While continuing the search for a new CEO, interim Cutter & Buck CEO Bill Swint and his team managed to turn a 2.3% top-line sales increase into a 38.1% boost to the bottom line for the second quarter of fiscal 2005. The company focused on profitable sales, refinements in product sourcing and fewer returns and allowances to bring the gross margin up 150 basis points while keeping operating expenses in check and reducing inventory to 120 days sales versus 130 days last year.

During a conference call with analysts, Swint did say that CBUK expects margins to fluctuate somewhat in Q3 because of normal seasonal markdowns.

CBUK continues to face challenges in the Men’s Golf business. Sales for the quarter were up 1.5%, but these numbers included sales made at the Ryder Cup tournament, a bi-annual event. If the Ryder Cup revenues were excluded from this year’s Golf results, the company would have reported a decrease in sales of approximately 6% for Q2. Swint said that the company remains very focused on its Men’s Golf business, but because of long lead-times in the apparel industry, the effects of this may not be seen for six to 12 months.

Cutter & Buck has seen much success in both its Women’s Golf channel and its corporate channel. Corporate sales were said to be up because of the positive economic environment, increased orders from existing customers, and the addition of new accounts.

The company will realize additional expenses next quarter associated with the CEO search; increased marketing to boost brand awareness; a computer systems upgrade; additional product development and design team talent; investing in growth through the golf channel; and the added expenses associated with the Sarbanes Oxley act.
The Board said it is close in its search for a permanent CEO, but took another management hit last week when EVP Jim McGehee announced his resignation.