent to EUR 24.1 million (USD $37.4 million).

Operating profit was EUR 1.4 million (USD $2.7 million) compared to EUR 3.5 million (USD $5.4 million) in the first quarter of 2007, representing 5.6 percent of net sales

Weaker market conditions in Exel Composites resulted in a decline in operating profit to EUR 2.9 million (USD $4.5 million). The company said unsatisfactory performance in Exel Sports Brands continued, with an operating loss of EUR 1.4 million (USD $2.7 million).

Fully diluted earnings per share were a loss of EUR 0.01 (USD $0.01).

For FY 2008, the company expects profit before taxes to be negative for the group.

(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 May 2.)

Garmin to buy distributors in Austria, Portugal

Garmin (Nasdaq: GRMN) said it has signed letters of intent for the proposed purchases of its consumer products distributors in Austria and Portugal. Financial details of the acquisitions, which were expected to be completed by July, were not released.

The distributor in Austria, Puls Elektronik GmbH, is expected to be renamed Garmin Austria GmbH after the acquisition. The distributor in Portugal, Satsignal Equipamentos de Comunicacoes e de Navegacao SA, will be renamed Garmin Portugal SA.

Garmin said both companies would keep their management, sales, marketing and supporting staff — 30 people at Puls Elektronik and 15 at Satsignal.

The companies will keep operating at their current headquarters, which is in Graz, Austria, for Puls Elektronik and Lisbon, Portugal, for Satsignal.

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