Outdoor financials: Timberland Q1 profit falls, lowers '06 forecast, plus Johnson Outdoors, Amer Sports, LaCrosse, Kellwood, Wellman, Sportsman's Guide
Timberland Q1 profit falls and company lowers '06 forecast, Johnson Outdoors' Q2 profit hit by decline in military sales, Amer's Salomon group reports sales increase, LaCrosse's earnings up 23 percent, Kellwood receives $400 million loan, Cabela's net income up 17 percent in Q1, Crocs quadruples Q1 profit, Wellman upsizes revolving credit facility, and The Sportsman's Guide to be acquired by Redcats USA.
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Timberland Q1 profit falls, lowers ’06 forecast
Shares of Timberland (NYSE: TBL) dropped 10 percent in morning trading on May 2 after reporting that its first-quarter profit fell 31 percent, affected by higher operating expenses and lower revenue. It also lowered its forecast for the second quarter and FY 2006.
The company’s shares slid $3.47, or 10 percent, to $31.09 on the New York Stock Exchange, where it was among the biggest percentage losers in morning trading. It dropped another $0.27 to close the day at $30.82.
Timberland reported first-quarter net income of $29.2 million, or $0.45 per share, versus $42.2 million, or $0.61 per share, in 2005. Revenue declined 1.2 percent to $349.8 million from $354.2 million in the year earlier period. Analysts had forecast a profit of $0.45 per share on projected sales of $352.3 million.
Apparel and accessories revenue increased 8.0 percent to $91.4 million supported by growth in Timberland apparel sales globally and the addition of the SmartWool brand to the company’s product portfolio, Timberland said. Overall footwear revenues fell 4.5 percent to $253.9 million as a result of sales declines in boots, outdoor performance and kids’.
Timberland said the addition of the company’s new SmartWool and Mion businesses contributed to moderate increases in working capital levels. Timberland’s accounts receivable increased 2.4 percent to $192.1 million, with all of the increase associated with its recent acquisition of SmartWool. Its inventory at quarter end was $174.9 million, 8.6 percent higher than at the end of the 2005 first quarter, with the bulk of this growth related to SmartWool and the expansion of the company’s Mion and Timberland Boot Company brands.
Including restructuring costs, operating profit for the quarter was $42.3 million. Comparable operating margins decreased 530 basis points to 12.2 percent. Timberland said the decrease reflected lower gross margins and higher levels of operating costs driven by investments in new businesses and international expansion. For the quarter, foreign exchange rate changes reduced operating profit by approximately $2.5 million.
Global wholesale revenue expanded 1.4 percent to $279.6 million. Worldwide consumer direct revenue declined 10.6 percent to $70.2 million. Sales in stores open at least one year dropped 10.8 percent globally. Timberland attributed the drop to warm weather in the United States, the later timing of this year’s Easter holiday, and lower sales at outlet stores.
Looking ahead, Timberland projected 2006 earnings per share would fall between 20 percent and 25 percent from 2005, on flat to modest revenue growth. The company said the weaker outlook reflects the effects of anti-dumping duties on European Union footwear imported from China and Vietnam, measures to control inventory and ongoing weakness in domestic boot sales.
Analysts forecast 2006 earnings of $2.20 per share on $1.63 billion in revenue. The company earned $2.43 per share on $1.57 billion in revenue in 2005.
For the second quarter, Timberland said sales would decline in the mid single-digit range, with an operating loss from $20 million to $25 million. Analysts predict the company will break even in the quarter, on $244.7 million in revenue.
The company also forecast lower comparable earnings in this year’s second half, due to pressure on third-quarter results. Third-quarter revenue is expected to expand in the low single-digit range, while the company sees gross margin declining between 3 percent and 4 percent.
Johnson Outdoors’ Q2 profit hit by decline in military sales
Johnson Outdoors (Nasdaq: JOUT) reported net income for the 2006 second quarter of $4.2 million, or $0.46 per share, an 11.9 percent decline compared with $4.7 million, or $0.54 per share, in the same period the year before. Net sales increased 1 percent to $107.4 million from $106.2 million.
The company said sales increased due to significant gains in marine electronics and watercraft sales, offsetting anticipated declines in military equipment sales and lower European diving equipment sales. Operating profits were hampered by a less-profitable product mix and significant increases in commodity costs.
The company said that outdoor equipment segment’s revenues decreased 11 percent due almost entirely to a 28 percent decline in military sales from the prior year quarter. Excluding the anticipated $3.7 million decline in military sales, Johnson Outdoors’ said its total net sales would have increased $4.9 million. At this time, the company expects fiscal 2006 military sales to be in the $35 million to $40 million range. Consumer camping benefited significantly this quarter from first-time specialty market sales, it added.
Sales for its watercraft division were more than 6 percent ahead of the last year’s second quarter results due to continued strength of Old Town and Ocean Kayak brands, it said.
The marine electronics segment’s sales grew more than 9 percent driven by Humminbird and the acquisition of the Cannon and Bottomline brands completed in October 2005, which added a combined $3.3 million in net sales to the unit during the quarter.
Amer’s Salomon group reports sales increase
Driven by “particularly good growth” with its Salomon business segment, Amer Sports reported net sales growth of 8 percent for the January to March first quarter — Euro 417.4 million (USD $527.4 million) in 2006 compared to Euro 385.0 million in 2005. Comparable net sales in local currencies were up 3 percent.
Amer Sports revised its segment reporting, dividing Salomon, Wilson, Precor, Atomic and Suunto into business segments. Salomon has been broken into the following business areas: winter sports equipment, apparel and footwear, and Mavic. By business segment, net sales for Salomon were up 29 percent; Atomic, up 6 percent; and Suunto, up 5 percent. In local currency terms, Salomon’s sales rose by 12 percent, while Atomic and Suunto both declined, 13 percent and 9 percent, respectively.
The company’s EBIT amounted to Euro 1.6 million (USD $2.02 million), while earnings before taxes were a loss of Euro 3.3 million (USD $4.1 million). Earnings per share were a loss of Euro 0.03. Net financial expenses added up to Euro 4.9 million (USD $6.2 million).
“The trend in the sports and leisure markets was favorable in the first months of the year. The winter sports equipment and apparel trade in particular benefited from the good winter season,” said CEO Roger Talermo.
For the Salomon group, first-quarter comparable net sales in local currencies rose by 12 percent — Euro 123.3 million (USD $155.8 million) in 2006 versus Euro 107.2 million in 2005. Salomon’s EBIT was a loss of Euro 22.4 million (USD $28.3 million). Amer said that due to seasonal variations, Salomon’s deliveries of winter sports equipment largely take place in the latter half of the year, putting the first two quarters of the year in the red.
Net sales for winter sports equipment were Euro 43.4 million (USD $54.8 million) up 35 percent from 2005’s Euro 38.3 million. It said sales increased thanks to favorable winter conditions in almost all market areas, but the company said was especially high in sales of cross-country skiing equipment.
Apparel and footwear was also up 41 percent to Euro 50.8 million (USD $64.1 million) compared to Euro 43.5 million in 2005. Amer reported that net sales growth was boosted by excellent winter conditions and Arc’Teryx’s robust product portfolio.
Mavic was up 24 percent — Euro 29.1 million (USD $36.7 million) in 2006 versus 25.4 million last year. The Americas generated 21 percent of net sales, EMEA 71 percent and Asia Pacific 8 percent. Sales rose in all market areas, Amer said.
The company added that 2006 is a transitional period for Salomon — the first year of its three-year turnaround initiative — and the effects of the initiative will become evident in 2007. Substantial earnings improvements are expected in 2007 and 2008, it said.
Talermo said in a statement: “Our key objective in 2006 is to pave the way for improving the profitability of Salomon. In December last year, we started up a three-year turnaround initiative which focus during current year is on codetermination negotiations in France and the restructuring of industrial production. The initiative is proceeding in line with expectations and the estimated schedule.”
For the quarter, Atomic’s net sales were down 13 percent in local currencies to 23.7 million (USD $30 million) versus 26.5 million last year. Of the net sales, the Americas generated 22 percent, EMEA 75 percent and Asia Pacific 3 percent. Sales declined by 13 percent in the Americas, 12 percent in EMEA and 26 percent in Asia Pacific. The distribution of Asics products ended in Austria, bringing net sales down by Euro 5.2 million (USD $6.6 million). Exclusive of the effect of Asics, net sales would have risen by 8 percent. Amer said that toward the end of the winter sports season, the result of operations was a loss of Euro 9.4 million (USD $11.8 million) compared to a loss of Euro 8.4 million.
Amer added that Atomic and Salomon will continue to engage in close cooperation to maximize winter sports synergies in the production of alpine and cross-country skis and alpine boots.
Suunto’s net sales declined by 9 percent in local currencies to Euro 19.2 million (USD $24.2 million) from 2005’s 20.0 million. Of the net sales, the Americas generated 38 percent, EMEA 51 percent and Asia Pacific 11 percent. Sales declined by 19 percent in the Americas and 3 percent in EMEA, but rose by 5 percent in Asia Pacific. EBIT declined by 35 percent to EUR 1.1 million (USD $1.4 million).
Although diving instruments and wrist-top computers accounted for a total of 66 percent of Suunto’s net sales, the brand’s total sales were weakened by the decline in sales of diving suits and watersports apparel. Sales of Suunto’s sports instruments were weakened during the second half of 2005 by a lack of PCBs caused by a fire at a supplier’s premises, which still caused delivery constrains and weakened sales in the first quarter of 2006.
Amer estimates that the trend in demand for sports equipment will be favorable in 2006, and net sales are expected to be Euro 1.8 billion (USD $2.2 billion) up fro 2005’s Euro 1.73 billion. Earnings per share in 2006 are expected to come in at Euro 0.90 to 1.05 (USD $1.13 to $1.32).
(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 3.)
LaCrosse’s earnings up 23 percent
LaCrosse Footwear (Nasdaq: BOOT), parent of Danner, reported slight improvement in sales and earnings in the first quarter of 2006, compared with the 2005 first quarter.
It had sales of $21.4 million, with earnings of $392,000, or $0.06 per share, in the first quarter, compared with sales of $18.8 million, with earnings of $318,000, or $0.05 cents per share, in 2005. The company said that approximately $1.7 million of the sales in the first quarter of 2006 can be attributed to five additional business days, compared with the first quarter of 2005, a result of the company’s quarterly reporting calendar.
Sales to the work market were $13.6 million for the first quarter, up 14 percent from the same period in 2005. Sales to the outdoor market were $7.8 million for the first quarter of 2006, up 13 percent from the same period in 2005.
Kellwood receives $400 million loan
Kellwood has received a $400 million credit facility from Bank of America Business Capital for working capital, general corporate purposes and to fund acquisitions. Banc of America Securities is co-lead arranger on the credit facility. Robert skinner, Kellwood chairman, president and CEO, said in a statement, “The new loan gives us the liquidity to pursue strategic opportunities that will drive long-term growth.”
Cabela’s net income up 17 percent in Q1
Cabela’s (NYSE: CAB) first-quarter net income increased nearly 17 percent on higher revenue. The company posted net income of $9.1 million, or $0.14 per share, compared to $7.8 million, or $0.12 per share, a year-ago. Revenue increased 15.5 percent to $404.8 million from $350.6 million
During the first quarter, direct revenue decreased 0.8 percent to $228.9 million, primarily due to less intensive promotions in the quarter, Cabela’s said. Total retail revenue for the quarter increased 49.6 percent to $145.3 million, while same-store sales decreased 0.3 percent. Cabela’s financial services segment revenue amounted to $28.5 million, up 39 percent from $20.5 million in the same period last year.
In 2006, the company plans to open four stores, bringing its total store count to 18 by year’s end.
Crocs quadruples Q1 profit
Crocs (Nasdaq: CROX) reported that its first-quarter profit more than tripled and set its guidance for second-quarter and full-year profits above analyst expectations on improved sales.
The company reported net income of $6.4 million, or $0.17 per share, up from $2 million, or $0.06 per share, in the year-ago quarter. Revenue more than quadrupled to $44.8 million from $11 million. Excluding stock-based compensation, the company said it earned $0.20 per share in the quarter. Analysts said they were expecting a profit of $0.14 per share off $36.2 million in revenue.
Gross profit for the quarter was $23.7 million, or 52.8 percent of sales, compared to gross profit of $6.8 million, or 62.4 percent in 2005. Selling, general and administrative expense was $13.7 million, or 30.6 percent of sales, compared to $4.7 million, or 42.6 percent of sales in the corresponding period a year ago.
For the year, Crocs said it expects earnings per share to be between $0.77 and $0.79, including stock-based compensation, on revenue of between $200 million and $205 million. For the second quarter, it expects earnings between $0.21 and $0.22 per share, on revenue of $53 million to $55 million. Analysts have lower expectations: earnings of $0.70 per share for 2006, on revenue of $176.5 million, and project $0.19 per share for the second quarter, with revenue of $45.4 million.
Wellman upsizes revolving credit facility
Wellman (NYSE: WLM) has closed on a $225 million revolving credit facility, which it has already upped once from $175 million and may do again for $275 million. The company said the facility has a five year term and conditions that are more favorable than its previous facility. It added that its new revolving credit facility was oversubscribed and well received by the syndicated loan market. Availability under this facility was approximately $120 million at closing.” Deutsche Bank was lead arranger and bookrunner; JP Morgan Chase Bank was syndication agent; and General Electric Capital, LaSalle Business Credit and Wachovia Capital Finance were co-documentation agents.
The Sportsman’s Guide to be acquired by Redcats USA
Offering a 20.2 percent premium over its three-month average trading price, Redcats USA’s subsidiary VLP Corp. plans to buy all of outstanding shares of The Sportsman’s Guide (Nasdaq: SGDE) for $31 a share. Valued at approximately $265 million, including the value of outstanding stock options, the transaction is expected to close during the third quarter.
The board of Sportsman’s Guide has unanimously approved the merger agreement and will recommend to shareholders to also approve the deal. Gregory Binkley will remain the company’s CEO following the merger. He and other members of The Sportsman’s Guide and The Golf Warehouse senior management have entered into new employment agreements to remain with the companies post-merger.
Redcats USA is a catalog and online marketer of apparel and home products, operating in North America. It is a wholly owned subsidiary of the Redcats Group, the world’s third largest catalog and online group in apparel and home products operating in 26 countries, and had 2005 revenue of Euro 4.37 billion (USD $5.52 billion).
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