Russell Corporation had to issue an earnings warning for the second quarter in a row, as the company sees a number of issues compound on top of each other to suck the energy out of the business. Management said the most recent warning is the result of ongoing operational issues, the impact of Hurricane Katrina, and the delay of the full implementation of CAFTA.

RML now expects third quarter EPS to be in the 50 cents to 60 cents per share range, compared to second quarter-end guidance of a range between 62 cents and 70 cents per share. The new range would indicate a 27% to 39% decline versus third quarter last year. Full year earnings are now seen in the $1.25 to $1.35 per share range on an ongoing basis, compared to the previous guidance of a range between $1.40 and $1.48 and full year 2004 EPS of $1.46 per share. The revised projections do not include the direct negative impact of approximately 16 cents to 20 cents per share from Hurricane Katrina for fiscal 2005.

While Russell did not suffer major direct losses to production facilities or distribution operations from Hurricane Katrina, the port in Gulfport, Miss. has been the company's primary port of entry for finished goods and for shipment of fabric and cut parts for products assembled in Central America, the Caribbean and Mexico. More than 40 containers of product, much of which was expected to fill fall retail orders, were lost or damaged in the storm.

RML also said that the delay in the implementation of CAFTA until January 2006 will result in “additional unanticipated costs in the current quarter.” The company was already expected to see a five cents to six cents per share impact from the termination of president & COO Jon Letzler.

The impact on Russell will evidently go far beyond the current quarter and year. Wal-Mart has apparently decided to pull the plug on the JERZEES boy’s fleece program next year, focusing only on the men’s business with the brand. The sales loss from the boys' program represents between 2% and 3% of RML's total revenues.

Gildan Activewear moved quickly to mitigate any impact on its own business, last week reconfirming its EPS guidance for the fiscal year ending October 2, 2005. The company also provided a first look at expectations for the 2006 fiscal year. GIL said it expects to “achieve or exceed” its most recent guidance of $1.50 per diluted share for fiscal 2005, before the special charge recorded in Q2 for the closure of a Canadian yarn-spinning facility.

For fiscal 2006, Gildan is currently projecting diluted EPS of approximately $1.85 per share.

Brunswick Corp. also expects to take a hit from Katrina, but also indicated that high fuel prices and lower consumer confidence could lead to a slowing of the economy as the marine industry moves into the off season.

The company said demand for its marine products had “remained robust” versus last year, with several of its boat brands registering double-digit retail growth in July and August. But Brunswick chairman and CEO George Buckley said they are concerned about the impact of demand at the wholesale level as the industry moves into its off season. The company plans to cut production rates to offset any potential downside. He said they could “readjust” production rates should the market remain strong or accelerate.

Based on the stated issues, BC now sees diluted EPS in the $3.20 to $3.25 per share range for the full year, compared to previous guidance of $3.30 to $3.40 per diluted share and $2.67 per diluted share reported in 2004.


>>> Is this the first of many or an isolated few??? Most vendors weren’t hurt directly, but what to make of this declining consumer confidence drumbeat… Did the storm actually give RML some cover…