A wide majority of vendors in the actve lifestyle space reported first-quarter results that topped Wall Street’s expectations, with many raising guidance for the year. Among brands, Vans, Champion, Puma and Callaway Golf stood out with healthy double-digit top-line growth, but earnings from Nike, Deckers Outdoor, Columbia Sportswear and Wolverine Worldwide also all easily topped Wall Street’s targets.
Nike Inc.’s earnings in the company’s third quarter ended February 28 came in well ahead of Wall Street guidance while sales were slightly ahead. North American sales were down 4 percent in the period but Mark Parker, president and CEO, said the company is seeing “a significant reversal of trend in North America.” The region is being helped by a strong response to new launches such as Nike React and Airmax 270, continued momentum in online sales and early success in pushing for further differentiation at the company’s retail partners. Sales in the quarter in the region for Nike Brand were down 5.6 percent to $3.57 billion, continuing to reflect efforts to clean up inventories for Nike Brand as well as Jordan Brand. Nike North America revenue is now projected to be roughly flat in Q4 and return to growth in the first half of fiscal year 2019. Nike Inc. continues to draw the most attention this year for the company’s sweeping investigation into workplace behavior that has led to the exits of a number of executives.
Adidas AG said a slowdown in Western Europe and continued weakening of key footwear franchises in the first quarter were more than matched by strong sales momentum overall in North America and Greater China, an accelerating apparel business and strong full-price selling. Revenues increased 10 percent currency-neutral to €5.5 billion ($6.6 bn). Net income from continuing operations increased 17.4 percent to €542 million ($649 mm), The gains were marked by healthy double-digit growth on a currency-neutral basis in strategic growth areas, including a 23 percent gain in adidas North America, 26 percent Greater China and 27 percent in e-commerce. Adidas confirmed the company’s outlook for the full year.
VF Corp. reported earnings for the transition quarter ended March 31 rose 20.9 percent on a 21.7 percent revenue gain. Excluding the Williamson-Dickie acquisition, revenues increased 12 percent (up 8 percent currency neutral), driven by broad-based strength across VF’s international and direct-to-consumer platforms and Outdoor & Action Sports coalition. Results beat analyst estimates on both earnings and revenue. Among brands, the star by far was Vans, running up 39 percent. The North Face global revenue increased 7 percent, driven by 19 percent growth in VF’s direct-to-consumer business, including more than 30 percent growth in digital. Timberland saw global revenue decline 1 percent.
Wolverine Worldwide reported adjusted earnings rose 35 percent in the first quarter to 50 cents a share, easily exceeding Wall Street’s consensus estimate of 37 cents a share. Underlying revenue inched up 0.3 percent on a currency-neutral basis as Merrell, Sperry and international exceeded expectations. The results prompted the company to raise full-year earnings guidance as the next phase of an ambitious, multimillion-dollar global growth agenda kicks in. Wolverine CEO and President Blake W. Krueger told analysts on Wednesday’s earnings call, “After two years of executing against an aggressive set of transformation and restructuring initiatives, we are beginning to harvest benefits which are, in part, being reinvested behind critical growth opportunities.”
Under Armour Inc. reported break-even results in the first quarter, exceeding Wall Street’s expectation by 6 cents a share. Revenue was up 6 percent to $1.2 billion (up 4 percent currency neutral). Sales in North America were flat, while international growth was 27 percent. A major restructuring initiative was launched in February and the quarter already showed improvement in expense and inventory disciplines. DTD revenue grew 17 percent versus a 1 percent gain in wholesale. The company maintained its guidance for the year.
Columbia Sportswear Co.’s net income grew 25 percent to $45.1 million, or 64 cents a share, beating consensus estimates of 58 cents. Revenues grew 12 percent to $607.3 million and 8 percent on a constant-currency basis. The gains were driven by strength in DTC (up 20 percent DTC), growth at wholesale (1 percent constant-currency), including a return to growth in U.S. wholesale and favorable currency translations. Due to the better-than-expected first quarter and higher-than-initially-planned initial fall wholesale orders, and favorable currencies, Columbia raised the company’s outlook for the year and bolstered plans to invest $10 million in e-commerce and other capabilities in the second half of the year.
Deckers Brands reported net income for the company’s fourth quarter ended March 31 of $29.7 million, or 66 cents a share. In the year-ago quarter, Deckers lost 12 million, or 49 cents per share. Adjusted EPS of 50 cents topped last year’s adjusted EPS of 11 cents and beat analysts’ estimates by 31 cents per share. Sales increased 8.4 percent to $400.7 million. Ugg, by far the company’s largest brand representing 64 percent of the company’s sales in the quarter, posted the best revenue growth since Fiscal 2015 thanks to a confluence of factors, starting with favorable cold weather that boded well for certain models. Sales grew 6 percent for Ugg, 34.1 percent for Hoka One One, 7.3 percent for Teva and 10.3 percent for Sanuk. By channel, DTC grew 18.1 percent versus a 1.8 percent wholesale gain.
Callaway Golf Co.’s earnings jumped 142 percent to $63 million, or 65 cents a share, besting Wall Street’s consensus target of 51 cents. Revenues rose 30.4 percent to $403 million. The gains were led by strong launches for the Rogue line of woods and irons, as well as the Chrome Soft golf balls. Also helping was foreign-exchange benefits and healthier market conditions in Japan and the U.S. In the U.S., revenues were up 31.9 percent in the quarter. Callaway’s EPS and sales guidance were lifted for the year.
Acushnet Holdings Corp’s earnings rose 8.9 percent year-over-year to $41.5 million. Lower tax expense helped offset higher interest expense and lower income from operations. Sales were down 2.2 percent in constant currency due part to tough comparisons against the successful 2017 launch of the new Pro V1 and Pro V1x and inclement weather to the start of the golf season in Japan and U.S. The company maintained guidance for the full year. Acushnet CEO Dave Maher told analysts the company expects a turnaround with new products now on the market. He said, “The early headline for the Titleist golf ball business in 2018 is the very successful launches of new Tour Soft and Velocity in late January. Both models have been well received, and we are pleased with the early buzz and interest.”
Puma lifted the company’s guidance for the year while reporting net revenues for the first quarter grew 21.5 percent on a currency-neutral basis to €1.13 billion ($1.38 bn). EBIT (earnings before interest and taxes) jumped 59.9 percent €112.2 million ($137.2 mm) due to the top-line growth, an improvement in gross margin by 110 basis points and “good and tight” operating expense management.
Asics Corp.’s sales in the American region fell 26.6 percent in the first quarter on a reported basis and 23.3 percent on a currency-neutral basis, to ¥21.9 billion ($200 mm). The decline was attributed to “weak sales in the U.S.” Operating income in the American region tumbled 82.8 percent, or 82.0 percent on a currency-neutral basis, to ¥443 million ($4 mm). The erosion was blamed on the sales decline and came despite an improved cost of sales ratio. Companywide, Asics reported sales were off 7.4 percent and down 9.4 percent on a currency-neutral basis, to ¥104.6 billion ($953 mm). Net profit dropped 43.2 percent to ¥5.3 billion ($48 mm).
Mizuno’s revenues in the Americas region in the company’s fourth quarter ended March 31 were down 27.6 percent to ¥4.2 billion ($38 mm). Comparable profitability figures weren’t available. In the full fiscal year, sales were down 14.2 perfect in the Americas but the loss in the region shrunk considerably due to a focus on inventory management and full-price sell-throughs. Companywide, Mizuno’s sales were down 2.3 percent in the quarter to ¥51.1 billion ($44 bn) while net profits reached ¥1.6 billion against ¥600 million.
Champion’s sales grew high-single digits in the first quarter, according to the brand’s parent., Hanesbrands. Gains at specialty and online more than offset a decline in the Champion mass business, which includes the C9 Champion activewear line sold exclusively at Target. Sales outside the mass channel in the U.S. catapulted over 50 percent, driven by strong consumer demand, space gains in the specialty channels and growth in the online channel. The Champion brand also led healthy organic gains for the international segment.
Amer Sports’ operating earnings before charges rose 14 percent in the first quarter, boosted by robust growth across the company’s DTC channels and in China as well as strong momentum for Arc’teryx, Precor and Sunto. The gains came despite strong currency headwinds and sluggishness in footwear due to efforts to rationalize distribution for the Salomon brand, as well as a flattish performance by Wilson.
Skechers USA’s earnings rose 25.2 percent to $117.7 million, or 75 cents a share, just ahead of Wall Street’s consensus estimate of 74 cents. Revenues reached $1.25 billion, an increase of 16.5 percent. Gains were driven by an 8.5 percent sales gain in domestic wholesale revenues, a 17.9 percent increase in the company’s international wholesale business, a 26.4 percent sales increase in its global company-owned retail stores, with comp store sales increasing 9.5 percent globally. Although officials blamed it on a timing shift, Skechers issued softer-than-expected sales and earnings forecasts for the company’s fiscal second quarter and the stock lost about a quarter of its value on the day earnings were reported.
Sturm, Ruger & Co. Inc. reported first-quarter earnings declined 35.8 percent to $14.3 million, or 81 cents a share, just ahead of Wall Street’s consensus estimate of 80 cents. Sales fell 21.6 percent to $131.2 million, ahead of Wall Street’s average target by $3.7 million. At the company’s annual meeting where earnings were revealed, Ruger’s CEO, Christopher Killoy, said distributor inventory was down “significantly” and results “started to turn around” in the first quarter, with improvement already marked in the first versus the fourth quarter.
Nautilus Inc. reported sales in the company’s Retail segment climbed 13.7 percent in the first quarter to $43 million, driven by a number of categories in both the mass retail and specialty fitness space. Retail sell-throughs were driven by the Bowflex Results line of cardio products, most notably the treadmill lineup.
Photo courtesy Vans
