The Escalade Sports division of Escalade, Inc. reported an increase of 4.5% in net sales for the third quarter to $52.0 million from $49.7 million last year. Operating income at the division, however, decreased 28.4%, while net income dropped 51.7% to $2.1 million from $4.2 million last year. Net sales for the company as a whole increased 3.2%, but net income fell 45.1% to $3.0 million for Q3, down from $5.5 million last year.
Management anticipates that sales to the mass market channel in 2006 will be comparable to the level achieved in 2005, but ESCA continues to pursue a strategy of expanding distribution into the specialty retail and dealer marketplace as well to lessen the impact of fluctuations in sales to the mass market retail channel. The acquisitions in the first half of 2006 support this strategy.
Sales into the specialty retail and dealer channels increased 94% for the quarter ended October 7, 2006 when compared to the same period last year. ESCA said that sales to the specialty retail and dealer channel yield higher gross margins, but also have higher selling and advertising costs. Management expects total Sporting Goods sales for 2006 to be better than 2005.
Higher selling, general, and administrative costs, primarily in the Sporting Goods business, resulted in lower operating income and net income. Earnings per share for the third quarter of 2006 were 23 cents per share compared to 42 cents per share in Q3 last year.
The profit declines are expected to continue for the year due to pricing pressures from mass market retailers and higher SG&A costs associated with expanded distribution in the specialty channels. A majority of the increase in SG&A costs relates to the Sporting Goods business and includes non-recurring start-up costs relating to the new plant in Mexico.
