Ashworth, Inc. depended on its international business to bump up sales for the fiscal year and to keep the decrease for the quarter below the double-digit mark. The quarterly sales dip was exacerbated by margins decreases and expenses increases, widening the quarterly loss, but a large annual margins improvement was enough to offset increases on the expenses line for the year, prompting the switch from an annual net loss last year to a profit this time around.
Consolidated net revenue for the fourth quarter decreased 9.3% to $50.2 million from $55.3 million during last years quarter. ASHW saw domestic revenues decrease 13.5% to $41.0 million, but saw strength overseas with international revenues increasing 15.7% to $9.2 million.
Revenues from Ashworth branded products decreased 15.6% to $26.6 million for the fourth quarter from $31.5 million in the same quarter in 2005. Revenues from Callaway Golf apparel branded products increased 2.3% to $12 million for the fourth quarter from $11.7 million in the same quarter of 2005.
For the fourth quarter, revenues from the domestic golf distribution channel decreased 35.2% to $13.6 million for the quarter from $21.0 million last year. On a conference call with analysts, management attributed the domestic golf sales slump to the company's decision to “reduce the amount of off-priced sales in the channel and improve the quality of distribution,” as well as “competitive pressures and general softness in the golf market.”
In the retail distribution channel, revenues increased 38.2% to $7.6 million from $5.5 million in the fourth quarter of the prior year.
For the fourth quarter revenues in the corporate distribution channel decreased 15.6% to $5.4 million from $6.4 million for the same period of last year with management pointing to “the late receipt of inventory delaying the shipment of a significant order from the fourth quarter into the first quarter of fiscal 2007” as the culprit.
Revenues from the company-owned outlet stores increased 16.7% to $2.8 million in the quarter from $2.4 million last year, primarily due to the net addition of four new outlet stores that added approximately $0.5 million to the revenue line. Comp store sales were down 5.3% for the fourth quarter.
Revenues in the collegiate/racing segment, which include the Game and Kudzu brands, decreased 4.1% to $11.6 million in the fourth quarter of fiscal 2006 from $12.1 million for the same period last year. Management attributed this decrease to lower sales of The Game products in golf related events and lower sales of Kudzu products in the NASCAR racing distribution channel.
Ashworth UK revenues increased 21.3% to $7.4 million in the fourth quarter of fiscal 2006 from $6.1 million for the same period last year. Other international revenues were “essentially flat” for the quarter at $1.8 million.
Gross margin decreased 210 basis points in the fourth quarter to 32.6% of net sales from 34.7% last year, while SG&A expenses increased 460 basis points to 44.7%.
The sales decrease paired with the margins decreases and expenses increases fueled a net loss for Ashworth in the quarter of $4.4 million, growing from a loss of $2.2 million for the same quarter last year. In diluted earnings per share terms, the loss was 30 cents for the 2006 quarter, down from a loss of 16 cents last year.
