Head N.V. second quarter revenues increased 1.9% to 57.3 million ($78 mm) with strong sales of racquets offsetting declines in its winter segments. On a constant currency basis, net revenues decreased by 1.8% for the quarter. Management said that all segments are still impacted by the economic down-turn.
Racquet Sports revenues for the three-month period increased 16.6% to 35.9 million ($49 mm) from 30.8 million ($48 mm) in the comparable 2008 period. This increase was due to higher sales volumes and favorable product mix resulting from the launch of tennis product as well as the strengthening of the U.S. dollar against the euro. During the second quarter last year, no new products were launched.
The new product launch improved volumes of racquets sold in the second quarter, but overall for the first six months units sold were still down 10% to 963,000. Ball sales grew in volume for the first six months of the year by 4.8% to 3.8 million dozen with increases in both the Penn in the US and Head in Europe.
Head’s diving division has been the most affected due to its link to travel and the relatively high price points of the products. Diving revenues for quarter decreased by 18.7% to 14.6 million ($20 mm) from 18.0 million ($28 mm) in the comparable 2008 period. This decrease was mainly driven by the overall decline in the economic environment and consumer spending as a result of the financial crisis.
Winter Sports revenues decreased 17.3%, to 6.5 million ($9 mm) for the second quarter, which is historically the low point for the division, from 7.9 million ($12 mm) in the comparable 2008 quarter.
This decrease was due to lower sales volumes partially offset by a favorable product mix. The volume of units sold were down significantly in all key product groups due to lower re-orders and sold outs inventory. Skis units sold were down 21% to 60,000 while bindings were down 20% to 216,000. Boots were down 31% to 44,000 pairs.
Head has collected a significant proportion of the company’s winter pre-season orders for the 2009/2010 season and the volume is, as expected, below last years level. Management said that this was due mainly to caution by retailers given the current suppressed consumer demand, particularly in the US.
Licensing revenues for the three months ended June 30, 2009 increased 29.7% to 1.7 million ($2 mm) from 1.3 million ($2 mm) in the comparable 2008 period.
Gross margins increased 530 basis points to 42.9% of sales in Q2 due to improved manufacturing costs as well as a favorable product mix in Racquet Sports. As a percentage of sales, SG&A decreased 130 basis points to 50.0% compared to 51.3% during the same quarter last year.
Operating losses decreased to 3.8 million ($5 mm) from 7.0 million ($10 mm) a year earlier. Head reported a net loss of 5.3 million ($8 mm), compared to a net loss of 6.1 million ($9 mm) in the comparable 2008 period.
For the full year 2009, Head management is still anticipating its sales to be lower than those achieved in 2008. The expected decline in sales, together with a lower cash and available for sale financial assets balance, combined with the cash costs of interest expense and capital expenditures, will result in Head using additional lines of credit during the third and fourth quarters this year.
