Umbro plc reported that total wholesale equivalent sales, which is the Groups buy/sell sales plus the wholesale value of licensees sales, for the first half declined 10.1% to £175.4 million ($329 mm) from £195.1 million ($356 mm) in H1 2004.
Operating profit before exceptional items decreased 25.0% to £12.3 million ($23 mm), compared to £16.4 million ($30 mm) in H1 last year. The 2005 year is a non-tournament year, in which sales are typically evenly spread throughout the year and is therefore not directly comparable with 2004, which benefited from an earlier sales phasing ahead of the European Championships.
Group turnover was £64.7 million ($121 mm), in line with expectations, compared to £94.1 million ($172 mm) achieved in the first half of 2004, when licensed apparel sales in the UK occurred earlier than this year. Licensed apparel sales declined 44.2% to £40.3 million ($75 mm), compared to £72.1 million ($131 mm) in the year-ago period.
Branded apparel sales jumped 30.5% to £47.3 million ($13 mm) from £77.5 million ($10 mm) in H1 last year. Total apparel sales declined 39.0% to £7.0 million ($89 mm) from £77.5 million ($141 mm) last year. Footwear sales grew 12.6% to £4.7 million ($8.9 mm) from £4.2 million ($7.7 mm), while equipment and other sales declined 13.1% to £1.6 million ($3.0 mm) from £1.9 million ($3.4 mm).
Umbro said one of the Groups objectives is to increase sales of non-licensed products, and in the first half year these categories have grown by 13.0% over H1 2004. The expansion in the USA has been a significant contributor towards this growth. Umbro said it continues to develop new channels of distribution to maximize the opportunities that are arising from the convergence of sportswear and leisurewear. Progress is being made in enhancing the perception of the brand through design collaborations.
Umbro operates through a network of 47 licensees in over 90 countries and generated 69.4% of global total wholesale equivalent sales (TWE) sales from these sources. The growth in TWE licensee sales was 9.2% on H1 2004, and was driven by branded product sales which accounted for 92.2% of licensee sales. TWE Sales in Continental Europe were up by 3.4% compared to last year. Difficult trading conditions in France and Spain have been offset by growth in other countries. Growth in Asia-Pacific was 14.0%, with China producing excellent results and growth of 70.1%. In the Americas, overall growth of 38.5% has been achieved, with sales in the USA having doubled, driven largely by footwear sales by Foot Locker Inc.
In January, Umbro announced that it had reached an agreement with Chelsea Football Club regarding the early termination of the sponsorship contract, and the taxable compensation of £24.5m, though receivable in 2006, has been recognized in these accounts.
Gross margins on buy/sell sales have improved by 420 basis points to 55.7% in the period, with 160 basis points was attributable to exchange rate benefits and the balance of 260 basis points was from a combination of improved sourcing and product mix.
Umbro posted net income of £26.3 million ($49 mm) in the first half, compared to a net loss of £18.5 million ($34 mm) in the year-ago period.
The company said its executive team has been strengthened this year with the recruitment of Simon Cunningham to the position of Head of International.
