Easton-Bell Sports Posts Q1 Loss Despite Strong Bike Products Performance

 

Strong sales in the category – particularly in cycling helmets and accessories – drove the companys Action Sports segment to 16.5 percent sales growth, up from $74.6 million in the year-ago period to $87.0 million in Q1 this year.

In a conference call with analysts, management for Van Nuys, CA-based Easton-Bell said sales of power sports helmets to specialty dealers, growth in Easton-branded cycling wheels and components along with the introduction of the Giro-branded cycling shoe also boosted the Action segment for the quarter.
For the Team Sports segment, which includes the Easton Baseball/Softball, Riddell and Easton Hockey brands, sales dipped 2.6 percent to $116.3 million from $119.4 million in the prior-year period, which management attributed to the company transitioning baseball and softball launches to later in the year in order to better coincide with retail selling.

In March, the company launched a newly-developed baseball/softball pitchers and fielders helmet, which management said has performed well thus far. Management added that the negative impact of the NFL lockout on consumer product sales and the performance of reconditioning services also impacted the Team Sports segment.

The company also noted a reduced demand for hockey sticks, which was partially offset by growth in protective equipment, hockey skates and the introduction of Easton-branded lacrosse equipment.

The Team Sports segment recorded a 430 basis point gross margin decline, a contraction that was attributed to the aforementioned transition of high-margin bat sales to later in the year along with sales growth in lower-margin youth football helmets, higher operating costs to keep pace with the growth in football demand, and increased fuel costs, all of which were partially offset by increased selling prices of varsity football helmets and improved sales mix in protective equipment and skates.  Management also noted that the company has had a little trouble fulfilling (backlog) with the Riddell product, which shifted some sales volume into the second quarter.

Management noted that margins in both segments benefitted from favorable foreign currency exchange rates for an overall benefit of 50 basis points.

Gross margins for the Action Sports segment, which includes Bell Helmets, Easton Cycling, and Giro, improved 230 basis points due to increased sales of higher-margin cycling helmets and accessories, the introduction of Giro-branded cycling shoes and reduced inventory write-offs and close-out sales.

Regarding consolidated results, The company reported net sales of $203.4 million for the first quarter of fiscal 2011, an increase of 4.8 percent compared to $194.1 million in the year-ago period.
Operating income for the quarter was $11.0 million – normalized for $1.6 million of increased compensation expense in 2011 – up 8.6 percent compared to $11.7 million in the first quarter of fiscal 2010.

The company recorded a slight net loss of $62,000 as compared to a small net income of $122,000 in the year-ago period. Adjusted EBITDA was $19.7 million, up 2.3 percent from $19.3 million in the year-ago period when normalized.

The companys consolidated gross margin for the quarter was 31.4 percent of sales, down 200 basis points from 33.4 percent of sales in the first quarter of fiscal 2010.  As noted, the margin decline related primarily to escalating fuel costs, shifting sales of higher-margin baseball bats versus last year and sales growth in youth football helmets, partially offset by lower inventory write-offs and close-out sales in Action Sports and favorable foreign currency exchange rates.

Looking ahead, management said the company has high expectations to the forthcoming Q2 launches of the Giro Aeon cycling helmet, which will retail at $250, along with the new BBCOR-compliant Power Brigade bats, which were recently delivered to top college programs.