Phoenix Footwears acquisition of Altama is not paying-off like the company expected when the deal closed in July of last year. Many of the military contracts held by Altama at the time of the acquisition have suffered from delayed procurements and the divisions sales dropped roughly 26% during fiscal 2004. This slow-down in activity pulled Phoenix into the red for Q4 in spite of strong sales and earnings growth in the other brands.
Net sales for the fourth quarter increased 83.2% to $20.7 million, compared to $11.3 million for the fourth quarter of 2003. Gross margin fell 770 basis points to 35.4% from 43.1% in the year-ago period.
The company reported a net loss of $624,000 compared to net income of $108,000 in the fourth quarter of 2003. The diluted loss per share was 8 cents compared to diluted EPS of 2 cents for the fourth quarter of 2003.
In a preliminary sales announcement released earlier this month, PXG management said that the Royal Robbins brand net sales increased roughly 30% for the full year compared to pro forma net sales for 2003. During 2004, Royal Robbins also expanded its distribution base to new channels, including Dillard's and Dick's Sporting Goods. For 2005, management said that they expect sales to grow in the “strong double digits,” but they did not expect the 30% growth from the brand they saw in 2004.
“As the brand becomes larger, that kind of growth becomes a higher hurdle to jump over,” said James R. Riedman, Chairman of Phoenix Footwear. “It will still be well above industry growth rates.”
