Despite a sporting goods retail market and consumer base that is now widely accepting performance fabrics as a core item, or perhaps because of it, Russell Corporation continues to struggle with the Sporting Goods business in the U.S.
RML reported last week that it expects fully diluted EPS for the 2005 second quarter to be between 12 cents and 14 cents per share, far below the 21 cents analysts were expecting and not even close to the 18 cents to 22 cents per share guidance the company re-affirmed as late as April 28.
RML shares were down 11% for the week to close at $18.92 on Friday.
The company said the revised estimate was primarily the result of “several short-term operational issues and lower than anticipated reductions in costs,” which created an earnings shortfall for the quarter that they will not be able to overcome for the full year.
While total company sales were said to be “close to plan” for the quarter, increasing more than 18% to more than $342 million, the increase was driven entirely by acquisitions that had “no material impact” on earnings for the period.
The Activewear division did post a 10% sales increase for Q2, driven by a 15% increase in the Artwear channel. The channel was not able to meet sales demand in the period, which RML said required a “rapid increase in capacity” and “substantial excess training expenses, start-up costs, and higher costs from new contractors being brought on line.” They also said a “strong, continuing shift” to hooded sweatshirts created additional overtime and training costs.
The 13% organic revenue decline in the Sporting Goods business, which includes most of the branded business outside the Activewear division, was due in large part to the loss of the Russell Athletic MLB business and the discontinuance of a Discus branded program at retail, which more than offset the sales gain in the Russell Athletic core business. Mossy Oak also saw “significantly lower sales” in Q2, due in large part to a “major shift in timing of fall shipments” and also the reduction of a major, lower-priced program that was expected.
>>> Losing key sales executives in the Russell and Bike business probably didnt hurt either
Especially not when one goes to a key competitor…
>>> Russell is reportedly taking share from the competition on the basic fleece side, but may be losing ground in other tops as consumers migrate to technical fabrications from Nike and Under Armour and fashion tops from adidas…
