Ashworth, Inc. appears to be heeding the wishes of one of its major shareholders, announcing last week that it had retained an investment bank to identify and evaluate strategic alternatives and options. In November, Discovery Equity Partners, which holds a 7.2% stake in Ashworth, filed a letter with the SEC citing a lack of confidence in the company's management. ASHW has lost three Board members and its CFO since June of this year.
Ashworth also issued a warning on fourth quarter earnings last week. While net revenues are expected to grow approximately 15% to roughly $55 million, the company said it expects a loss of approximately $2.1 million to $2.4 million, or 15 cents to 17 cents per diluted share, for the fourth quarter ended October 31. ASHW said gross margins and earnings were adversely impacted by “lower than anticipated sales of full-margin products” and “special promotional programs,” as well as “aggressive sales of low-margin product” during the quarter. Accounts receivable were below levels of a year ago despite the increase in sales.
Daniel Donoghue, a managing member of Discovery, indicated in his letter that investors who hold as much as 40% of Ashworths shares had also expressed concern over management. Donahue feels the company could fetch as much as $12 per share, nearly 44% above the closing price of ASHW shares on Friday.
