Head NV reported that second quarter net sales decreased 8.8% to 56.2 million ($87.9 mm) from 61.6 million ($83.1 mm) last year as decreases in its Winter Sports and Racquet Sports divisions more than offset modest growth in Diving. The company had a net loss of 6.2 million ($9.6 mm) for the second quarter, improving 4.8% from a loss of 6.5 million ($8.7 mm) in the comparable 2007 period.
“Q2 2008 results for Head have been as anticipated,” commented Johan Eliasch, chairman and CEO. “The continued lack of consumer confidence as a result of the global economic downturn, sharp increases in raw material costs, inflationary pressures, poor spring weather and the continued impact of the lack of snow in 2006 has resulted in tough trading conditions. Head is however, tackling these issues having undergone substantial restructuring in recent years and continues to support the growth of the brand through marketing.
“Our order book for winter sports 08/09 is now complete and as anticipate; we have only recovered about half of the sales lost 2007. We believe that the tennis market has seen a decline in the first six months of the year, and whilst the sell-in for diving is still holding up, the sell-out is starting to weaken reflecting the weakening in consumer confidence and less consumer spending.
“Overall, we anticipate tough trading conditions for the remainder of 2008 and we continue to anticipate that we will record an operating loss for 2008.”
Winter Sports
Winter Sports revenues for the second quarter decreased 20.7%, to 7.9 million ($12.3 mm) from 9.9 million ($13.4 mm) in the comparable 2007 period. This decrease was due to lower sales volumes of ski bindings and unfavourable product mix.
Racquet Sports
Racquet Sports revenues for the quarter decreased 10.8% to 30.8 million ($48.1 mm) from 34.5 million ($46.5 mm) last year. This decrease was mainly due to the strengthening of the euro against the U.S. dollar as well as lower sales volumes in tennis racquets and unfavorable product mix partially offset by higher sales volumes of balls and sales from our newly introduced tennis footwear.
Diving
Diving revenues for the three months ended June 30, 2008 increased by 6.7% to 18.0 million ($28.2 mm) from 16.9 million ($22.8 mm) in the comparable 2007 period due to increased sales but negatively effected by the strengthening of the euro against the U.S. dollar in the reporting period.
Licensing
Licensing revenues for the three months ended June 30, 2008 decreased 37.1% to 1.3 million ($2.1 mm) from 2.1 million ($2.8 mm) in the comparable 2007 period.
Profitability
Sales deductions for the quarter remained stable compared to 2007. Gross margin decreased to 37.6% in 2008 from 38.9% in the comparable 2007. Selling and marketing expense decreased 2.4% to 20.9 million ($32.7 mm) from 21.4 million ($28.9 mm) in the comparable 2007 period. Higher advertising costs for sponsored professional ski racers, newly introduced badminton products and tennis footwear were partly offset by lower commissions and shipment costs as a consequence of decreased sales. General and administrative expense increased by 2.9% to 7.4 million ($11.6 mm) from 7.2 million ($9.7 mm) in the comparable 2007 period.
As a result of the foregoing factors, operating loss for the second quarter increased by 26.7% to a loss of 6.7 million ($10.5 mm) from a loss of 5.3 million ($7.1 mm) in the comparable 2007 period. The company had a net loss of 6.2 million ($9.6 mm) for the second quarter, improving 4.8% from a loss of 6.5 million ($8.7 mm) in the comparable 2007 period.
