The fiscal 2009 fourth quarter ended is clearly a dramatically different business environment than it was in the prior year. In the previous year, the financial markets had bottomed out and the credit environment was completely frozen. Joes Sports, Outdoors + More, one of the largest sport retail chains in the Pacific Northwest, had just started bankruptcy liquidation sales. Consumers had stopped spending on virtually everything except necessities.
Today, the numbers are looking better. Among the public companies tracked by The B.O.S.S. Report, sales are increasing across the board and inventories are slowly starting to climb again at retail. With the last of the fourth quarter reports now filed with the SEC, The B.O.S.S. Report presents a wrap-up of industry public company results shown in the chart on page 5 of this issue. Results are posted for those companies that have reported results for the period ended closest to the end of January. Because the report is not a total picture of the entire industry, BOSS feels the total numbers are less significant than the trending information provided in the percentage increases and decreases.
Overall, Vendor and Manufacturer sales are up in the low-single digits for the quarter, with apparel and footwear companies out-pacing those who rely primarily on hardgoods for revenue. Retail Sales are even stronger, with high-single digit increases on average.
Looking specifically at the Softgoods sector, sales were up in the mid-single digits on average with stronger margins and lower inventories driving overall net income up over 67% for the quarter. Among Softgoods companies, return on sales (a metric measuring profitability as a function of sales) increased from 6.9% in the fourth quarter of 2008 to 10.9% in the most recent quarter. These companies have clearly been aggressively cutting inventories. Compared to the last quarter of 2008, inventories are down over 17% on average. Every Softgoods vendor covered in this report except Descente made inventory cuts this quarter.
LaCrosse Footwear and Under Armour showed the two largest top-line and bottom line gains during the quarter, with Deckers close behind.
Timberland was also able to show a solid increase in profits in spite of a slight decline in sales for the quarter.
Hardgoods companies only saw a 1.8% increase in sales during the fourth quarter with relatively flat sales among the companies that produce winter sports hardgoods. Gross margins in the Hardgoods sector were relatively flat for the quarter, but profits were up sharply due to a large increase in net income at HEAD, driven by a stock-for-debt swap conducted earlier in the year.
Overall retail sales for publicly-reporting companies in the Bicycle, Outdoor, and Snow Sports industries increased nearly 10% in the fourth quarter. The average gross margin was up nearly 60 basis points and this improvement helped drive the retail sector to a profit compared to a collective loss last year. The biggest shift came from Dicks Sporting Goods which swung to a $67.4 million profit, compared to a loss of $105.6 million in the fourth quarter of last year.
Return on sales in the retail sector jumped to 5.5% compared to a loss of 1.1% during the fourth quarter last year. Retail inventories are slowly rebuilding-very slowly. Average inventories were up only 2.1% at retail for the fourth quarter.
Many key performance metrics showed positive momentum in the fourth quarter for the first time in at least a year. If retail sales maintain their upward trajectory, and retailers continue to bring in more inventories, the industry could see a solid turn-around heading into the summer months.
