Ashworth shifted its selling strategy during the quarter, selling more full-priced product and fewer discounts, which in turn led to a strong improvement in margins. The Ashworth brand itself experienced slight weakness in green grass accounts, but otherwise, the company looks to be back on track to profitability in the near future. Sales of Ashworth branded merchandise decreased 3.8% to $41.0 million from $42.6 million during the same quarter last year. Callaway branded apparel sales increased 20.6% to $17.0 million from $14.1 million during last years second quarter.
Total revenues in the domestic golf channel in the second quarter decreased 9.0% to $27.9 million. Revenues for the corporate distribution channel were $7.3 million, an increase of 20.8% over the same period last year, representing the fourth consecutive quarter of double-digit growth in the channel. Revenues for the retail distribution channel were $7.0 million, an increase of 22.2% over the same period last year.
Second quarter revenues for Ashworth East, formerly Gecko, were $8.1 million, an increase of 2.7% over the same period last year. Revenues for The Game, the company’s brand in the collegiate bookstore channel, increased 12.5%, primarily due to cross-selling of Ashworth apparel into the channel as well as the direct import headwear program. Sales of the company’s brand in the NASCAR/racing channel decreased 32.0%, primarily due to the sale of one major customer to an acquiring company. All other sales increased 33.7%, primarily as a result of being the exclusive on-site event merchandiser for the 2006 Kentucky Derby.
Revenues from company-owned outlet stores were $2.5 million, an increase of 63.9% over the same period last year. Since the second quarter of 2005, the company added a net of six new outlet stores (eight outlet openings, two outlet closings) bringing the company’s total number of outlet stores to 14. Same-store sales increased 8.2%.
Management attributed the 2.8% net income decrease to the opening of company-owned retail outlets, the cost of new business at the Kentucky Derby, and a charge of $800,000 related to legal expenses surrounding the on-going exploration of strategic alternatives. The company reaffirmed its guidance for fiscal 2006 of revenues of approximately $210 million to $220 million with net earnings of 48 cents to 56 cents per diluted share.
| Ashworth, Inc. | |||
| Fiscal Second Quarter Results | |||
| (in $ millions) | 2006 | 2005 | Change |
| Total Sales | $66.0 | $64.7 | 2.1% |
| Domestic | $52.8 | $51.9 | 1.7% |
| International | $13.2 | $12.8 | 3.1% |
| GM % | 45.3% | 43.4% | +180 bps |
| SG&A % | 32.6% | 29.8% | +270 bps |
| Net Income | $4.7 | $4.8 | -2.8% |
| Diluted EPS | 32¢ | 34¢ | -5.9% |
| Inventory* | $53.1 | $53.9 | -1.5% |
| *at quarter-end | |||
