Costa Inc., formerly known as the Cross Optical Division of A.T. Cross & Co., reported revenues increased 26.3 percent in the third quarter as its Costa optical brand more than offset sales declines at Native.


 

Costa reported its two outdoor-inspired performance eyewear brands hauled in sales of $24.6 million in the quarter ended Sept. 30. Noting that Costa saw growth across non-prescription sun glasses, performance apparel and prescription eyewear, the company raised its revenue guidance for 2013 sales from $97 million to between $99 and $100 million.


 

Native sales, meanwhile, were off 3 percent for the three quarters ended Sept. 30. Key sporting goods chains who have been testing the brand have not expanded it to new doors in a meaningful way, said Costa Inc. CEO David Whelan.
“We believe that the product is strong and the brand position is correct,” Whelan said of Native. “But we have yet to gain the critical mass of distribution necessary to drive meaningful revenue.”

 

Costa started in Florida and is popular with the fishing and watersports crowd. It grew its store count by 600 to about 6,900 in the first nine months of 2013. Native, which was founded in Pennsylvania and targets the mountain sports crowd, grew by between 150 and 175 doors in the last three quarters and is now in more than 1,200 stores.
 

Both brands had operated within the Cross Optical Division of A.T. Cross & Co. (Nasdaq: ATX) until mid-September, when ATX sold another division that made Cross pens and other personal accessories so it could focus on the faster growing optics business. The company kept the ATX ticker symbol, but changed its name to Costa Inc. in search of a richer valuation.

 

 

In the third quarter, ATX reported gross margins dipped 40 basis points during the quarter, but losses surged as it recognized expenses incurred in the operation and sale of CAD. Operating income declined 85 percent to $200,000, due primarily to $2.1 million in non-cash compensation expense associated with equity awards that vested upon the sale of the CAD. Net loss from continuing operations was $200,000 compared to net income of $900,000 a year earlier. Net income from continuing operations swung from $1.1 million in the third quarter of 2012 to a loss of $10.1 million due primarily to a net loss of $10.2 million at CAD and certain tax expenses related to its sale.

 

 

In last week’s earnings call, Whalen reiterated the company’s plans to spend some of the approximately $54 million in net proceeds from the sale acquiring performance sports eyewear and watersports brands.

 

 

While Whalen noted that ATX had transitioned into a “pure-play, premium performance-optical company,” its apparel and accessories sales grew 46.6 percent during the third quarter, or twice as fast as its optical business. He expects apparel sales to reach $10 million this year and take a big jump in 2015 when the company plans to offer a broader selection of softgoods.