Head N.V. ended a tough fiscal year with a tough fourth quarter as sales for both time periods decreased in the low-teens. The company said it was hampered by a sharp downturn in Winter Sports sales caused by the terrible 06/07 winter season that left retailers stuffed with inventory and limited futures open-to-buy dollars. Though Winter Sports were an issue for the quarter, the company did see sales growth in its smaller Racquet Sports and Diving divisions, although not enough to move Racquet Sports sales in the positive for the year.

Overall, the company saw global net revenues decrease 11.4% to €109.2 million ($158.2 mm) for the fourth quarter, leading to a decrease of 78.8% for net income to €0.7 million ($1.0 mm).


Winter Sports revenues for the fourth quarter decreased 19.3% to €70.9 million ($102.7 mm) from €87.9 million ($113.4 mm) in the comparable 2006 period.  The company attributed the Winter Sports decline to “significantly lower orders placed for winter sport products.”   The quarterly sales decline pushed Winter Sports sales down 24.3% for the second half, when 90% of the division’s sales occur.  The hurt did not end at the top line, though, as the lower sales forced lower utilization of production capacity, in turn causing a decline in gross margins for the segment.


The company’s year-end result implies that Winter Sports sales declined 19.8% for the quarter to €49.5 million ($71.6 mm) in Europe, while slumping 15.0% to €9.9 million ($14.4 mm) in North America. The rest of the world saw a 23.8% decrease in Winter Sports sales for the quarter to €11.6 million ($16.8 mm).


Ski sales declined 22.4% to €25.1 million ($36.4 mm) as bindings decreased 19.8% to €17.7 million ($25.6 mm) and boots decreased 21.6% to €19.7 million ($28.5 mm). Snowboards, the company’s smallest Winter Sports segment, was also the only to see sales improve for the quarter, up 1.0% to €8.5 million ($12.3 mm).


In terms of actual quantities produced for the full year, skis decreased from 601,000 pairs to 456,000 pairs; bindings were down from 1.7 million to 1.15 million pairs; ski boots declined from 693,000 pairs to 472,000 pairs; and, snowboard equipment was down from 285,000 units to 232,000 units.


Management declined to comment when asked about the results thus far in the current quarter.


Racquet Sports division revenues improved 4.2% to €27.5 million ($39.8 mm) for the quarter from €26.4 million ($34.0 mm) in the comparable 2006 period. This increase was due to higher sales volumes in tennis racquets as a consequence of new product introductions, which were partially offset in euro value terms by the strengthening of the euro against the U.S. dollar.


Sales were soft in the North American market, down 7.0% to €11.6 million ($16.7 mm) for the quarter, but were more than offset by a 10.9% increase in Europe sales to €13.3 million ($19.2 mm) and a 32.8% increase in rest of the world sales to €2.7 million ($3.9 mm).


Racquets sales increased 3.0% to €17.9 million ($25.9 mm) for the fourth quarter, but were outpaced by 6.4% growth in the smaller balls category to €9.7 million ($14.0 mm).


For the year, racquet sales were up from 1.89 million units to 1.96 million units, while tennis balls remained flat, at approximately 6.7 million.


Diving segment sales increased 4.1% to €11.1 million ($16.1 mm) for Q4 from €10.6 million ($13.7 mm) for the prior-year period, despite a negative impact of the strengthening of the euro against the U.S. dollar in the reporting period.


On a constant-currency basis, diving revenues grew 6.6% for the quarter.


Diving revenues from Europe increased 12.5% to €7.2 million ($10.4 mm), more than offsetting a 14.3% decline in rest of the world revenues to €2.3 million ($3.3 mm). In North America, sales rose only 0.8% to €1.6 million ($2.4 mm).


The Mares brand saw a 1.9% increase in quarterly revenues to €10.3 million ($14.9 mm) for the fourth quarter.


Licensing revenues remained flat at €2.1 million ($3.1 mm) for the quarter.


Overall Head gross margins decreased slightly to 37.2% in Q4 2007 from 37.3% last year. Net income plummeted to €0.7 million ($1.0 mm), compared to €3.3 million ($4.3 mm) in the prior-year period.