Ashworth, Inc. saw strength in international markets somewhat offset soft results in the U.S., but the bigger news was back-end work that boosted gross margins and allowed the company to switch from a net loss in the year-ago quarter to a modest profit this year.  The company is currently shipping its fall 2008 product, the first since its major revamp and new look debuted at the PGA Merchandise Show in January, with management reporting stellar results.


“I am happy to report, we are selling out of some of our fashion inventory for fall '08, which is great because then that is less of a markdown, less liquidation to market,” said Ashworh President Eddie Fadel on a conference call with analysts.


Ashworth reported its third consecutive quarter of revenue growth in the domestic golf channel as sales grew 2.3% to $22.3 million from $21.8 million for same period last year. Management attributed the increase to higher revenues from on-course golf retailers, partially off-set by lower revenues from off-course and off-price golf retailers. 

 

As part of the company's effort to restore sales growth, management is implementing new sales management processes in both the on-course and off-course channels of distribution, including reviewing sales territories and adding additional sales representatives.


Sales for the corporate channel decreased 18.1% for the fiscal second quarter to $5.4 million for the second quarter of fiscal 2008.  The decline was attributed to “certain customer events that occurred in the prior year quarter that did not recur in the comparable 2008 quarter,” as well as to the decision to discontinue sales to certain accounts.


Revenues for the retail distribution channel were $3.1 million for the second quarter of fiscal 2008, a decrease of 52.0% from the year-ago quarter. The decline was attributed by management to account consolidation in the channel, as well as a decision by the management team to strategically exit a number of underperforming doors.


The company’s Gekko Brands, LLC division reported a 20.0% jump in fiscal second-quarter revenues to $11.8 million as it saw improved penetration within the NASCAR channel combine with an additional increase as a result of having exclusive vendor rights for the 50th running of the Daytona 500.


Net revenues from company-owned outlet stores decreased 14.2% to $2.2 million for the second quarter from $2.6 million for the same period of 2007.  This decrease reflects a generally difficult retail environment, as well as lower unit volume as a result of fewer promotions and markdowns.


Net revenues for Ashworth U.K. Limited increased 4% to $8.9 million from $8.5 million for the same period of the prior year.  The increase was attributed to the shipment of certain first-quarter orders that were delayed until the second quarter after the company closed its United Kingdom distribution center to deploy a new ERP system. 


Net revenues from the rest of the international sales were flat at $4.2 million for the fiscal second quarter.


The increase in consolidated gross margins came as a result of an increase in the domestic average selling price outpacing a corresponding increase in the average cost per unit. In addition, lower overhead costs within the domestic operations – primarily in labor – and a favorable impact of fewer off-price sales as compared to the prior year from U.K. operations also aided margin expansion.