Cutter and Buck Shakes Off Fiscal Q4 Profit Decline; Looks to New Initiatives…

Cutter & Buck is getting a bigger slice of its business in the Specialty channel these days, which may be a key driver for the introduction of a new premium “Signature” collection that will launch for Spring ’06. The company is also getting back into the direct business in a bigger way, but will go the catalog route rather than opening retail stores.

Total sales for the fiscal fourth quarter ended April 30 declined 9.0% to $34.9 million from $38.4 million in the year-ago period. The Specialty Retail and International businesses were the only channels to provide any positive momentum in the quarter as Corporate channel sales declined 2.0% to $14.6 million and the Golf (Green Grass) channel saw revenues fall 17.1% to $11.5 million in the period.

CEO Tom Wyatt pointed to challenges in product sell-through at retail, the contraction of inventory levels at retail, and the decline in rounds played as the major contributors to the declines. The Corporate channel, which represented about 42% of Q4 sales, is seen as less problematic, with the decline in Q4 attributed primarily to the strong quarter last year.

Mr. Wyatt said the company is focused on three new initiatives, but mentioned the launch of a new consumer catalog and updated Web site as well. The new catalog will drop in September, but the total number to be printed was not determined. The new Cutter & Buck Signature Collection, to be launched for Spring ’06, should start shipping in November. It is to be positioned at the higher end of the customer base. Wyatt also talked about a stronger commitment to technical fabrications in the overall line that will be supported with an increased marketing spend. He said he expects technical fabrications to make up 20% to 30% of the total business going forward, up from the current 8% level. He also said that they have expanded and enhanced their classics range for 2006, with a continued support of quick response programs. Currently, core basics represent about 88% of the inventory on hand and a new SAP system in place is expected to give the company more versatility in responding to the business.

Specialty Retail, which includes department stores, grew 6.8% to $5.7 million for the quarter and now represents about 16% of sales versus less than 14% of total sales in Q4 last year. Wyatt, who was credited with placing much more emphasis on product when he took the reins at CBUK, said that wovens represent roughly 44% of the Specialty Retail business.

The International sector increased 5.0% to $857,000.
The company’s “Other” business slid 34.6% to $2.2 million in the fourth quarter, but management looked at the results as a positive since inventory liquidation makes up much of this business, along with e-commerce sales and freight revenue.

The e-commerce business saw a “strong increase” for the period, but freight revenue was “down slightly,” in line with sales. Reflecting much cleaning of stocks, inventory liquidation was down 57% for the period.

“The reduction in liquidation sales is due to continued strength in our inventory management, thereby decreasing our need to liquidate distressed inventory,” said Ernie Johnson, chief financial officer, in a release.

Gross margin got a boost from the cleaner business as GM rose 210 basis points to 48.0% of sales in Q4, compared to 45.9% in the year-ago quarter.

Net income for Q4 was cut in half to $2.8 million, or 25 cents per diluted share, compared to $5.6 million, or 49 cents per diluted share, in fiscal Q4 last year.