Led by the acquisitions of Altama Footwear, Phoenix footwear boosted its top-line by 110.9% to reach sales of $23.2 million in the second quarter of 2004. Sales at the Trotters, SoftWalk, H.S. Trask, and Royal Robbins brands generated flat organic growth during the third quarter, but management said that future bookings in all brands are up in the “low teens” and they expect better organic growth in fourth quarter.
In a conference call with analysts, Richard White, CEO of PXG said that HS Trask was showing positive signs after its transitional period, and the company has seen “significant” increases in orders from specialty chains like The Walking Co.
Gross margin in the third quarter was 42.4% of net sales, compared to 41.3% last year. SG&A expenses climbed 250 basis points to 29.8% of net sales, versus 27.3% of net sales last year due to higher administrative expenses associated with higher sales volume. Net earnings for the quarter were $1.7 million or 24 cents per diluted share, versus a net income of $1.1 million, or 27 cents per diluted share, in Q2 last year. PXG has issued over 3.4 million new shares in the last year.
PXG now expects overall revenues of $70 to $75 million for the full year 2004, compared to prior guidance of $79 to $89 million. Full-year 2004 diluted EPS is expected to be in the range of 65 cents to 70 cents compared to previous guidance of $1.00 to $1.10 and last years EPS of 22 cents.
While Phoenix footwear is far from regretting their decision to enter military footwear sales through the acquisition of Altama, the company certainly learned the markets fickle nature the hard way. Nearly the entire projected 2004 sales shortfall is due to contract and order problems with Altamas military customers.
Altama sales for 2005 are also expected to be less than projected 2004 sales, but Phoenix Footwear Chairman, James R. Riedman, told analysts that the company still expects the brand to be a “significant contributor” to both sales and earnings moving forward.
