Industry vendors looked to acquisition help to boost sales and earnings growth for the third quarter, with the Hardgoods companies relying much more on those deals over the last year to bolster the top line. Benefits from foreign exchange rates also pushed sales and earnings higher for the period as the weaker dollar continued to make U.S. companies look better, while many European companies struggled to keep pace with the FX rate-aided growth posted by their U.S. counterparts.
The B.O.S.S. Report presents an overview of third quarter industry results in the chart on page two. In a shift from Q2, it now looks that many of the acquisitions are starting to pay off on the bottom line as well.
The honors for most organic growth in the Softgoods sector again goes to Deckers, a company that is reaping very nice rewards from the Ugg boot phenomenon while taking full advantage of its acquisition of the Teva brand. The VF Corp. Outdoor Coalition, which includes The North Face, Jansport, and Eastpak in their ongoing businesses, also saw nice organic growth of nearly 29% for Q3. Deckers also gets the nod as top-performer on the bottom line as net income jumped more than 1100% for the period to 10.4% of sales. LaCrosse Footwear did a nice job recovering from a Q2 loss, posting a 81.9% increase in net income for the period.
In Hardgoods, the honors for highest sales growth went to K2 Inc., with acquisition-aided growth of 98.5% for the period. KTO would have had just an 11.5% increase in sales for the quarter excluding its various deals over the last year.
The SnowSports segment posted the largest gain, again due to the K2 Inc. acquisitions of Volkl and Marker that resulted in a 153% sales increase in the K2 Action Sports business that houses the Winter Sports brands. Excluding K2, the SnowSports segment saw sales increase 12.0% for the period, with Atomic increasing 6.5%, Head Winter Sports gaining 5.7%, and Salomon rising 3.0% for the period. Rossignols fiscal Q2 sales dipped 0.4% for the period.
The SnowSports segment also posted a profit gain for Q3. After posting wider losses in the second quarter, the SnowSports segment saw income increase 31.3% for the quarter, with most of the gain again coming from K2. Salomon operating income rose 5.6% in the quarter, but Atomic saw profits dip 3.6% in the period.
Retail sector profit growth again outpaced sales growth in the retail third quarter, but slowed substantially from the outstanding numbers posted in the second quarter. Acquisitions and the accompanying integration expenses had much less of a negative impact on the numbers for the period as the companies that benefited from big deals over the last year started to see some of the volatility slow.
The impact of Garts acquisition of The Sports Authority actually had a positive impact on channel results rather than the drag in past quarters. The new merged TSA business had its first anniversary quarter, but still saw integration expenses play a role in weaker bottom line results for the period. Dicks also posted a loss on merger integration costs. Excluding the expenses associated with the two deals, TSA net income would have still fallen 84% to just $692,000, or just 0.1% of sales, but Dicks would have posted net income of $2.9 million versus a loss of $103,000 in Q3 last year on a pro forma basis.
