Head N.V. first quarter net revenues were down 15.3% to 57.3 million ($75.1 mm) due to slow winter sports sales, which had sales decline by 46.6%. Operating loss increased by 5.1 million ($6.7 mm) to 8.9 million ($11.7 mm), from 3.8 million ($4.6 mm) in Q1 2006. The net loss for the period was 9.6 million ($12.6 mm) compared to a 5.3 million ($6.4 mm) loss in Q1 2006.
Johan Eliasch, Chairman and CEO, commented, “Following our strong results for 2006, the first quarter for 2007 has been adversely affected by the extremely poor conditions experienced during the recent Winter Sport season. For the market as a whole, our current estimate is that globally, pre-season orders for alpine ski equipment may be down 25-30%, due to high inventory & caution among retailers. Overall, our net revenues have declined 15%. Despite reduced revenues from our Winter Sports division, our overall gross margin has improved, demonstrating our ability to react to challenging market conditions. In addition, our diving division has shown positive development, with increased sales & growth in market share. In light of the adverse conditions that have impacted the recent Winter Sports season, we currently anticipate that we may record an operating loss for 2007.”
Winter Sports revenues for the three months ended March 31, 2007 decreased by 9.4 million, or 46.6%, to 10.8 million from 20.2 million in the comparable 2006 period. This decrease was due to lower sales volumes of all of our winter sports products as a consequence of bad snow conditions in the winter season 2006/2007.
Racquet Sports revenues for the three months ended March 31, 2007 decreased by 3.2 million, or 9.0%, to 33.0 million from 36.2 million in the comparable 2006 period. This decrease was due to lower sales volumes in tennis racquets and balls and the strengthening of the euro against the U.S. dollar in the reporting period.
Diving revenues for the three months ended March 31, 2007 increased by 2.4 million, or 21.9%, to 13.4 million from 11.0 million in the comparable 2006 period. This increase was mainly driven by better product availability and shipments by all units.
Licensing revenues for the three months ended March 31, 2007 decreased by 0.8 million, or 33.1%, to 1.7 million from 2.5 million in the comparable 2006 period. This is mainly caused by historically high portions of winter apparel (socks, gloves) in our Q1 revenues which were reduced in 2007 due to the warm weather.
Sales deductions for the three months ended March 31, 2007 decreased by 0.7 million, or 30.6%, to 1.5 million from 2.2 million in the comparable 2006 period due to decreased sales.
Gross Profit for the three months ended March 31, 2007 decreased by 3.3 million to 23.4 million from 26.6 million in the comparable 2006 period. Gross margin increased to 40.7% in 2007 from 39.3% in the comparable 2006 period due to improved operating performance and product mix.
Selling and Marketing Expenses for the three months ended March 31, 2007 increased by 1.2 million, or 5.2%, to 24.2 million from 23.0 million in the comparable 2006 period. This increase was mainly due to higher advertising costs for our ski racing team partly offset by lower commissions and selling expense as a consequence of decreased sales. General and Administrative Expenses for the three months ended March 31, 2007, remained stable compared to the comparable 2006 period.
As a result of the foregoing factors, operating loss for the three months ended March 31, 2007 increased by 5.1 million to 8.9 million from 3.8 million in the comparable 2006 period. For the three months ended March 31, 2007, interest expense increased marginally by 0.1 million, or 1.8%, in the comparable 2006 period.
As a result of the foregoing factors, for the three months ended March 31, 2007, we had a net loss of 9.6 million, compared to a net loss of 5.3 million in the comparable 2006 period.
