Ashworth, Inc. saw its fourth consecutive quarterly net loss going back
to the fiscal fourth quarter of 2006 in its fiscal third quarter ended
July 31. The troubles for the apparel vendor started at the top
as a mid-singles decrease in net sales started the ball rolling south,
while a decrease in margins and growth in expenses compounded to turn
last years net profit into red ink. Also impacting the bottom
line was a tax charge of $1.4 million, or 10 cents per diluted share,
recorded by the company as a valuation allowance against deferred tax
assets.
Total revenues in the domestic golf channel in Q3 remained roughly flat
at $17.2 million as compared to $17.3 million for the same period last
year. Revenues from on-course golf retailers, increased 10.1%, or
$1.2 million, to an assumed $13.1 million from $11.9 million in the
year-ago quarter. The gains on-course were somewhat offset by a
$514,000 decrease in sales to off-course golf retailers.
Revenues for the corporate distribution channel were $6.3 million, a
decrease of 17.1% from $7.5 million last year. The decrease in the
corporate channel resulted from continued missed sales opportunities
due to out-of-stock positions in selected styles. On a conference call
with analysts, management said the out-of-stocks were “specifically in
some womens items, as partner items to [the companys] mens items in
the corporate catalog
”
Revenues for the retail distribution channel were $1.7 million, a
decrease of 43.7% from Q3 2006 revenues of $2.9 million. Consolidation
in the retail market accounted for approximately $0.9 million of the
decrease and approximately $0.5 million of the decrease resulted from
choosing to end sales to several accounts.
Revenues for Gekko Brands, LLC increased 5.2% to $12.6 million from
$12.0 million for the year-ago quarter, driven by the growth of
Ashworth apparel in the collegiate/bookstore channel. Operating income
decreased 38.8% to $813,000 from $1.3 million last year.
Excluding the Gekko business, domestic revenues decreased 7.0% to $28.7
million from $30.8 million in the year-ago quarter. Operating income
for the segment decreased to an operating loss of $5.4 million from
operating income of $795,000 last year.
Revenues from company-owned stores were $3.2 million, an increase of
11.8% over $2.9 million for the year-ago period. The company
opened three new outlet stores in the second half of 2006 bringing the
company's total number of outlet stores to 18 at quarter-end. The new
outlet stores accounted for $0.2 million of the sales, while comparable
store sales increased 7.4%.
Net revenues for the Ashworth UK, Ltd. subsidiary decreased 17.8% to
$6.1 million from $7.4 million for the same quarter last year.
Operating income was $1.1 million for the quarter, improving from an
operating loss of $983,000 in the year-ago period. Other international
revenues decreased 19.5% to $2.2 million from $2.7 million last year,
with a corresponding 12.5% decrease in operating profit to $568,000.
The company did not provide any guidance on the fiscal fourth quarter
or full year results, but ASHW will need stronger bottom line results
than its seen in over a year just to break even. Through the
first nine months, the company is running a net loss of $10.6 million,
compared to the companys just under $1 million net income seen for the
previous fiscal year. To post a sales gain for fiscal 2007, ASHW
will need to post top line growth in excess of 23% or total sales of
$61.9 million for the fourth quarter.
