Jarden Corp. CEO Jim Lillie lowered his expectations for organic growth at the company's sporting goods segment in the wake of flat second quarter sales and lower margins.
Lillie said July 29 he expects organic sales at Jarden Outdoor Solutions to grow about 3 percent, down from the 3 to 5 percent range he mentioned in February.
JAH reported Wednesday that revenues at the segment dipped 0.2 percent to $753.3 million in the second quarter ended June 30 after adjusting for exchange rates.
The news is significant because Jarden Outdoor Solutions is the largest sporting goods business in the world. Its portfolio spans dozens of brands in adventure travel, camping, fishing, performance, snow and team sports including Coleman, Rawlings and K2. Last year, it generated sales of $2.74 billion and grew organic sales 1.9 percent.
In the second quarter, Coleman experienced broad-based growth across most regions on the back of strong POS performance, particularly in North America and Europe. Sales at Jarden's higher margin fishing business rebounded as deliveries that had been delayed by a slow down at West Coast ports in the first quarter finally reached retailers. At Rawlings, baseball mitts continued to strengthen, reflecting new custom design opportunities offered by Rawlings.com and better execution of a good-better-best strategy across all channels.
Marmot and ExOfficio gained market share.
Higher mix of Coleman sales takes down margins
Still, segment earnings fell 15.2 percent to $84.9 million and segment margin fell 200 basis points to 11.3 percent from the year earlier quarter and below the company's forecast of 13.5-14.0 percent growth. Adjusted to include restructuring costs, acquisition-related items and depreciation and amortization, segment margin 8.5 percent compared with 10.5 percent a year earlier.
“Coleman across the entire outdoors businesses had a very good quarter, but it is our lowest gross margin business,” Lillie explained. “And so, you get that weighing on profitability coupled with the global effect of FX. Fishing is a very international business and so they take it particularly hard on FX.”
K2 and Volkl draw attention
Lillie said the results position Jarden Outdoor Solutions to post organic growth of 3 percent for the full year.
Ski production at a new winter sports equipment factory Jarden built in China are running slightly ahead of expectations, which bodes well as the company seeks to grow its share of the market to offset a decline in snowboard participation rates.
“Martin and I actually have spent a lot of time with both the K2 and the Volkl teams,” Lillie said in a reference to JAH Executive Chairman Martin Franklin. “There is a great array of new products coming out, particularly for women, that are going to make skiing more enjoyable, less fatiguing and the styles and the offerings I think are really going to hit a sweet spot over the coming 12 to 24 months.”
Jarden narrowed its guidance for 2015 earnings per share, which includes results from its two other consumer products businesses, to $2.75-to-$2.85 compared with $2.75 to $2.90 cited in June to reflect both currency headwinds and the July 22 sale of 18.4 million shares of common stock. The company still expects adjusted earnings per share to grow at a double-digit rate in currency-neutral terms.
The new forecast assumes relatively stable commodity prices, and predicts price increases this fall will offset some of the currency headwinds. Lillie noted that Jarden, which is among the top 15 container importers in the U.S., recently renegotiated its global ocean container contracts successfully.
