Head NV’s Says Winter Sports Sales Helped Cut Usual First Quarter Loss

The Netherlands-based company said sales increased 3.5 percent in currency-neutral terms.

 

While Winter Sports sales increased 9.8 percent to €14.6 million ($20mm) compared to the quarter ended March 31, 2013, the first quarter generally only accounts for 10 percent of such sales. So, despite decent snowfall in Southern Europe and parts of the United States, Head still expects a lack of snow across much of the Northern Alps and Scandinavia after Christmas will result in lower orders for winter 2014. Head estimated the world-wide sales of alpine and snowboard equipment declined between 5 and 10 percent in 2013 compared to 2012.

 

Racquet Sports slipped 2.6 percent to €41.2 million ($57mm) compared to the first quarter of 2014 primarily due to a decline in the volume of Penn balls in addition to adverse currency movements. The late arrival of spring in North America has suppressed sell through at retail, including new products launched in the fourth quarter. 

 

Diving equipment sales fell 3.3 percent to €12.6 million ($17mm) as the economies of Southern Europe remain weak and political turmoil in Egypt and Eastern Europe continue. Head is confident Diving sales will improve this summer as it integrates Concept Systems International GmbH, which operates dive schools in 110 countries under the Scuba Schools International brand. Head acquired the company in January, 2014 for €5 million. Head typically generates between 25 and 35 percent of its Racquet and Diving revenues in the first quarter. 

 

US Sportswear sales for the three months were broadly flat at €1.8 million ($4mm).

 

Gross margins improved 400 basis points to 46.0 percent compared with the year earlier quarter, mainly due to higher licensing revenues, lower cost of sales in the tennis ball business and an improved mix in diving. Selling and marketing expenses increased 4.5 percent to €27.9 million and general and administrative expenses increased 6.8 percent to €7.5 million. The adjusted operating loss for the three months decreased by €1.5 million, or 46 percent as higher gross profit of €3.3 million offset increased costs of €1.8 million, that were mainly due to higher advertising expenses in Diving and Sportswear and higher selling costs. The net loss improved to -€3.4 million compared with -€6.1 million a year earlier.

 

Head ended the quarter with inventory valued at €97.0 million, up 3.7 percent from a year earlier. The company sells alpine skis, ski bindings, ski boots, snowboard and protection products, tennis, racquetball, paddle and squash racquets, tennis balls and tennis footwear, sportswear and swimming products under the Head brand; tennis balls and racquetball balls under the Penn brand; Tyrolia ski bindings and owns the Mares and SSI diving brands.