Head NV reported its adjusted operating losses grew substantially in the first quarter as it battled unfavorable weather and exchange rates in many of its key markets.
Unaudited figures released by the Dutch company show sales of its skiing, tennis, diving and other gear declined 0.6 percent to €69.6 billion ($91 mm) in the three months ended March 31 compared to the first quarter of 2012. Sales were up slightly on a currency-neutral (c-n) basis.
The company reported an adjusted operating loss of €4.76 million ($6 mm), up 81 percent from the first quarter of 2012. Head attributed most of the increase to lower gross margins due to a less profitable mix of products, but said higher advertising and selling costs and foreign exchange also contributed.
A €557,000 increase in non-cash ESOP costs as a result of the companys higher share price in March 2013 compared to December 2012 increased the companys net operating loss to €6.1 million ($8 mm), compared to a net loss of €2.2 million in the comparable 2012 period.
Net cash from operating activities plummeted 52 percent to €11.9 million ($16 mm) in the quarter due to the lower profitability and reduced cash inflow from accounts receivable. The company was able to reduce its net debt by 12.6 percent to €42.3 million, however, by reducing cash tied up in working capital by nearly €4 million.
Winter Sports sales declined 2.2 percent to €13.3 million ($18 mm) as head was again forced to discount product due to the last start to winter in both North America and Europe. While weather was more favorable in Japan and Europe, retail equipment sales lagged the growth in skier visits in Europe. Retailers were still able to sell out much of their inventory, however, because they had cut back their orders coming into the season coming off of the prior years unusually warm winter. The season ended with lower retail inventory of skis, boots and other gear, which should lead to improved pre-season orders for 2013/14.
Racquet Sports sales inched up 0.1 percent (1.2 percent c-n) to €42.3 million ($56 mm). Stronger ball sales were offset by weaker racquet sales.
Diving sales rose 2.2 percent to €13.0 million ($17 mm). Conditions remained challenging in Italy and Southern Europe, but continued to improve in Asia and North America. Computers and regulators performed best.
Sportswear sales declined 13.1 percent to €1.8 million due to lower sales of tennis wear in part as a result of the cool weather in Europe and the resulting slow start to the tennis season. Revenues from licensing were €1.30 million, down 16.5 percent.