Cutter & Buck Inc. posted a sales decrease for the fiscal third quarter, which paired with an increase in SG&A expenses to cause the company’s net income to fall. On a conference call with analysts, CFO, VP, and corporate secretary, Michael Gats noted that the decrease in sales comes as a result of a tough comparison against last year’s quarter when the company sold off a large amount of discontinued product. “In fact, if we compare our third quarter sales to those of the third quarter two years ago when we didn't have any unusually large sales of discontinued product, our sales increased over 20% during the quarter including a 2.8% increase in corporate sales and a 9.7% increase in golf sales,” said Gats.

The sales decline in the specialty retail channel was attributed to the pending litigation with Casual Male and Rochester Big and Tall. According to the company, “Big and Tall sales represented less than 4% of the consumer channel’s total sales during the third quarter.”

By selling less discontinued product this year, the company was able to pad its margins slightly, however, because the quarter is CBUK’s lowest in terms of sales, it was unable to overcome the expense increases that came as a result of “investments…made in [the company’s] infrastructure over the last year.”

Looking ahead, the company said that it expects margins to remain in the 44% to 48% range, though it did not give specific sales or earnings guidance.

Cutter & Buck, Inc.
Fiscal Third Quarter Results
(in $ millions) 2007 2006 Change
Total Sales $30.3 $31.2 -3.1%
Golf $4.8 $5.0 -4.2%
Corporate $12.9 $31.2 -58.6%
Specialty Retail $5.2 $5.9 -11.9%
Consumer Direct $3.5 $2.4 46.2%
International $1.0 $0.8 38.1%
Other $2.8 $2.7 6.4%
Gross Margin % 44.6% 44.1% +50 bps
SG&A % 41.9% 40.4% +150 bps
Net Income $0.3  $0.5  -31.4%
Diluted EPS 3¢ 4¢ -25.0%
Inventories* $31.3  $25.7  +21.9%
Acct Rec*  $16.2 $23.0 -29.5%
* at quarter-end