Escalade Inc. saw lower sales volumes for both of its business segment in the third quarter ended October 1, but the traditionally strong period for the Sporting Goods segment took a big hit as the company’s largest customer discontinued the sale of a key product. Net sales for Escalade Sports declined 16.5% to $49.7 million for the period, compared to sales of $59.6 million in the year-ago quarter.

ESCA attributed the sharp decline in sales to a decision by Sears to eliminate an arcade product. The product was first introduced in 2004 and represented roughly $7 million in sales to Sears last year. Sears apparently embarked on an aggressive inventory control and pricing adjustment program this year that saw the retailer increase retail pricing on certain products and substantially curtail advertising campaigns.

Net income attributed to the Sporting Goods business declined 19% for the quarter to $4.3 million from $5.3 million last year. Operating income in the Sporting Goods business declined 19.5% in the nine-month period to $10.1 million, compared to $12.6 million for the same period last year.

Based on YTD results, the company expects that fiscal 2005 sales to Sears will be down $14 million to $18 million compared to fiscal 2004, while sales in the fourth quarter are estimated to be comparable, or slightly down, compared to the same period last year. The decrease is expected to push overall Sporting Goods sales lower for the 2005 fiscal year versus the previous year.

Despite the declines in the Sporting Goods business, total Escalade Inc. net income increased nearly 26%, thanks to improved grow margins in the Office Products business.