Easton-Bell Sports, Inc., which markets and licenses sporting goods under the Easton, Bell, Giro, Riddell and Blackburn brands, reported net sales surged 16.9 percent to record levels in the fourth quarter as it shipped new baseball, softball and other spring sports items earlier than a year ago. Gross margin increased by 180 bps to 35.2 percent and Adjusted EBITDA increased by $6.0 million or 31.9 percent.
Net sales at the company’s Team Sports business increased $24.2 million, or 25.3 percent in the fourth quarter of 2011 compared to the fourth quarter of 2010. Sales growth was driven by market share gains by Riddell football helmets, growth in reconditioning services and increased sales of Easton’s new line of Power Brigade bats. Easton’s power brigade bats are designed to comply with the BBCOR standard adopted by the NCAA last year to protect players from ball injury. High schools began requiring BBCOR-compliant bats starting this year. The growth came in part from the earlier launch of baseball and softball bats in the back half of this year compared to the first half in 2010 which was designed to better coincide with retailers’ calendars.
For the full year, Team Sports sales grew by $45.5 million, or 10.7 percent, or 10.2 percent on a currency-neutral (c-n) basis. Gross margins increased 150 basis points driven by sales growth in football helmets and baseball and softball bats, partially offset by the closeout sales of ice hockey products and unfavorable FX rates which dampened margins by 40 basis points.
Action Sports net sales increased $5.8 million, or 7.1 percent for the fourth quarter of 2011, as compared to the fourth quarter of 2010 from increased sales of cycling helmets and accessories as well as Giro cycling shoes, which were introduced earlier in the year. Increased sales of newly launched power sports helmets also contributed to growth. For the year, Action Sports sales were up $16.6 million, or 4.8 percent (4.2 percent c-n). Gross margins for the year rose 180 basis points to 35.2 percent thanks to higher sales of higher-margin cycling helmets and fewer closeout sales of fitness products, partially offset by reduced sales of higher-margin snow helmets due to high levels of inventory in Europe and overall softness in the global market due to lack of snow.
Companywide, SG&A expenses increased $7.7 million, or 16.3 percent, for the quarter, but decreased 10 basis points as a percentage of sales. The increase related to $1.5 million of increased variable costs to support the sales growth, planned investments in marketing and R&D of $2.1 million to enhance brand awareness, $1.5 million of planned investments in and increased depreciation on capital expenditures for information technology, and $1 million of increased legal expenses. Adjusted EBITDA for the quarter grew 12 percent to $24.8 million, or 31.9 percent of sales, up 140 basis points from a year earlier. Net income for the quarter was $2.5 million versus $100,000 last year.
For the full fiscal year, Easton-Bell reported net sales of $834.9 million, up 8.0 percent compared to $772.8 million for fiscal 2010. Gross margin remained at 34.0 percent and operating income increased $3.2 million, but decreased 20 basis points as a percentage of sales, due to the planned investments in marketing and R&D. Adjusted EBITDA increased by $3.0 million or 3.1 percent to $98.2 million.
Margins were flat with 2010 at 34 percent as the improvement from the strong product launches and the sales growth of higher-margin products was offset by the negative impact of the reduced snow helmet sales and closeout sales of ice hockey equipment.
The company ended the year with inventory valued at $145.8 million, up 3.4 percent from a year earlier.
“I think they are in line with the retailers' expectations,” said CFO Mark Tripp. “We continue to focus on really bringing innovative product to market that is going to cut through that open to buy, because the consumer is still pulling it through if you are delivering that value proposition along with the technology.”
