With the last of the third quarter reports now filed with the SEC, The B.O.S.S. Report presents a wrap-up of industry public company results. Results are posted for those companies that have reported results for the period ended closest to the end of September.
Based on the reported results, B.O.S.S. calculates that total vendor revenues for the reporting companies were up 6.5% for the third quarter. The growth may represent that last quarter of growth for the consolidated vendor side of the business as the market experiences significant weakening through the Holiday period.
One of the biggest impacts on Softgoods sector growth for the third quarter last year, Crocs, reversed course and took the dubious honor as the biggest decliner for the 2008 third quarter. Excluding Crocs, the balance of the Softgoods business would have been up 7.3% for the quarter. Most of the Crocs decline was offset by a gain in the UGG business at Deckers.
The biggest top-line gains in footwear came from Deckers (+52.5%) and LaCrosse (+9.2%). Apparel sales gains were once again led by Under Armour (+24.1%), Volcom (+22.7%) and VFCs Outdoor Coalition (+12.5%), which includes The North Face and JanSport. Columbia was the only apparel company to post a decline for the period.
Overall margins in Softgoods took a haircut, with a 440 basis point decline in the sector average, thanks in large part to a 59 percentage point decline in gross margins at Crocs, Inc. It was another reversal of fortunes at the Niwot, CO-based company, which saw a 240 bps rise in margins in Q3 last year. Excluding the Crocs implosion, consolidated Softgoods gross margins were basically flat for the period versus the year-ago quarter and overall vendor margins were down about 70 basis points for the period.
Profitability in the Softgoods sector was down 17.7%, again due primarily to the Crocs issue, which managed to see $200 million in net income evaporate versus the year-ago period.
The other major impact to the Softgoods sector came from Quiksilver, which had taken a massive write-down after the sale of the Cleveland Golf business. Excluding those two companies, industry bottom-line results were up over 13% for the quarter.
Softgoods sector return on sales (ROS), a metric that measures profitability as a percentage of sales, shrunk 180 basis points in the third quarter to 6.6% of sales, compared to 8.4% in Q3 last year. Like overall profitability, this metric too was swayed the Crocs implosion and Quiks write-down last year. When excluding ZQK and CROX, ROS was up 60 basis points to 13.9% of sales in the third quarter.
Hardgoods sales were up 12.3%, mostly due to Jarden Outdoors acquisition of K2, Inc. mid-way through the third period last year. Organic growth in Jardens legacy Coleman business was up 7% for the quarter, primarily due to the launch of a new lighting program, a new gas program and hurricane-related sales. When using pro forma numbers supplied by Jarden to account for the acquired K2 and Pure Fishing businesses, Jarden net sales increased just 1.1% for the quarter from $613.1 million in pro forma revenues in Q3 last year. Total Hardgoods sector revenues were up 3.2% when accounting for the K2 pro forma revenues. The Hardgoods sector was rather anemic in the quarter as consumers dialed back on equipment expenditures, which in turn forced retailers to do the same. The upside in hardgoods came from the bicycle market, which saw strong double-digit gains at retail throughout the summer, and snow sports, which posted 7.1% growth in the third quarter.
Hardgoods gross margins took a hit on a consolidated basis as improvements at Easton-Bell could not offset continued decreases at Head and Johnson Outdoors. Heads margin issues were primarily due to higher raw material and energy prices and a less profitable mix of winter and racquet product sales.
Net income for the industrys reporting Hardgoods sector fell nearly 35% as Jarden posted the only profit improvement for the period — thanks to the K2 Inc. acquisition — and Johnson Outdoors saw nearly $74 million in net income evaporate compared to the year-ago period. JOUTs earnings took their biggest hit from a one-time, non-cash charge of $41.0 million meant to reflect the diminished value of the goodwill and other intangible assets on their balance sheet.