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Outdoor financials: Wolverine Q2 profit rises 7.4 percent, plus Rocky, VF

Wolverine Q2 profit rises 7.4 percent, Rocky Brands' shares tumble on expected Q2 loss, and VF reportedly eyeing India's growing middle class

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Wolverine Q2 profit rises 7.4 percent
Wolverine World Wide’s (NYSE: WWW) second-quarter profit increased 7.4 percent and beat analyst estimates, prompting the footwear maker to increase its 2006 financial targets.

Net income rose to $14.2 million, or $0.25 per share, from $13.3 million, or $0.22 per share. Earnings in the latest quarter were decreased by $0.03 per share for stock-option costs and spending on initiatives for Patagonia Footwear and Merrell Apparel. Revenue climbed 11 percent to $238.5 million from $215.7 million.

Analysts had expected Merrell and Sebago’s parent to earn $0.23 per share on revenue of $228.2 million.

Wolverine credited a business-model change with an international partner for the increase in revenue.

“Sales to this growing international distributor were changed from a distribution-fee basis to a wholesale basis, which increased both revenue and cost of products sold by $8.3 million in the second quarter,” said Stephen Gulis, Wolverine’s CFO, in a statement. “The change accounted for 3.8 percentage points of the quarter’s revenue increase and also reduced gross margin in the quarter by 140 basis points, which is reflected in the quarter’s 37.9 percent gross margin.”

The company now expects 2006 earnings per share ranging from $1.38 to $1.42 versus its prior estimate of $1.34 to $1.40. Revenue is expected to come in at $1.12 billion to $1.14 billion, an improvement over the previous estimate of $1.11 billion to $1.13 billion.

Wolverine’s board also declared a quarterly cash dividend of $.075 per share of common stock. The dividend is payable on Nov. 1, 2006, to stockholders of record on Oct. 2, 2006. The dividend is equal to the last quarterly dividend and represents a $.30 per share annual dividend.

Wolverine ended July 12 at $22.92, down $0.33.

Rocky Brands’ shares tumble on expected Q2 loss

Following the news that it expects to post a loss during the second quarter, Rocky Brands’ (Nasdaq: RCKY) stock sank 27.1 percent in after-hours trading on July 13 on the Nasdaq Stock Exchange.

Its stock was down $6.03 to $16.26 in the late session, from their Nasdaq close of $22.29 on July 13. July 14 wasn’t much better as it closed the day at $12.72.

The company said preliminary second quarter results showed it would lose between $0.05 and $0.10 per share for the second quarter, compared with a profit of $0.50 per share during the same period last year.

The company added that net sales may fall to $57 million, compared with $65.5 million last year, due to weaker-than-expected sales in its outdoor business. The decline came in part because last year, the company sold $5.8 million worth of footwear to the U.S. military, but had no military sales this year.

The company will report its second-quarter results July 27.

Rocky Brands also said it refinanced a six-year, $30 million term loan with American Capital Strategies, initiated January 2005. In all, $15 million of the loan was refinanced with GMAC Commercial Finance with the rest remaining at American Capital.

VF reportedly eyeing India’s growing middle class
VF Corp. (NYSE: VFC) recently got permission from the Indian government to enter into a joint venture with Arvind Brands Ltd. to market and distribute VF’s products there, according to an AP story.

Arvind Brands already sells VF’s jeans and Nautica sportswear under a license agreement, but the joint venture would expand that relationship. Brands under the VF umbrella include The North Face, Eastpak and JanSport.

But press reports in India, citing unnamed sources, said VF planned to take a 60 percent stake in the new joint venture, routing its investment through VF Mauritius, a subsidiary based in the island nation of Mauritius, according to the AP article.

Although the AP article reported that VF Chairman and CEO Mackey McDonald would not talk about the possible deal in an interview, he did say both India and China are of growing importance to VF.

“Not only do they have large populations — close to 1 billion in India and over 1 billion in China, but they also have what’s very attractive to us: a growing middle class,” McDonald said. “But there’s not been the level of disposable income for much of that population to be able to purchase our brands. That’s changing.”

Asia represented only 2 percent of VF’s $1.6 billion in international revenue in 2005. International revenue represented 25 percent of total company revenue of $6.5 billion. But VF has outlined plans to grow international revenue to as much as 40 percent by the end of 2009 as it targets such emerging markets for its brands as India and China.

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