Ashworth saw a $1.0 million after-tax benefit from the sale of its existing distribution center in Carlsbad during the quarter, which added seven cents to the company’s EPS line for the fiscal second quarter ended April 30. Excluding the DC benefit, ASHW net income rose 9.3% to $4.7 million, or 33 cents per diluted share, for the period. The company attributed the balance of the net income gain to higher sales and gross margin and SG&A improvement as a percentage of sales.

Sales of Ashworth product declined 2.4% for the quarter to $41.4 million, compared to $42.4 million in the year-ago period. The company pointed to a decline in at-once orders for the brand as reason for the dip. Callaway brand apparel sales jumped 30.2% to $13.3 million from $10.2 in Q2 last year.

ASHW experienced continued weakness in the U.S. golf business in Q2, but sees a very strong light at the end of the tunnel when pointing to the second straight quarter of golf rounds played (+5.3%) and a 19.2% increase in global bookings at quarter-end versus last year. The Core “Green Grass” Golf business was said to be “unchanged” for Q2 at $32.4 million after growing 17.5% in the same period last year. The average order size for Callaway was said to be up, while the Ashworth brand average order size was characterized as “slightly down”. The Women’s business in the Green Grass segment was up 26.1% in the quarter and saw good sell-through.

Domestic Core Golf bookings for fall are up in the low twenties, which management said was “stronger than spring”, and Retail bookings for fall are up in the 30% neighborhood.

Revenue in the company’s Retail segment, which includes the Department Store business, was up 24.3% in Q2 to $5.0 million. The channel saw very strong sell-through of both of the company’s brands in the quarter, with Ashworth brand sales reportedly increasing 85.8% at retail during the period and Callaway sales jumping 170% at retail. Season-to-date comp sales were said to be up 30.8% for the Ashworth brand and up 43.7% for the Callaway apparel product.

The company’s resort concept shops were described by management as an “overwhelming success” and Ashworth plans to keep rolling out additional shops to feed the current positive trends. The current 11 shops showed a 45% plus comp sales gain for the Ashworth brand in May, while the Callaway brand saw a 69% comp sales gain in the shops during the month.

Ashworth plans to open seven additional shops in the next six months and six more in the following six months to give them a total of 24 resort concept shops in the next year. ASHW announced earlier in the week the opening of the first four of the new shops to be located in two Parisian stores, Belk’s SouthPark Mall location, and a Lord & Taylor location in Garden City, NY.

Corporate segment sales were up 5.2% to $5.7 million, primarily due to the expansion of the Callaway Sport line, which showed a 98% increase in the period, and an improving economy.

Ashworth’s owned-retail business was down 13.3% to $1.4 million in the second quarter, due to the closure of two under-performing stores. Comp sales for the remaining seven stores actually rose 8.0% for the period.

The increase in net revenues from the International segment was primarily due to the effect of FX rate fluctuations. Sales in the U.K. were up 14.9% to $6.1 million and Canadian sales were up 6.6% to $3.3 million.

The 15.4% decline in International bookings for fall was due to Ashworth’s decision to not be the lead vendor for the British Open this year. Management said they did not match a competing vendor’s bid because they would have lost too much on the deal. Excluding the Brit Open impact, ASHW said Ashworth brand bookings would have been “flat” in the International segment.

EZ Tech products reportedly made up 18% of fall bookings for the Ashworth brand.

Ashworth reiterated and maintained its revenue guidance for fiscal 2004, still estimating that consolidated net revenues to be in the $155.0 million to $162.0 million range for the year. EPS is expected to be in the 66 cents to 72 cents per diluted share range including the DC sale gain and 59 cents to 65 cents per diluted share excluding the sale impact. Gross margin in seen rising 30 to 50 basis points from the 40.7% of sales last year and SG&A is expected to improve 50 to 100 basis points for the year.