Escalade, Incorporated recorded a 13% decline in first quarter net sales, while switching to a net loss of $0.8 million compared to a gain for the same quarter last year of $1.1 million. Earnings per share for the first quarter was a loss of 7 cents compared to a gain of 8 cents for the same quarter last year.
Revenues from the Sporting Goods business segment declined 14% in the first quarter compared to last year due to several factors. Approximately 74% of this decline relates to the company's mass-market retail customers who are experiencing lower than expected sell through on game room products. General market demand for game room products has been declining for several years and this decline has been accelerated in 2008 by worsening economic conditions in the United States. In response, several of the company's mass-market retail customers have initiated efforts to reduce their inventories and consequently buy less of the company's products. Sales to the company's largest mass-market retail customer, Sears Holdings, were down 60% and the company will cease supplying table tennis and billiard tables to Sears Holdings in the second half of 2008; these product lines comprised 50% of total sales to Sears Holdings in fiscal 2007. Sales to specialty retailers and dealers were down 9% in the first quarter compared to the same period last year due principally to delayed production and shipment of archery bows. Based on first quarter results and early product placement information, the Company currently expects sporting goods sales for 2008 to be approximately 12% lower in 2008 compared to 2007.
Robert J. Keller, president and CEO of Escalade, Inc. stated: “The first quarter was very challenging because mass-market retailers were tightening inventory levels in anticipation of worsening economic conditions and production problems surfaced in some of our operations. We remain confident that our strategy of expanding into the specialty dealer channel will lessen reliance on the mass-market retail channel and provide greater profitability. Additionally, we have substantially resolved the production issues that surfaced during the first quarter and shipments are now returning to normal.”
