Head N.V. saw had a difficult second quarter as net sales decreased in every operating segment except for Diving. Winter Sports sales were down in this seasonally slow quarter with Bindings, which account for the bulk of the quarters sales in the division down heavily. Racquet Sports sales were also down in the double-digits with the added burden of a shift away from Racquet sales hurting segment margins.
Nonetheless, the company did manage to slim its quarterly net loss as an other non-operating expense that hurt the bottom line by 0.3 million for last years quarter, turned to a benefit of 1.1 million for the second quarter of 2008 due mainly to foreign currency gains.
Regionally, the only real bright spot for Head during the quarter was the Asian market where sales jumped to 2.6 million ($4.1 mm) from 0.2 million ($0.3 mm) last year. Sales to Austria declined 21.2% for the quarter to 15.0 million ($23.4 mm) from 19.0 million ($25.6 mm), while sales to Italy declined 2.6% to 12.4 million ($19.4 mm) from 12.7 million ($17.2 mm) for the year-ago quarter.
Racquet Sports revenues for the second quarter decreased 10.8% to 30.8 million from 34.5 million in the comparable 2007 period. This decrease was due primarily to a decline in Racquets, down 12.3% to 18.8 million ($29.4 mm) from 21.4 million ($28.9 mm) last year as a result of poor spring weather, partially offset by growth in the companys recently launched footwear product. Balls were also down for the quarter, decreasing 8.5% to 12.0 million ($18.8 mm) from 13.1 million ($17.7 mm) for the year-ago quarter.
In terms of quantities sold during the half year 2008, excluding contract manufacturing, racquet sales increased to 1.07 million units from 1.04 million units last year. Ball sales were flat at 3.6 million dozens.
As a result of the decreased racquets sales, gross margins suffered. Racquet Sports gross margins contracted 180 basis points to 39.8% of second quarter segment sales from 41.6% for the year-ago period.
Winter Sports revenues for the quarter dropped 20.7% to 7.9 million from 9.9 million last year. Ski sales increased 3.7% to 1.3 million ($2.1 mm) compared to last years quarter, but Bindings were down 25.6% to 6.0 million ($9.3 mm) and Boots were down 20.7% to 0.5 million ($0.7 mm). Snowboards accounted for 0.1 million ($0.1 mm) in sales for the quarter. The company attributed the decline in binding sales to lower OEM orders, while the Boots decline was attributed to timing issues. Winter Sports gross margins dropped to 3.0% for the quarter from 9.2% last year. The second quarter is a low sales, but high manufacturing period for the segment as it readies for the season ahead.
Winter Sports revenues for the quarter dropped 20.7% to 7.9 million from 9.9 million last year. Ski sales increased 3.7% to 1.3 million ($2.1 mm) compared to last years quarter, but Bindings were down 25.6% to 6.0 million ($9.3 mm) and Boots were down 20.7% to 0.5 million ($0.7 mm). Snowboards accounted for 0.1 million ($0.1 mm) in sales for the quarter. The company attributed the decline in binding sales to lower OEM orders, while the Boots decline was attributed to timing issues. Winter Sports gross margins dropped to 3.0% for the quarter from 9.2% last year. The second quarter is a low sales, but high manufacturing period for the segment as it readies for the season ahead.
Skis, including contract manufacturing, increased from 47,000 pairs to 7,000 pairs. Bindings, including contract manufacturing, were down from 351,000 pairs to 270,000 pairs. Ski boots increased from 33,000 pairs to 64,000 pairs. Snowboard equipment was down from 21,000 units to 17,000 units for the quarter. In protection, Head saw an increase to 13,000 units from 5,000 units for the year-ago period.
Management reported on a conference call with analysts that their order book is now broadly complete. The company recovered about one-third of the sales lost in 2007, which it sees as above the increase for the market as a whole, suggesting regained market share.
Diving revenues increased 6.7% for the second quarter to 18.0 million ($28.2 mm) from 16.9 million ($22.8 mm) last year due to growth in the smaller Spora brand offsetting a slight decline in Mares. Mares sales decreased 0.2% to 15.7 million ($24.5 mm). Spora sales, meanwhile jumped 131% to 2.3 million ($3.7 mm). Gross margin increased in Diving to 41.6% of segment sales, up 130 basis points from 40.3% last year.
Licensing revenues for the first quarter decreased 37.1%, to 1.3 million from 2.1 million in the comparable 2007 period due to fewer licensing agreements and the impact of foreign currency exchange rates.
The company reported that its 130 basis point decline in gross margin for the quarter was a result of the declines in Racquet Sports margins due to product mix as well as increased raw material prices.
Management commented that Diving sell-in was good, but sell-through was slowing.
