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liquidations should be largely over before the back-to-school sell-ing period. “Although we certainly do not know at this time what the ultimate outcome will be for all of the Sports Authority and Sport Chalet store locations, we believe that our stores stand to benefit once the competitive landscape rationalizes,” said Miller. “Fortunately, our healthy financial condition offers us the flexibil-ity to take advantage of this opportunity.”
Miller noted the company is actively working with the vendor community on opportunistic buys, as well as preparing for poten-tially increased consumer demand as stores shutter. He added, “If you think about the vendor community, they need to replace the lost business. That promotes a positive conversation in some cases.”
He further said Big 5 is developing market initiatives aimed at introducing Big 5 to consumers “who may soon need a new place to shop for sporting goods.” Miller didn’t expect to gain any real estate from any leases that may become available. Big 5’s stores average around 11,000 square feet while both the size of Sports Authority and Sport Chalet’s locations run 40,000 square feet or larger.
Miller stated Big 5 continues to maintain a “very healthy bal-ance sheet” that will help the chain weather the industry’s chal-lenges. He added, “While our results may be challenged in the near-term, we believe that as conditions in the sporting goods space normalize, our proven business model, which focuses on providing customers with the optimal mix of value, selection, service and convenience, will enable us to resume positive sales growth and create value for our shareholders.”
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BIG 5 SPORTING GOODS CORP. FIRST QUARTER STUNG BY RETAIL BANKRUPTCIESBig 5 Sporting Goods (Nasdaq:BGFV) said first-quarter earnings came in at the low-end of guidance and issued a weak outlook for the second-quarter. The West Coast retailer blamed lackluster spring sales despite the arrival of warmer weather as well as a hy-per-promotional climate tied to the troubles at Sports Authority and Sport Chalet.
Big 5 reported a loss in the quarter of $1.1 million, or 5 cents, a share, against earnings of $2.3 million, or 11 cents a share. When reporting fourth-quarter earnings in February, the company pro-jected results in the range of a loss of 5 cents a share to earnings of 2 cents a share due to signs of increased clearance activity.
Sales in the latest quarter slid 3.7 percent to $234.5 million. A calendar shift that caused its 2016 calendar year to begin one week later than fiscal 2015, as well as the later Easter, negative-ly impacted sales by approximately $3.9 million. Big 5 said a low-single-digit increase in average sales was offset by a low-sin-gle-digit decrease in customer transactions. Same-store sales sagged 1.9 percent on a comparable 13-week basis. Same-store sales were projected to arrive in the negative low single-digits to positive low single-digit range. On May 4, the day following the earnings release, shares of Big 5 fell 21.7 percent to $9.50.
On a conference call with analysts, Big 5 President and CEO Steve Miller said the first-quarter started off strongly with January comps ahead in the high-single-digit range as the retailer benefit-ed from “extremely favorable” winter weather conditions out west. However, sales softened significantly mid-quarter, when the weath-er in mid-February turned warm “and we did not receive the lift in our non-winter-product categories that we might have anticipat-ed.” Comps were down mid-single-digits in February and March.
Miller further stated the performance in the last two months of the quarter reflected a challenging retail environment in the sporting goods sector in connection with liquidation and promo-tional efforts associated with the struggles and bankruptcies of Sports Authority and Sport Chalet.
From a category standpoint, apparel comped positively, in the high-single-digit range for the period, largely on the strength of winter apparel sales in the first-half of the quarter. Footwear sales
comped up in the low-single-digit range, and hardgoods comped down in the high-single-digits.
The bottom line also reflected a 120 basis-point decline in gross margins to 30.3 percent. Merchandise margins decreased 86 basis points due to the impact of the calendar shift, as well as heightened promotional activity to drive traffic in the challenging environment.
SG&A expense was 30.4 percent sales in the quarter, up from 29.8 percent, as a result of lower sales. On an absolute basis, SG&A expense decreased $1.3 million year-over-year, primarily reflecting legal settlement and proxy contest costs in 2015.
Looking ahead, Miller said sales for the second-quarter have remained soft due to ongoing competitor’s liquidation sales from Sports Authority and Sport Chalet. Comps were running down in the low-to-mid-single-digit range.
With April being a low-volume period for the retailer, success in the quarter heavily depends over the back-half of the period, which includes Memorial Day, Father’s Day, and the lead up to the Fourth of July, he noted.
For the second-quarter, comps are expected in the negative low-single-digit-to-flat range with EPS between break-even and 6 cents a share. Net sales comparisons are expected to benefit by $7 million as a result of the year’s calendar shift with the pre-Fourth of July holiday sales shifting to the second-quarter from third-quarter last year.
Regarding the bankruptcies, Miller said about 210 Sports Authority and Sport Chalet stores overlap with about 250 Big 5 stores, or nearly 60 percent of the chain.
Asked how Big 5 can combat the liquidation sales, Miller ad-mitted, “you truly can’t combat a peer going-out-of-business sale.” He noted that stores liquidating will eventually run out of basic products and both bankrupt chains haven’t been receiving fresh inventory. “We may step up our promotional activity, but we’re certainly going to operate rationally looking to balance sales and margins, expense control and inventory management to real-ly ensure that we’re best positioned to benefit from the competi-tive rationalization once this effectively is done and over,” he said.
Looking further ahead, Miller noted that even with additional closings coming from Sports Authority in the weeks ahead, the
BIG 5 SPORTING GOODS CORP. Fiscal First Quarter Results
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underwear and activewear - grew. While Gildan-branded socks gained market share and Gold Toe socks sustained its top position in with department stores and national retail-ers, overall sales declined due to weakness in those channels.
The latest government data indicates de-partment store sales in the first- quarter came in 2.8 percent below their level a year ago. De-partment stores are on pace to close dozens of stores for the third consecutive year. While government data indicates sales of apparel and sporting goods stores appear to have grown during the quarter, many national retailers
are struggling. On May 4, Aeropostale followed Pacific Sunwear of California Inc., Sports Authority, Sports Chalet, Eastern Mountain Sports and Bob’s Stores into Chapter 11 bankruptcy.
A Focus On MarginsGiven its first-quarter revenue decline and the grim outlook for the national retailers who sell its branded apparel, Gildan focused Wednesday on how it managed to grow net income 12.9 percent to $63.2 million during the quarter. The company expanded gross mar-gin 440 basis points to 26.4 percent and operating margin 220 basis points to 11.8 percent not just because of lower cotton prices but be-cause of ongoing investments in upstream manufacturing operations including a new yarn spinning facility in North Carolina.
The Alstyles acquisition, which is expected to be accretive to earn-ings this year, is expected to increase Gildan’s leverage with cotton and other raw materials and logistics vendors.
Gildan, which does significant business in Europe and is expanding a production facility in Bangladesh to keep up with demand in China, said it would not update its fiscal 2016 guidance until it completes the Alstyle acquisition. In the meantime, it continues to expect printwear sales to come in flat at $1.6 billion and branded apparel sales to grow about 7 percent to $1 billion fueled by new Gold Toe and Gildan pro-grams.
“We’re very excited,” Chamandy said. “Our sales will be up signifi-cantly in the back-half of the year as we continue to set these new programs.”
Photo courtesy UGG
GILDAN PIVOTS WEST AND SOUTH AS U.S. RETAIL CUSTOMERS STRUGGLE
Amid a rash of store closings and retail bank-ruptcies in the United States, Gildan Active-wear Inc. (NYSE:GIL) is pivoting west and south.
The Canadian company announced May 4 that it had signed a definitive agreement to acquire 100 percent of fellow Canadian printwear manufacturer Alstyle Apparel LLC for $110 million in cash, or about 1.8 times earnings and nearly six times EBITDA in the fiscal year ended February 29.
Alstyle owns a large textile facility and sew-ing operation in Mexico and a warehouse and distribution facility in Los Angeles.
“This is really like a west coast play,” explained Gildan President and CEO Glenn Chamandy during Gildan’s first-quarter earnings call. “If you ever go to California, you really don’t see a lot of the tra-ditional products, even ours, in a lot of the souvenir stores because a lot of it is driven by brands that are more west coast driven. So that’s the way I would view this as an opportunity for us to really penetrate in the western part of the United States.”
Alstyle’s Mexican factory also has duty-free access to South American countries that have signed trade deals with Mexico.
Gildan announced the deal moments before reporting its printwear sales declined by $39.2 million, or 9.1 percent, to $392.1 million in the fiscal first-quarter ended April 3 compared with the year earlier quarter.
Gildan said sales of its cotton fashion basics grew in the mid-teens reflecting strong gains by the Anvil and Comfort Colors brands, while sales of Gildan’s performance apparel, which is made with polyester, grew close to 20 percent from year-ago levels. Sell-through was stron-ger in the mass channel than department stores or national chains. While distributors did sell through excess fleece inventories seen at the end of last year, the growth was not enough to offset an anticipated decline in distributors’ replenishment orders.
Dragged Down By Big BoxesAt Gildan’s branded apparel segment, revenues slipped $3.7 million, or 1.8 percent, to $201.2 million due primarily to the company’s decision to exit private label programs with certain retailers. Excluding those programs, sales of core products - and particularly Gildan-branded
Photo courtesy Alstyle Apparel LLC
3 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
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ADIDAS GROUP TO SELL TAYLORMADE AS CORE BUSINESS ACCELERATES
After several years struggling to turnaround a long-suffering business in a challenged sport, Adidas Group has decided to sell parts of its golf business, including TaylorMade.
The German sportswear maker began a stra-tegic review last year of its golf business, an-nouncing that it had hired an investment bank to explore options for the business, which has been in part challenged by declines in rounds played in recent years with many younger par-ticipants having been turned off by the pace of the sport.
On May 4, Adidas Group said it would active-ly seek a buyer for its TaylorMade, Adams and Ashworth golf hardgoods brands and would instead focus on golf footwear and apparel sales through its Adidas Golf brand. The sale will come as TaylorMade, the crown jewel of its hardgoods golf segment, managed to return to growth in the first quarter, up 6 percent, driven by sales increases in metal woods and irons.
Herbert Hainer, Adidas AG’s CEO, said on his company’s first-quarter conference call, “TaylorMade continues to be the clear number one driver brand in the industry and the most played brand on tour. The most recent product launches, such as the M1 and the M2 have, once again, proven TaylorMade’s unrivaled leader-ship when it comes to innovation.”
In addition, sales at Adidas Golf also in-creased in the quarter, driven by high single-dig-it growth in footwear, “underlying the viability of this part of our business,” said Hainer.
Hainer further said the restructuring the golf segment has undergone over the last year would make the TaylorMade organization “a much more nimble and profitable one going forward.”
“I am convinced that with its leadership po-sition in the industry and the turnaround plan gaining traction, which is clearly reflected in the topline improvement recorded in Q1, as well as
the recent market share gains, TaylorMade offers attractive growth opportunities in the future,“ added Hainer. “However, we decided that now is the time to focus even more on our core strengths in the athletic footwear and the apparel market. The planned divestiture will allow us to reduce complexity and focus our efforts on those areas of our business that offer the highest return.”
The news of the sale of the golf brands came as the company reported stellar first-quarter results. The strong quarter wasn’t unexpected with the company the prior week raising its 2016 guidance for the second time in three months after indicating that first-quarter earn-ings came in stronger than expected.
The quarter marked Adidas Group’s high-est organic quarterly growth rate in more than 10 years. Sales increased 16.8 percent to €4.77 billion ($5.44 billion) and gained
22 percent on a currency-neutral basis. First-quarter earnings from continuing operations jumped 38 percent to €350 million ($399 million). Reebok continued to see steady progress, recording its twelfth consecutive quarter of growth.
But the much-bigger Adidas brand stood out with a strong acceleration in top-line growth. Growth was lead by the four regions – North America, Western Europe, Greater China and Latin America – and expected to drive its 2020 Strategic Plan.
“The momentum our brands are enjoying today is a direct consequence of our new con-sumer-obsessed mindset which, after the imple-mentation of brand leadership, is not only ful-ly-reflected in our organizational structure, but it’s also clearly leaving its mark on our results,” Hainer said on the call.
The Adidas Brand grew 20.4 percent in the quarter to €4.04 billion ($4.6 billion) and gained 25.5 percent on a currency-neutral basis. The improvement reflected strong double-digit growth in its lifestyle business but also acceler-ated momentum in sports performance with sales ahead 22 percent.
Among key sports performance categories for the Adidas brand, global football (soccer) was up 25 percent with double-digit increas-es in most markets. Footwear grew at strong double-digit rates due to the successful in-troduction of new products and franchises, including the ACE16+Pure Control laceless football boot. And soccer apparel grew dou-ble-digits in Europe due to ongoing demand for Federation kits.
Running for the Adidas brand expanded 19 percent with both footwear and apparel sales improving at double-digit rates. A highlight was the launch of PureBoost X, the brand’s first true female-focused running shoe concept. The quarter also saw the launch of PureBoost ZG, another light running shoe. The Boost collec-tion now represents one-third of Adidas’ total running footwear business, and runners wear-ing Boost models have won 18 marathons, of-ficials said.
Training increased 15 percent with dou-ble-digit growth rates in all major markets. The women’s business outperformed men’s during the quarter. Adidas also formed a multi-year partnership with Wanderlust, producer of the largest yoga lifestyle events in the world, to sup-port the women’s training business.
In its lifestyle business, Adidas Originals grew 45 percent on top of healthy year-ago gains with strong double-digit increases in all markets except Russia/CIS. “Huge de-mand” continued for its established franchises such as Superstar or the Stan Smith. The star,
Photo courtesy TaylorMade
4 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
however, was the NMD, featuring Adidas’ Boost technology in the midsole and a unique upper. Hainer said sell-through rates “have been unbelievable” with more than 400,000 pairs sold in one day.
Reebok’s overall sales inched up 1 percent to €416 million ($474 million) and advanced 6.5 percent on a currency-neutral basis. Dou-ble-digit increases were seen in key markets, such as Western Europe, Greater China, Ja-pan, Middle East, Africa and other parts of Asia. Both training and classics saw in-creases. Gross margin for Reebok improved 40 basis points, mainly due to a more favorable regional mix.
Hainer noted that in North America, Reebok is “still facing major challenges” due to its efforts to reduce the number of factory outlet stores to streamline the brand’s distribution footprint. Said Hainer, “In 2016, we will continue to pur-sue that path, as we are convinced this is a pain-ful, yet necessary move for a more profitable future.”
Reebok will also be expanding its in-store shop program with retailers while opening 20 showrooms in 2016 to reintroduce con-sumers to the brand. Said Hainer, “Bringing back Reebok to a successful and profitable growth path in its home market is the brand’s most relevant goal going forward, and we will not stop working towards that goal until it is achieved.”
In the North America region, sales for Adidas brand and Reebok accelerated strongly rising 23.2 percent to €728 million ($830 million) and adding 21.6 percent on a currency-neutral basis. The gains were driv-en by both its lifestyle and performance busi-nesses. Said Robin Stalker, Adidas Group’s CFO, “The latter is the clear sign that our grassroots activation is paying off with the U.S. consumers starting to acknowledge us as an authentic sports performance brand.”
The U.S. sports business increased more than 50 percent in the first quarter for Adidas brand with key categories such as training and running recording double-digit growth. Running was led by the Ultra Boost franchise. In total, sports performance sales in the U.S. grew 20 percent in the first quarter. At Reebok, sales declined 13 percent due to ongoing streamlining efforts but were in line with its expectations.
Higher marketing costs still weighted on profitability in the region, although North America was able to net a profit of €19 million ($21.7 million) in the quarter, rebounding from a loss of €9 million. Operating margins increased 4.1 percentage points to 2.7 percent, supported by an increase in gross margins of 1.2 percentage points.
In other regions, revenues in Western Europe for Adidas Brand and Reebok grew 23.7 percent to €1.41 billion and gained 24.7 percent on a currency-neutral basis, building on recent mo-mentum. The Adidas brand grew 26 percent and Reebok jumped 15 percent.
Marking its eighth consecutive quarter of double-digit growth in the region, Greater China’s sales for Adidas and Reebok expanded 27.7 percent to €762.6 million ($869 million) while running was ahead 30.2 percent on a currency-neutral basis. The Adidas brand grew 30 percent with double-digit growth in training and running and had “tremendous double-digit growth” in global football in line with the government’s objectives to de-velop soccer in China. Also benefitting from the country’s push toward healthier lifestyles, Reebok added 22 percent with all major cat-egories expanding at double-digit rates. Op-erating margins in Greater China increased 2.5 percentage points to 39.1 percent. Stalk-er said the performance shows that “China’s sports performance market is still in its infan-cy, and we believe there is still plenty of room for growth.”
In Latin America, sales for Adidas and Reebok were down 6.8 percent to €394 million ($449 million) but grew 18.7 percent on a cur-rency-neutral basis. The gains were driven by strong double-digit growth at Adidas while Reebok declined. Argentina, Mexico and Chile remain the major growth drivers in the region, although Brazil recovered to show double-digit growth ahead of the Olympic games.
In Russia/CIS, sales for Adidas and Reebok were down 15 percent to €138 million ($157 million) due to weakening currencies but achieved a 1.8 percent gain on a currency-neu-tral basis despite an ongoing challenging macro-economic environment.
In the MEAA region, sales for Adidas and Reebok were up 10.3 percent to €701.6 million ($800 million) and climbed 17.2 percent on a currency-neutral basis. The improvement was boosted by high single-digit growth in South Korea as well as double-digit improvements in Australia, the United Arab Emirates and Turkey. In Japan, sales for Adidas and Reebok vaulted 52.6 percent to €236 million ($269 million) and jumped 44.4 percent on a currency-neutral basis.
Revenues in Other Businesses were up 5.2 percent to €396 million ($451.4 million) and gained 5.5 percent on a currency-neutral basis, as strong double-digit sales growth in other cen-trally managed businesses was only partly off-set by declines at TaylorMade-Adidas Golf and Reebok-CCM Hockey.
TaylorMade-Adidas Golf eased 1.7 percent in the quarter to €275 million ($334 mm) and was off 1.4 percent on a same-store basis. Hainer noted that the decline was solely related to lower revenues from Adams and Ashworth, a golf ap-parel brand with TaylorMade and Adidas Golf, as noted, showing gains.
The TaylorMade-Adidas Golf business post-ed sales of €1.34 billion in 2012, but has steadily declined in recent years. The company posted
sales of €902 million last year. Adidas Group ac-quired TaylorMade in 1997, Ashworth in 2008 and Adams in 2012.
Reebok-CCM Hockey sales were down 3.4 percent to €38 million ($43 mm) and slid 2 percent on a currency-neutral basis.
Companywide, gross margins in the quarter increased 0.3 percentage points to 49.4 percent. Positive effects from favorable pricing and prod-uct mix more than offset severe headwinds from negative currency effects as well as lower prod-uct margins at TaylorMade-Adidas Golf.
Spending on marketing and point-of-sale- activation increased 8 percent in the quarter, leading to a 13 percent increase in Adidas Group’s operating expenses, amounting to €1.924 billion ($2.19 billion). As a percentage of sales, however, other operating expenses decreased 1.3 percentage points to 40.3 percent, reflecting the strong top-line improvements as well as a different phasing of the company’s marketing investments in 2016 compared to the prior year.
Adidas Group’s net income attributable to shareholders which, in addition to net income from continuing operations, includes the re-sults from discontinued operations, was up 47 percent to €351 million ($400 million).
As noted in the prior week, Adidas Group now expects sales for 2016 to increase at a rate of around 15 percent on a currency-neutral basis, up from 10 percent and 12 percent previously. The top-line expansion
is projected to be supported by double-digit growth in all regions except Russia/CIS.
With higher-than-expected gross margins due to favorable pricing, product and region-al mix at both Adidas and Reebok and further enhancements in the company’s channel mix, Adidas also raised its earnings guidance. Net income from continuing operations, excluding goodwill impairment, is projected to increase at a rate between 15 and 18 percent, up from 10 to 12 percent previously.
5 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
WOLVERINE WORLDWIDE INC. RESTRUCTURING EFFORTS GAIN TRACTION IN FIRST QUARTER
Wolverine Worldwide Inc. (NYSE:WWW), not surprisingly, re-ported lower earnings and sales for the first quarter 2016, but results came in ahead of internal plans. More encouragingly, ac-tions taken over the past several quarters — particularly reorga-nizing its brand groups, closing stores and realigning its leader-ship roles — are starting to pay off.
“Nearly all regions around the world and most of our brands beat our plan for the quarter,” said Blake Krueger, chairman, CEO and president, on the company’s May 3 conference call with analysts. “Our diverse brand portfolio and global operational ex-cellence continue to provide competitive advantage and deliver strong earnings and cash flow in what remains a volatile global retail environment.”
In other developments, Krueger said the company “may seek strategic alternatives” for some of its 12 footwear brands as part of an overall review. Despite the better-than-expected results, the company reaffirmed its guidance for the year.
In February, while reporting its fourth-quarter 2015 results, Wolverine had warned that its first-half would be hurt by heavy inventories that are clogging the retail marketplace following a mild winter. Other factors challenging domestic growth were said to be consumers migrating to online channels and both con-sumers and retailers buying closer to need. Globally, currency issues, a slowdown in China and geopolitical volatility are im-pacting results.
In the first-quarter, earnings slumped 56.6 percent to $17.4 million, or 18 cents a share. Excluding restructuring and impairment costs, the loss was 29 cents a share. On a curren-cy-neutral basis, earnings slid to 34 cents a share from 37 cents a year ago, but easily topped Wall Street’s consensus estimates.
Gross margins eroded to 39.6 percent from 41.4 percent. Currency headwinds drove down margins by 130 basis points. In addition, first quarter gross margin was negatively impacted by one-time royalty benefits recognized in 2015 that did not recur in 2016. Adjusted gross margin for the quarter was 41.6 percent, an increase of 20 basis points as a result of the proactive strategic price increases implemented last year and the benefit of contin-ued management of supply chain and product costs.
Total SG&A expenses were down approximately $14.7 million although they still grew to 31.9 percent of sales from 31.5 percent. Selling expenses were down primarily due to
closing stores and reducing related overhead. Advertising spend was lower as a result of a shift in the timing of some of its incre-mental investment spend with Merrell’s initiatives not ramping up until the second quarter.
Sales were down 8.5 percent to $577.6 million. Excluding the impact of currency changes, retail store closures and the exit of certain brand businesses, underlying revenue declined 6.6 percent.
Among its groups, revenues at the Wolverine Outdoor Lifestyle Group (Merrell, Chaco, Cat Footwear, Hush Puppies and Seba-go) were down 2.8 percent but beat internal expectations in the quarter. Chaco posted high-double-digit growth, Merrell was down mid-single-digits, Hush Puppies slid low-single-digits, CAT dropped high-teens and Sebago moved up low-single-digits.
For the group’s biggest brand, Merrell, the decline reflected softness in its active lifestyle category, its decision to exit the wholesale channel for Merrell apparel and the conversion of its China distribution arrangement to a joint venture. Merrell de-livered mid-single-digit revenue growth in the United States and high-single-digit underlying growth in EMEA. Merrell’s e-commerce and total direct-to-consumer’s (DTC) revenue grew more than 30 percent.
“I am encouraged by the early success of Merrell’s new product introductions given that the full benefit of the brands go-to-market strategy has not yet kicked in,” Krueger said. “New strategic partnerships with key retailers focused on wider pre-sentations of specific product collections and Merrell’s lead spon-sorship of Tough Mudder, the leading global outdoor obstacle challenge, are just beginning to ramp up.”
In the Wolverine Boston Group segment (Sperry, Saucony and Keds), revenue declined 10.1 percent. Sperry, which was comp-ing against mid-teens growth in the year-ago period, was down low-teens, Keds gave back low single-digits and Saucony slid high single-digits.
Sperry, the segment’s biggest brand, exceeded expectations in the quarter. As expected, the boat shoe category remained soft in the quarter, but Sperry boat shoes performed better than anticipated.
“The boot category continued to perform exceptionally well,” added Krueger. Seacoast, a vulcanized line, was the top style for the brand in the quarter. For the second-half, Sperry plans to sig-nificantly expand its boot program, including the strong-selling Saltwater collection. “We continue to be encouraged by Sperry’s
ability to expand beyond its core category, Krueger said. Our out-look for Sperry has improved a bit since February due to a decent start to the year and healthy demand for boots in the second-half.”
Krueger noted that Saucony’s rare decline reflected “some of the bankruptcies we’ve read about in the sports sector,” as well as shipment challenges transitioning to a new Canadian ware-house. The fourth-quarter Everun launch also pulled some sales into that quarter from the first. “So it was nothing permanent, the brand has great momentum,” Krueger said.
In its Wolverine Heritage Group segment (Wolverine, Bates, Harley-Davidson Footwear and HyTest), revenues slumped 11.5 percent. Sales were down in the low-teens at both Wolverine and Bates, up low-single digits at HyTest and down high-teens for Harley Davidson. The Wolverine brand’s performance in the quarter was negatively impacted by softness in the oil patch states.
“Additionally, boot inventory for retail remained elevated fol-lowing our unseasonably warm fall and winter and several of the brand’s key wholesale accounts continue to experience tough trading conditions,” Krueger said. “Recently we’ve seen at-once orders improve as retailers continue to rely on us to hold inven-tory and to support consumer demand.”
Krueger also detailed progress on several initiatives launched last year that were a “direct response to the choppy global retail environment and slow-burn economic recovery which led to a performance in 2015 that fell short of our expectations.”
In store operations, Wolverine will be closing up to 100 stores, large-ly Stride Rite locations, in 2016 while initiating “programs to refresh the go-forward stores to deliver a much richer consumer experience.”
The Stride Rite children’s group and its Michigan-based DTC group merged, new leadership was recruited for the retail seg-ment, and a merchandising structure was set up to support the smaller business.
WOLVERINE WORLD WIDE INC. Fiscal First Quarter Results
(Con’t Pg. 6)
6 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
BOGS/RAFTERS SALES DECLINE FOR SECOND CONSECUTIVE QUARTER
Sales of Bogs and Rafters footwear declined 17 percent to $7.75 million in the first-quarter due primarily to the same mild weather that sent them down 22 percent in the fourth-quar-ter, according to parent company Weyco Group Inc. (Nasdaq:WEYS).
The decline marked the first time sales of the brands fell in two consec-utive quarters since Weyco acquired them in March 2011. Bogs is best known for making waterproof leath-er and rubber boots, while Rafters makes sandals.
Weyco disclosed May 3 that it paid the former shareholders of Bogs a final earn-out payment of $5.22 million March 22 on top of the $1.27 million paid in March 2013. That brought the final price paid for the brands to $39.4 million, or about 1.5 times their 2010 sales.
The payments were tied to Bogs achieving certain levels of gross mar-gin dollars between January 1, 2011, and December 31, 2015.
Prior to the fourth-quarter of 2015, Bogs and Rafters sales had grown at double-digit rates for 11 consecutive quarters.
Said Krueger, “I’m pleased to report the business has improved significant-ly as a result of our efforts. Comp store sales improved materially during the fourth- quarter and were up mid-single-digits during the first-quarter, almost double the rate of the industry.”
To expand e-commerce, every brand has been migrated to a new, common IT platform and talent has also been added.
Noting that the company has “underperformed in this area for several years,” Wolverine’s apparel and accessory operations have been recently overhauled and restructured with new leadership. For example, the Merrell apparel office in Portland, OR has been closed and relocated to Merrell’s headquarters in Michigan.
“Today our Merrell team is focused on designing and building assortments for the 300-plus Merrell stores around the world, nearly 60 of which are located here in the U.S.,” Krueger said. “We believe significant growth opportunity exists here for our brands, and I feel very good about the recent moves we have made.”
Internationally, its Canada and EMEA operations were consolidated and streamlined over the past six months.
To spur innovation, Wolverine is in the process of establishing an extensive innovation, consumer and design center at its global headquarters. The estab-lishment will double its consumer research and marketing intelligence group and increase resources for advanced concepts.
“With increased consumer and trend capability our product development and marketing teams will be armed with extensive intelligence and meaningful insights to deliver fresh innovative product and marketing stories which frank-ly is paramount to today’s empowered and discerning consumer,” Krueger said.
Finally, Krueger noted that while the company continues “to investigate new brands to strategically add to our portfolio,” it’s also engaged in a portfolio re-view as part of an extensive examination of existing businesses and growth opportunities.
“Most critically we are aligning that review with our future growth and op-erating margin goals,” he said. “As a result of this process we may seek strategic alternatives for some of the brands and businesses within the current portfolio. We have done this periodically over the years. And while we have nothing real-ly to announce today, we believe this review and assessment will better position the company for long-term success and ultimately increase shareholder value.”
For 2016, Wolverine continues to expect revenues in the range of $2.48 to $2.58 billion, representing an underlying revenue decline in the range of approximately 4.3 to 0.5 percent. On a reported basis, a revenue decline is projected in the range of approximately 8 to 4.3 percent.
Adjusted EPS is expected in the range of $1.30 to $1.40. On a curren-cy-neutral basis, EPS is expected to land in the range of $1.48 to $1.58. Reported EPS is expected in the range of $1.16 to $1.26, which compares to $1.34 in the prior year. Photo courtesy Bogs FootwearPhoto courtesy Rafters Footwear
7 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
It marked a rare down quarter for the business, which has been a star performer since CODI ac-quired it in late 2010, but executives said they still expect Ergobaby to meet expectations this year.
Lower sales drove Ergobaby’s impressive gross margins down just 40 basis points to 65 percent, although SG&A rose to 40.3 percent of sales from 35.5 percent a year earlier due to the timing of marketing campaigns, higher employee and other costs. Income from operations slipped 24.1 percent to $4.1 million, or 21.1 percent of sales, compared with 26.1 percent a year earlier.
At Liberty Safe, a Utah-based manu-facturer of gun and home safes, sales grew by $3.1 million, or 12 percent, to $29 million during the quarter. Higher sales, in-creased manufacturing volumes and low-er input costs pushed gross margin up nearly 1,000 basis points to 32.1 percent. SG&A rose to 14 percent of net sales from 12.6 percent, due primarily to higher spending on radio and other advertising media. Operating income grew near-ly 2.5 times to $4.8 million, or 32.1 percent of net sales, compared with 22.3 percent a year earlier.
GUN SAFES OVERTAKE BABY CARRIERS AT COMPASS DIVERSIFIED IN FIRST QUARTER
Guns are in and babies are out if first-quarter results at Compass Diversified Holdings Inc. (NYSE:CODI) are any indication.
Compass Diversified, which is a publicly trad-ed holding company with controlling stakes in multiple industrial, consumer and active lifestyle businesses, reported sales of Liberty Safe gun safes rose 12 percent in the quarter ended March 31, while sales of Ergobaby infant carriers fell 6.1 percent in a reversal of trends a year ago.
Ergobaby sales declined $1.25 million to $19.4 million compared with the first-quarter of 2015 on lower sales both at home and abroad. Sales in the United States declined 7.1 percent to $9.1 million due to lower orders for the Ergobaby 360 wearable carrier; the timing of promotions at chain stores; and lumpy orders from boutique retail customers.
Sales of Orbit Baby integrated car seat and stroller systems also declined due to lower de-mand. International sales dipped 5.3 percent to $10.4 million, reflecting in part the compa-ny’s decision to buy back inventory from its distributor in Canada where Ergobaby is con-verting to a direct distribution model.
ICONIX SEES FIRST QUARTER DECLINES FOR STARTER AND UMBRO
Iconix Brand Group Inc. (Nasdaq:ICON) said Danskin delivered one of its strongest perfor-mances in the first-quarter among its brands, but its two other primary sports brands, Starter and Umbro, were both down.
On a conference call with analysts, John N. Haugh, president and CEO, said Danskin was the company’s “strongest performing women’s brand.” The company sells the Danskin line at Walmart and will be further supporting the re-lationship with a new enhanced marketing pro-gram that will launch this month.
Starter, which recently renewed its part-nership with Walmart, was down in the first-quarter as the brand shifted out of some accessory categories. Haugh said the compa-ny is launching a new marketing campaign to support Starter’s Walmart business. He also called Starter Black, a premium lifestyle brand extension launched in 2012 and serv-ing urban stores, “an untapped jewel” for the company.
Umbro’s sales were down due to challenging macroeconomic conditions in key markets like Russia and Scandinavia. For the full-year 2016, Umbro is expected to show an increase with strength in Chile, Argentina, France and the
United Kingdom as well as due to a new license in China.
Among its urban brands, Rocawear was down to a license transition and the push in the timing of its relaunch to fall 2016. Ecko’s new license started on April 1 and J.C. Penney, Dil-lard’s and other major national retailers have secured distribution for the brand. The overall men’s segment, which includes Starter, Umbro, Pony, Zoo York, Rocawear, Ecko and Ed Hardy, overall saw a 15 percent decline in licensing rev-enues in the quarter but is expected to be flat to slightly up for 2016.
Companywide, Iconix’s net income plunged 72 percent in the first-quarter, to $18.6 million, or 37 cents a share. The decline reflects a special gain in the year-ago period from the buyout and re-measurement of the company’s investment in Iconix China and a foreign currency translation gain. Non-GAAP diluted EPS was 53 cents a share as compared to 54 cents in the first quarter of 2015.
Licensing revenues were down 1.3 percent in the quarter to $94.6 million. The company’a other primary brands include Candie’s, Bongo, Joe Boxer, Rampage, Mudd, Mossimo, London Fog, Sharper Image, Material Girl, Peanuts, Strawberry Shortcake, and Royal Velvet.
Photo courtesy Libery Safe
Photo courtesy Umbro
8 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
it easy for our customers to offload, access and edit their GoPro content,” Woodman said.
To that end, the company acquired two mobile editing apps, Replay and Splice, in February and is working to better integrate their technologies into the GoPro network. “We believe that Re-play, with over 13 million downloads, represents the best auto-mated edit experience on mobile,” Woodman said. “While Splice, with over 19 million downloads, represents the best manual edit experience. We intend to combine these two apps to simplify mobile content creation for not only GoPro customers, but for smartphone users as well. Opening up GoPro as a content en-abling platform for billions of smartphone users is an important evolution of our strategy, one that we are very excited about.”
Earlier in the week, GoPro launched updated versions of both apps, including rebranding Replay as Quick, which will auto-matically edit users’ content in a few seconds. The idea being, if consumers don’t have time to edit video, technology can do it for them and serve it ready to post.
Looking ahead, GoPro officials maintained its full-year guid-ance in the range of $1.35 billion to $1.5 billion.
“We expect modest sequential revenue growth in the sec-ond-quarter resulting in the vast majority of our full-year reve-nue occurring in the second-half of the year,” officials said. “Our guidance takes into account the delay in Karma, the launch of our VR products and the introduction of our next generation of the Hero5 cameras and accessories.”
Brooks Running Company promoted Mike Billish to VP of U.S. Sales and Marc Misiewicz to Director of National Accounts.
CycleBar, the boutique indoor cycling franchise, will collaborate with the American Heart Association/American Stroke Association to create the CycleNation movement, a nation-wide push to bring cycling charity events to cities across the nation.
Dollamur Sport Surfaces signed a four-year agreement with USA Wrestling to serve as its official mat provider.
Dorel Sports appointed Dean Stojanovic to the role of VP of International Sales Operations, based at the company’s headquarters in Wilton, CT.
GNC Holdings Inc. may put itself up for sale as the board of directors began reviewing strategic and financial options to increase shareholder value.
HanesBrands is planning to offer $1.5 billion in aggregate principal amount of senior notes due 2024 and 2026 in a private offering.
Harman International Industries laid off half of the approximately 50 Yurbuds employees it had in St. Louis. It plans to close that office by June.
Jabo launched a fitness-dating app that matches users with similar fitness levels.
Kit and Ace, founded by the wife and son of Lululemon Founder Chip Wilson, appointed Wendy Bennison as its President.
Life Fitness named Mike Shedivy VP of Global Commercial Category Management and Product Development.
Mission Athletecare signed an exclusive global partnership with 37.5 Technology, a textile innovation by Cocona, Inc.
NSGA introduced a new measure called Total Participation Points (TPPs) as part of the 2016 edition of its Sports Participation Report. “The benefit of TPPs is that it takes into account the combination of reach and depth of participation,” said NSGA Director of Research and Information, Dustin Dobrin.
Performance Sports Group Ltd. said Rich Wuerthele, EVP of Hockey, is leaving the company effective May 20.
Skullcandy reported its losses slightly widened in the first-quarter to $4.9 million, or 17 cents a share, from $3.7 million, or 13 cents, a year ago.
AISLE TALK GOPRO LOOKS TO DRONES, VR CAMERAS TO STEM DROP IN SALES
Sales for action-camera leader GoPro (Nasdaq:GPRO) plummet-ed by half during the first-quarter 2016, as CEO Nick Woodman tried to assure investors that consumer demand for new technol-ogies will stop the bleeding.
Quarterly sales, ended March 31, 2016, came in at $185.5 million, versus $363.1 million during the same period a year ago.
Gross margins fell 1,260 basis points to 32.5 percent, versus 45.1 percent a year ago. Margins were impacted by charges of approximately $8 million related to legacy products for excess purchase commitments, inventory write-downs and marketing development funds. “GoPro has no further financial exposure remaining from purchase commitments and inventory related to our end-of-life HERO camera line,” officials said.
GoPro’s inventory fell by 25.7 percent to $139.7 million at the end of its first quarter versus a year ago.
The company is also spending heavily on its next-generation of products. Operating expenses of $157.5 million in the first-quar-ter 2016 were up 37 percent year-over-year. R&D expenses rose 46 percent and sales and marketing expenses grew 38 percent.
With the crash in sales and the higher expenses, the compa-ny reported a first-quarter net loss of $107.5 million, or a loss of 78 cents per diluted share, versus a profit of $16.8 million, or 11 cents per share, a year ago.
Despite the poor performance, “consumer demand for GoPro remains solid,” Woodman told investors on the company’s May 5 conference call, pointing to better sell-through numbers versus sell-in as retailers work through a glut of inventory. He added that consumers are hungry for innovations — both in hardware and software.
One of the company’s slated products, GoPro’s Karma drone, was scheduled to launch during the first half of 2016, but will be delayed to the second-half during the holiday period, Woodman said. It’s also investing heavily in virtual-reality (VR) camera technology, which captures live 360-degree views — think Google Maps’ Street View.
But perhaps the greatest hurdle for GoPro will be battling con-sumer fatigue. While active lifestyle consumers continue to cap-ture video and photos from their adventures, there’s a tendency to not do much with the content afterward. “We acknowledge the need to accelerate the development of software tools that make
Photo courtesy GoPro
9 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
FITBIT INC. FIRST QUARTER SALES SOAR, OUTLOOK DISAPPOINTS
Fitbit Inc. (NYSE:FIT) reported first-quar-ter earnings and revenue that beat Wall Street expectations, but its shares tumbled after it provided a disappointing earnings outlook for the second-quarter.
In the first-quarter, sales jumped 50.1 percent to $505.4 million. The company had projected sales in the range of $420 to $440 million.
Fitbit has been spending heavily to diversify its portfolio of colorful wristbands and clippa-ble devices that track calories, sleeping patterns and heart rates to better compete against rising rivals from Apple and Garmin, as well as to tap into new markets.
Year-on-year revenue gains were driven by continued growth in shipments of Charge HR, its leading product, augmented by the launch of its new products, Blaze and Alta. Although Fitbit started shipping both Blaze and Alta in the latter part of the quarter, they collectively represented 47 percent of total revenue and 50 percent, includ-ing related accessories, exceeding expectations.
“This was driven by higher reorders than we anticipated to support sell-through by our channel partners,” said James Park, Fitbit’s chairman and CEO, on a conference call with analysts. Blaze and Alta also drove an 18 percent increase in its ASP (average selling prices) from $85 a year ago to $100.
From a consumer standpoint, Park noted that approximately 40 percent of Blaze and Alta user activations were by users who had prior Fitbit devices; and approximately 20 percent of those were buyers who re-activated, coming back to the Fitbit community after having been inactive for 90-days or more.
“These strong results of Fitbit Blaze and Alta reinforce the overall trend in which we are see-ing older, lower-priced products declining in volume and favor newer higher-priced prod-ucts,” Park said.
Overall, the company sold 4.8 million devices in the first three months of the year, up 23.1 percent from the same period a year before. Fitbit is currently the largest maker of wearable devices according to research company IDC, with nearly double the market share as Apple. Last year, it sold 21.3 million devices, up from 10.9 million devices in 2014.
By region, U.S. revenue grew 33 percent year-over-year; EMEA vaulted 113 percent, APAC jumped 142 percent, and Other Americas add-ed 74 percent. The U.S. comprised 70 percent of first-quarter 2016 revenue; EMEA, 15 percent; APAC, 11 percent; and Other Americas, 4 percent.
In the United States, Park said Fitbit still sees “significant expansion of shelf space” with its top four retailers in the U.S. expected to increase linear footage of its displays by over 50 percent to accommodate Blaze, Alta and re-lated accessories. Park added, “As part of this expansion, this quarter we should start observ-ing retailers transitioning to more modular and
interactive display systems that will allow for easier changes for new products yet to come this year”
Non-GAAP earnings, which exclude special items largely tied to acquisitions and its initial public offering last June, were down 51.7 percent to $45.1 million, or 10 cents a share, but still exceeded Wall Street’s consensus estimate of 3 cents a share.
The lower earnings reflect a hike in non-GAAP operating expenses to 39.3 percent of revenue during the first-quarter, compared to 22.3 percent a year ago, and 32.2 percent in fourth-quarter 2015, predominantly reflecting increased investment in R&D and marketing to drive innovation and growth. Fitbit’s R&D head-count grew to 755 in the first-quarter, compared to 295 a year ago, and 624 at year-end 2015.
Park said, “The strong growth and defensibil-ity of our business continues to be powered by product innovation, the network effects of our community, our expanding global distribution, and investment in our brand.”
Marketing also more than doubled to $107 million to support the launch of the Blaze and Alta.
Looking ahead, the company said it expects earnings between
8 and 11 cents per share for the quarter end-ing in June. That’s far below the 26 cents per share analysts expected on average. Fitbit said it expects second-quarter revenue between $565 and $585 million, above the $531.5 million analysts expected.
William Zerella, CFO, said the company would continue to invest in innovation and brand building to maintain its leading market position in order to make it “increasingly diffi-cult for competitive offerings to achieve critical mass” but also tap the “network effect” to gain new Fitbit users. The company pointed to a study that showed that 44 percent of consumers said that friend or family member positively influ-enced their decision to purchase a fitness tracker.
Zerella further said early success with Blaze and Alta reinforced this view. He add-ed, “Therefore, in the second-quarter, we will maintain our investment in brand-building by supporting the penetration of Blaze and Alta into the market while investing more in inter-national market development than in the U.S. and frontloading engineering costs to support future new product introductions.”
The lower outlook caused shares of Fitbit to tumble $3.22, or 18.8 percent, to $13.88 on May 5, a day after results were reported. Fitbit’s shares are down 42 percent this year and now sit below its $20 IPO price.
For the full-year, Fitbit raised its outlook for sales to a range of $2.5 to $2.6 billion, up from $2.4 to $2.5 billion. Non-GAAP net income per share is now projected in the range of $1.12 to $1.24, up from previous guidance of $1.08 to $1.20.
Photo courtesy FitBit
10 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
Fitbit Inc. (NYSE:FIT) reported first-quarter earnings and revenue that beat Wall Street ex-pectations, but its shares tumbled after it pro-vided a disappointing earnings outlook for the second-quarter.
In the first-quarter, sales jumped 50.1 percent to $505.4 million. The company had projected sales in the range of $420 to $440 million.
Fitbit has been spending heavily to diversify its portfolio of colorful wristbands and clippa-ble devices that track calories, sleeping patterns and heart rates to better compete against rising rivals from Apple and Garmin, as well as to tap into new markets.
Year-on-year revenue gains were driven by continued growth in shipments of Charge HR, its leading product, augmented by the launch of its new products, Blaze and Alta. Although Fitbit started shipping both Blaze and Alta in the latter part of the quarter, they collectively represented 47 percent of total revenue and 50 percent, including related accessories, exceed-ing expectations.
“This was driven by higher reorders than we anticipated to support sell-through by our channel partners,” said James Park, Fitbit’s chairman and CEO, on a conference call with analysts. Blaze and Alta also drove an 18 per-cent increase in its ASP (average selling prices) from $85 a year ago to $100.
From a consumer standpoint, Park noted that approximately 40 percent of Blaze and Alta user activations were by users who had prior Fitbit devices; and approximately 20 percent of those were buyers who re-activated, coming back to the Fitbit community after having been inactive for 90-days or more.
“These strong results of Fitbit Blaze and Alta reinforce the overall trend in which we are see-ing older, lower-priced products declining in volume and favor newer higher-priced prod-ucts,” Park said.
Overall, the company sold 4.8 million devic-
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AVIA, AND1 AND HEELYS DRIVE GROWTH FOR SEQUENTIAL BRANDS
Sequential Brands Group (Nasdaq:SQBG) reported licensing revenues more than tripled to $34 million from $13.6 million in the pri-or-year quarter, helped by a strong performance by Avia, AND1 and Heelys.
“For Avia and AND1, the growth continues to stem from our business at Walmart in core categories,” said Yehuda Shmidman, Sequential Brands CEO, on a conference call with analysts. “And with this past quarter’s expansion into the sporting goods category for AND1, and our recent expansion of AND1 into Walmart Canada, we believe we will see continued incre-mental growth for the balance of the year and into 2017.”
He noted that with Walmart Canada operat-ing approximately 400 stores, AND1 would add the equivalent of roughly 10 percent to its total door count of its U.S. business.
Regarding Heelys, Shmidman said the con-tinued outperformance following last year’s momentum is coming from a combination of footwear sales growth in the United States and internationally and across the board through e-commerce sales channels.
Other performances that were either on-plan or above-plan included Ellen Tracy, and the newly acquired brands in 2015, including Martha Stewart, Emeril Lagasse, Joe’s Jeans and Jessica Simpson. The company also owns DVS, William Rast, Revo, Caribbean Joe, The Frank-lin Mint, Nevados, Linens ‘N and FUL. The company licenses its brands in a variety of cate-gories to retailers, wholesalers and distributors.
Despite the stronger performances in its ac-tive lifestyle categories, Sequential Brands re-ported a net loss of $1.1 million, or 2 cents per share, for the first-quarter, compared to a prof-it of $1.4 million, or 4 cents, in the prior-year quarter. The loss reflected a tripling of interest expense.
Adjusted EBITDA more than doubled to $16.7 million, compared to $8 million in the prior-year quarter. On a non-GAAP basis, net income of $2.5 million, or 4 cents a share, was up from $1.3 million, or 3 cents, in the prior- year quarter.
The company reiterated its guidance for the year of $145 to $150 million in revenue and ad-justed EBITDA of $83 to $87 million.
Photo courtesy Avia
11 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
JOHNSON OUTDOORS INC. SECOND QUARTER EARNINGS SOAR JOHNSON OUTDOORS INC. Fiscal Second Quarter Results
Johnson Outdoors Inc. (Nasdaq:JOUT) reported a significant jump in its fiscal second-quarter earnings due to improved gross mar-gins and lower operating expenses. Revenues inched up 0.8 percent to $134.2 million.
Continued momentum in its fishing and kayaking segments offset weakness in its outdoor gear and diving brands. Foreign currency translation had a 1 percent negative impact on revenue.
On the May 6 conference call with analysts, Helen John-son-Leipold, chairman and CEO, noted that sales as anticipated “evened out” in the company’s fiscal second-quarter ended April 1 after seeing double-digit gains in the first-quarter. Profits, how-ever, continued to hum along.
She called out strong demand for many of the company’s product lines, including the Minn Kota Ulterra fishing motor, Hummingbird Helix series of fishfinders, Jetboil Genesis per-sonal cooking systems and Old Town Predator fishing kayaks. She added that Johnson Outdoors is furthering its commit-ment to innovation while also looking to bring better “balance” performances across segments.
Earnings in the quarter, ended April 1, more than doubled to $9.3 million, or 93 cents a share, from $3.6 million, or 36 cents, a year ago. Total company operating profit nearly doubled, increas-ing to $15.1 million compared to $7.6 million in the previous fiscal-year quarter.
Gross margin in the quarter improved 200 basis points to 41.0 percent from 39 percent due to a favorable mix and improved operating efficiency in all units.
Operating expense during the quarter declined 10.1 percent year-over-year due to reduced legal expenses of $2.9 million and lower warranty and promotional expense. As a percent of sales, operating expenses was reduced to 29.7 percent of sales from 33.2 percent a year ago.
Legal expenses in the prior-year were primarily related to the company’s side scan sonar patent infringement lawsuits against Garmin. In November 2015, the International Trade Commission (ITC) affirmed that some Garmin sonar products infringed on one of the company’s patents and issued an order barring import, sale or distribution of infringing products and components. Last week, Johnson Outdoors and Garmin jointly announced that a settlement agreement had been reached resolving the litigation, which includes the licensing of three side scan sonar patents to Garmin, and would bring closure to related legal matters in the
case. Terms of the agreement were confidential. “Innovation is in our lifeblood and what Johnson Outdoors has
delivered consistently for nearly 50 years,” Johnson-Leipold said. “It is the driving force behind our legacy of continuous growth and success. This is why we invest heavily in development and protection of our proprietary innovation and vigorously defend it against unauthorized use.”
By segment, Marine Electronics (Minn Kota motors and accessories; Humminbird fishfinders, maps and charts; Cannon downriggers) delivered a 1.9 percent gain in sales in the quar-ter, to $91 million. The gains were driven by continued market momentum in Minn Kota and Humminbird brands and came on top of last year’s record-high second-quarter sales. Op-erating earnings in the Marine Electronics segment jumped 55.3 percent to $17.3 million.
Johnson-Leipold said the Marine Electronics’ segment is be-ing helped by strong demand for the Minn Kota Ulterra, the first automatic stow and deploy fishing motor which was intro-duced last year. This year, Minn Kota introduced the Riptide Ulterra for saltwater anglers and both items are “exceeding expectations.” Also performing well is the Minn Kota Talon shal-low water anchor and the Minn Kota I-Pilot wireless GPS trolling system. She called the Hummingbird Helix Series featuring the company’s side-imaging sonar technology “perhaps the biggest news in fishing this year.” She added “We are working hard to keep up with demand that continues to be strong.”
Johnson-Leipold said the early April acquisition of Northport Systems, specialists in digital cartography technologies and solu-tions, “brings us new cartography capabilities and partnerships which can broaden our innovation horizon, accelerate speed to market and further enhance potential for bigger, new product success and sustained growth in fishing.”
In the Watercraft segment (Old Town canoes and kayaks; Ocean Kayak and Necky kayaks; Carlisle paddles; Extrasport per-sonal flotation devices), sales improved 6.1 percent in the quarter to $14.8 million, driven by Old Town and its accessory brands. The segment notched an operating profit of $831,000 against break-even results in the prior year.
Johnson-Leipold said moves four years ago to streamline the Watercraft segment to reinvigorate innovation and align resources against fast-growing segments in core trade channels are paying off with positive momentum in the Old Town Predator series of
kayaks over the last two years. Added Johnson-Leipold, “As a result, our Watercraft unit is in a solid, profitable growth trajectory.”
Sales in the Outdoor Equipment segment (Eureka! tents and camping gear; Silva digital instruments; Jetboil personal cooking systems) declined 4.5 percent to $11.6 million. Growth from spe-cialty retailers could not overcome reduced revenue in large out-door retailers. Operating earnings slid 6.6 percent to $999,000.
A highlight for the segment is the Jetboil Genesis Basecamp 2 Burner System, which has fueled double-digit growth for Jetboil this year.
In the Diving segment (Scubapro), sales slid 4.8 percent to $17.1 million. The segment’s loss widened to $704,000 from $369,000. Unfavorable currency translation of 1.4 percent and continued turmoil in the Mideast resulted in a drop in the Diving segment’s revenues.
Johnson-Leipold said the focus in the Diving segment remains on “spurring more innovation in underwater electronics.” To-ward that end, she promised that last November’s acquisition of Seabear, a dive innovation start-up specializing in the develop-ment of underwater instrumentation, would prove to be a “win-win formula” to drive greater innovation for Scubapro.
For the six months, Johnson Outdoor sales are up 7.6 percent year-over-year. Earnings recovered to reach $8.8 million, or 88 cents as share, rebounding from a loss of $548,000, or 6 cents, a year ago.
Looking ahead, Johnson-Leipold said that the U.S. market is “seeing positive indicators with respect to consumer discretion-ary spending and retailers are stocking up for the season accord-ingly.” Overseas, “the economic picture is less certain, but we are working hard to implement plans to achieve share gains.”
12 SPORTS EXECUTIVE WEEKLY | MAY 9, 2016 © SportsOneSource, LLC
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