Outdoor financials: VF Q4 profit jumps 51 percent, plus Kellwood accepts Sun Capital's takeover bid, Timberland, Amer Sports, Dorel buys Cannondale and Sugoi, Luxottica/Oakley, LaCrosse, Sport Chalet

VF Q4 profit jumps 51 percent

VF Corp. (NYSE: VFC) posted a 51-percent jump in fourth-quarter profit as sales improved, boosted by new brands. The company is the parent of various outdoor brands, including The North Face, JanSport, Eastpak, Eagle Creek, Vans, Kipling, Napapijri and Reef.

The company reported net income of $164.4 million, or $1.46 per share, compared with $108.6 million, or $0.95 per share, in the year-ago period.

Results include a $12 million, or $0.11-per-share, favorable tax benefit, offset by $13.3 million, or $0.09 per share, in special spending initiatives, most of which were related to the company’s jeanswear business. The previous year’s fourth-quarter results included a favorable tax resolution of $16.9 million, or $0.15 per share, and unusual expenses of $14.7 million, or $0.12 per share, which resulted in a net benefit to earnings of $0.03 per share.

Fourth-quarter 2006 results showed a loss of $32.8 million, or $0.29 per share, from discontinued operations, compared with a gain of $362,000 from discontinued operations in the final quarter of 2007.

Revenue increased 22 percent to $1.96 billion from $1.6 billion in the fourth quarter of 2006.

Sales were helped by the recent additions of Seven For All Mankind and lucy activewear. The two brands make up the company’s new contemporary brands segment and added $110 million to fourth-quarter revenue. And the acquisition of the Eagle Creek brand of travel gear added $7 million to revenue in the quarter.

VF said the outdoor coalition had another outstanding quarter, with total revenues up 32 percent. Domestic revenues grew 34 percent in the quarter while international revenues rose 28 percent. The North Face, Vans, Kipling, Eastpak and Napapijri brands each posted double-digit revenue gains in the quarter. Operating income rose 43 percent, with operating margins rising to 15.9 percent.

For the full year, income rose 11 percent to $591.6 million, or $5.22 per share, from $533.5 million, or $4.72 per share, in 2006. Revenue jumped 16 percent to $7.22 billion from $6.22 billion in the previous year.

VF expects an 8 percent to 10 percent increase in both earnings and revenue in the first quarter of 2008, driven by its outdoor, imagewear and contemporary brands segments.

Based on 2007 results, this equates to earnings of between $1.30 and $1.32 per share on sales of $1.8 billion to $1.84 billion.

Additionally, VF also affirmed previously issued full-year guidance, saying it expects earnings per share from continuing operations to increase 10 percent this year. This equates to earnings of $5.95 per share, based on earnings from continuing operations of $5.41 per share in 2007.

The company said revenue should climb 9 percent for the year, to about $7.87 billion based on 2007 results.

Revenue from VF’s outdoor business segment is expected to grow at a mid-teen percentage rate. Sales from the company’s new contemporary brands segment, which consists of Seven For All Mankind and lucy activewear, are expected to exceed $415 million in 2008.

VF said cash flow from operations could total more than $700 million this year.

Separately, VF’s board declared a cash dividend of $0.58 per share. The dividend is payable on March 19 to shareholders of record as of March 9.

Kellwood accepts Sun Capital bid, makes recommendation to shareholders

Five months after Sun Capital Securities Group first made a $542 million takeover bid for it, Kellwood (NYSE: KWD) has relented, accepting the $21-per-share deal and recommending it to its shareholders.

Kellwood initially opposed the takeover, saying it believed its own plan could boost shareholder value even further. But in January, Kellwood said it would let shareholders decide.

On Feb. 11, Kellwood said its board agreed to the deal because the offer is fair, there were no superior bids, and because the company expects the majority of stockholders to tender their shares.

“As a strong, private company, Kellwood will continue to execute on its strategic priorities to position the company as a brand-focused marketing enterprise,” said Robert C. Skinner Jr., Kellwood’s chairman, president and CEO, in a statement.

Sun Capital vice president Jason Bernzweig said in a statement that the transaction “is in the best interests of shareholders, employees, vendors and customers.”

“As we have said before, we are prepared to commit substantial resources beyond the purchase price to build Kellwood’s business, and we will work closely with management and employees at Kellwood to strengthen the company and develop its branded portfolio,” Bernzweig added.

Shareholders will vote on Feb. 12 whether to accept the deal.

Before this announcement, Sun Capital had added an extra condition to its proposed buyout of Kellwood that would give it more control over the company’s board of directors. Sun Capital said that if it acquires Kellwood, its representatives must hold a majority of seats on the board.

Kellwood shares rose $0.40, or 2 percent, to $20.93 in morning trading on Feb. 11. After peaking at $33.19 on Feb. 22, 2007, Kellwood shares had slipped to $14.21 on Sept. 18, 2007 — the day before Sun Capital’s initial offer.

Kellwood has annual sales of about $1.6 billion, and is the parent company of various outdoor brands, including Sierra Designs, Kelty, Royal Robbins, Slumberjack, Ultimate Direction and Wenzel.

Timberland Q4 profit falls 33 percent, FY ’07 profit plummets 61 percent

Timberland (NYSE: TBL) said its fourth-quarter profit dropped 33 percent due to restructuring costs and a drop in footwear sales.

For the quarter ended Dec. 31, net income fell to $24.1 million, or $0.40 per share, from $36.2 million, or $0.58 per share, in the prior-year quarter. Excluding restructuring costs, the company said it earned $0.52 per share.

Revenue fell 9 percent to $442.7 million from $488.2 million. Same-store sales fell 9.3 percent at domestic locations and 5.5 percent worldwide.

Sales of footwear, which make up the bulk of the company’s overall revenue, fell 14 percent to $304.4 million mainly from lower sales of boots and kids’ footwear. Apparel and accessories sales rose about 3 percent to $133.5 million, driven by double-digit growth of SmartWool socks and apparel.

Global wholesale revenue decreased 14.9 percent to $289.3 million reflecting declines in boots and kids’ sales. Worldwide consumer direct revenue increased 3.4 percent to $153.4 million, as global door expansion was partially offset by a 6 percent comparable store sales decline.

Operating income for the quarter was $32.4 million, down 44.2 percent from $58.0 million in the prior year. Operating income excluding restructuring and related costs was $42.0 million, 31.3 percent below the comparable prior year level.

For the year, profit dropped 61 percent to $40 million, or $0.65 per share, from $101.2 million, or $1.59 per share, in the prior year.

Revenue fell 8 percent to $1.44 billion from $1.57 billion in 2006. Same-store sales fell 5.5 percent at domestic stores and 5.5 percent worldwide.

The company said it is targeting low-single digit revenue declines in 2008.

Amer Sports’ Q4 sales drop 15 percent on weak wintersports equipment sales

Amer Sports’ fourth-quarter sales sank 15 percent, ravaged by a 32-percent decline in sales for its wintersports equipment division. Its brands include Salomon, Arc’Teryx, Atomic and Suunto.

Fourth-quarter sales for Amer Sports’ entire company were EUR 497.1 million (USD $733.2 million) compared to EUR 581.6 million (USD $857.8 million) in last year’s quarter. Profit was down 8 percent to EUR 202.2 million (USD $298.2 million) versus EUR 220.4 million (USD $325.0 million) last year.

For the quarter, earnings before interest and taxes (EBIT) amounted to EUR 53.7 million (USD $79.2 million) before non-recurring items — down 23 percent from EUR 69.7 million (USD $102.8 million). Non-recurring expenses to the amount of EUR 42.7 million (USD $62.9 million) resulting from the reorganization of the wintersports equipment business were recorded for the period. Earnings per share were EUR 0.02 (USD $0.029) — EUR 0.47 (USD $0.69) exclusive of the non-recurring items — compared to EUR 0.65 (USD $0.95) last year.

Amer Sports 2007 net sales decreased 8 percent to EUR 1.65 billion (USD $2.43 billion) compared to EUR 1.79 billion (USD $2.64 billion) in FY ’06. In local currency terms, sales were down 4 percent. FY ’07 profit was EUR 664.4 million (USD $979.9 million) down 5 percent from last year’s EUR 697.4 million (USD $1.02 billion).

EBIT fell to EUR 92.2 million (USD $135.9 million) — before the non-recurring items booked in Q4 — down 23 percent from EUR 120.2 million (USD $177.2 million) the year before. Earnings per share amounted to EUR 0.25 (USD $0.36) — EUR 0.70 (USD $1.03) excluding the non-recurring items — compared to EUR 0.98 (USD $1.44).

Amer Sports’ newly organized winter and outdoor business segment, which includes wintersports equipment, apparel and footwear, cycling and sports instruments, posted a 21-percent decline in fourth-quarter sales — EUR 304.9 million (USD $449.7 million) versus EUR 387.1 million (USD $570.9 million) in the same period last year. EBIT was down 37 percent to EUR 35.2 million (USD $51.9 million) compared to EUR 56.3 million (USD $83.0 million).

Fourth-quarter sales by division were:

• wintersports equipment: EUR 188.7 million (USD $278.3 million) in ’07 down 32 percent from EUR 278.5 million (USD $410.7 million) in ’06
• apparel and footwear: EUR 60.2 million (USD $88.7 million) in ’07 up 14 percent from EUR 52.6 million (USD $77.5 million) in ’06
• sports instruments: EUR 25.3 million (USD $37.3 million) in ’07 up 11 percent from EUR 22.8 million (USD $33.6 million) in ’06

FY ’07 sales for the winter and outdoor segment were down 12 percent to EUR 830.1 million (USD $1.22 billion) compared to EUR 947.5 million (USD $1.39 billion) in FY ’06. EBIT for the year plummeted 56 percent to EUR 20.9 million (USD $30.8 million) from EUR 47.2 million (USD $69.6 million) last year. Amer Sports said the decline was caused by a considerable softening of the demand in the wintersports equipment market.

FY ’07 sales by division were:

• wintersports equipment: EUR 394.2 million (USD $581.4 million) in ’07 down 28 percent from EUR 544.3 million (USD $802.8 million) in ’06
• apparel and footwear: EUR 229.4 million (USD $338.3 million) in ’07 up 22 percent from EUR 188.8 million (USD $278.4 million) in ’06
• sports instruments: EUR 90.7 million (USD $133.7 million) in ’07 up 12 percent from EUR 81.3 million (USD $119.9 million) in ’06

Amer Sports said decreased sales of Atomic’s and Salomon’s winter sports equipment were due to the poor 2006/07 winter season and the resulting changed behavior of the trade and consumers: the number of preseason orders of wintersports equipment halved during the first quarter, and during the second quarter, pre-orders decreased more than 20 percent. Despite good snow conditions toward the end of the year, the volume of re-orders in the fourth quarter remained low.



Favorable development of Salomon and Arc’Teryx apparel and Salomon footwear continued, the company added. Sales of trail running shoes increased the fastest.

Amer Sports 2008 net sales are expected to increase approximately 5 percent in local currencies. EBIT is estimated to amount to EUR 100 million to EUR 130 million (USD $147.4 million to $191.7 million), with earnings per share coming in at EUR 0.75 to 1.00 (USD $1.10 to $1.47).

Amer Sports’ board proposed a dividend of EUR 0.50 (USD $0.73) be paid per share.

(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 Feb. 6.)

Dorel buys Cannondale and Sugoi

Dorel Industries Ltd. (TSX: DII.A and DII.B) has acquired Cannondale Bicycle Corp., including its Sugoi Performance Apparel segment, for an all-cash transaction between $190 million to $200 million. The final price is subject to Cannondale’s earnings results for the year ending June 30, 2008.

Headquartered in Bethel, Conn., Cannondale, a designer, developer and manufacturer of high-end bicycles, has facilities in Bedford, Pa., as well as offices in Canada, Switzerland, Holland, Japan and Australia.

The transaction, which will be immediately accretive to Dorel’s earnings, is being financed through debt. Cannondale and Sugoi are being purchased from an affiliate of Pegasus Capital Advisors, which acquired the company in 2003. 2007 sales for Cannondale and Sugoi were approximately $200 million.

The company said its Recreational/Leisure segment is being split into two distinct operating divisions. A new Dorel Independent Bicycle Dealers (IBD) division, the Cannondale Sports Group, is being created and will focus exclusively on this category with premium-oriented brands. Backed by Dorel’s resources, the Cannondale Sports Group will build on Cannondale’s strengths to grow significantly within the IBD channel. Pacific Cycle will become a stand-alone division with an exclusive focus on mass-merchant customers.

Luxottica projects FY ’08 and FY ’09 sales

Luxottica Group (NYSE: LUX) said it expects to generate sales of EUR 6.1 billion (USD $8.9 billion) in 2009 based on new business prospects generated by Luxottica’s $2.1 billion acquisition of Oakley in November 2007.

The fiscal year ’09 sales estimate is based on an average exchange rate of 1 euro equaling USD $1.45, reflecting an increase of 27 percent at constant exchange rates from fiscal year 2007.

Consolidated sales for fiscal year 2008 are expected to be between EUR 5.6 billion (USD $8.1 billion) and EUR 5.75 billion (USD $8.4 billion). EPS in excess of EUR 1.31 (USD $1.91) are expected for 2009 (up by 35 percent from 2007, excluding the impact of exchange rates and trademark amortization).

EPS for 2008 are expected to be between EUR 1.11 (USD $1.62) and EUR 1.14 (USD $1.68). The group now expects that it will report fiscal year 2007 EPS of EUR 1.08 (USD $1.58), reflecting an increase of 24 percent from fiscal year 2006 at constant exchange rates.

Luxottica estimates that operating synergies between the two companies will deliver yearly benefits worth EUR 100 million (USD $146.3 million) by 2010, broken down as follows: EUR 20 million (USD $29.2 million) in 2008, EUR 60 million (USD $87.8 million) in 2009 and EUR 100 million (USD $146.3 million) in 2010.

(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 Feb. 7.)

LaCrosse gets order from U.S. Marines

LaCrosse Footwear (Nasdaq: BOOT) said its Danner subsidiary received a delivery order from the U.S. Marine Corps to provide cold weather boots for troops in Afghanistan.

The $900,000 contract stipulates Danner will supply 5,730 pairs of the Mountain Cold Weather Boot in several shipments in the first half of 2008. The boots were manufactured in the company’s Portland, Ore., facility in conjunction with the Marines.

In other company news: LaCrosse’s board approved a special dividend of $1 per share and declared a quarterly dividend of 12.5 cents per share. The dividends will be paid March 18 to shareholders of record on Feb. 22. LaCrosse added it switched to quarterly dividends from annual dividends.

Sport Chalet reports Q3 ’08 net loss

For its third fiscal quarter ended Dec. 30, 2007, Sport Chalet (Nasdaq: SPCHA and SPCHB) said sales increased 1.6 percent, negatively impacted by soft macroeconomic trends as well as warm weather and wildfires in the company’s core Southern California market.

Sales were $116.6 million for the FY ’08 third quarter compared to $114.7 million for the third quarter of 2007. The company noted that 10 new stores not included in same-store sales contributed $9.5 million in sales for the quarter while same-store sales decreased 6.9 percent.

Gross profit as a percent of sales was 30.2 percent compared to 32.5 percent for the third quarter of last year. The decline was primarily from increased rent and more promotional activity.

Selling, general and administrative expenses (SG&A) as a percent of sales increased to 26.2 percent from 23.9 percent last year, reflecting higher expenses as the company’s newer stores ramp up as well as reduced leverage from lower same-store sales.

Sport Chalet also recorded a non-cash impairment charge of $2.1 million pre-tax, or $0.09 per diluted share, in relation to certain California stores. Including the non-cash impairment charge, net loss for the third quarter of 2008 was $682,000, or $0.05 per diluted share. Excluding the non-cash impairment charge, net income for the third quarter of 2008 was $574,000, or $0.04 per diluted share, compared to a net income of $4.0 million, or $0.28 per diluted share, for the third quarter last year.

The company added that it expects full fiscal year net sales to increase moderately over fiscal 2007, while comparable store sales are expected to decline approximately 2 percent to 4 percent. Excluding the non-cash impairment charge of $0.09 per diluted share recorded in the third quarter of fiscal 2008, the company anticipates reporting a slight net loss for 2008.

Additionally, Sport Chalet anticipates opening three to four new stores during the year. The new stores will be focused on adding density to current markets, namely California and Arizona.

It will also complete the relocation of its flagship La Canada Flintridge store in the second half of calendar 2008. It’s also relocating four small specialty stores, which previously served the La Canada Flintridge market into a single, 45,000-square-feet store in the La Canada Flintridge Town Center.

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