Switzerland's Calida Group reported net income more than doubled in 2014 thanks to a quicker than expected turnaround at the French outdoor and action sports businesses it acquired with its December, 2013 acquisition of Lafuma Group of France.

Calida reported its net sales doubled during the year to CHF412.4 million ($444 mm) and net income increased 122.6 percent to CHF23.6 million ($25 mm) despite cost of integrating the Lafuma brands and a slight decline at its legacy business, which makes and sells loungewear, basics, swimwear and lingerie under the Calida and Aubade brands.

Calida reported that three former Lafuma divisions – Millet Mountain Group, Furniture and Oxbow – performed well despite declining or flat sales.

Outdoor group breaks even
The Millet Mountain Group, which makes and sells Millet, Eider and Lafuma branded apparel, turned a profit despite a 10.5 percent decline in sales, which totaled €109.8 million ($140 mm). The decline was driven primarily by Lafuma Outdoor, where sales dropped 33.4 percent, or €13.1 million to €25.6 million ($33 mm).

Sales at Millet slipped €1.3 million, or 2.2 percent, to €59.1 million ($75 mm), but contributed profits and exceeded plan. Eider sales inched up €800,000, or 3.7 percent to €22.6 million ($29 mm).

Calida said the results matched expectations given that its focus during the period was on integrating the three brands into the Calida Group and stopping the bleeding at Lafuma Outdoor. Toward that goal, Calida placed all three brands under a new central sales group in Annency, France.

Calida said Lafuma Furniture earned a profit by growing export sales to offset a slight decrease in sales in its native France. The division, which manufactures camping and garden furniture in the mid-price segment, was able to grow sales 1.5 percent to €32.6 million ($41 mm).

Oxbow turns a profit
The Oxbow Division, which makes apparel for surfers and snowboarders, recorded a profit for the first time in years despite another steep drop in sales after Calida discontinued the brand’s practice of offering deep discounts to offset falling sales.

“These measures were not successful in stabilizing sales and margins slipped even further as a result,” according to Calida’s annual report.

Oxbow sales which peaked at €78 million in 2008, fell 23.3 percent in 2014 to €29.8 million ($38 mm).

On a consolidated basis, Calida reported consolidated EBIT after non-recurring effects increased by 29.5 percent to CHF27.2 million ($29 mm).  Return on sales fell 360 basis points to 6.6 percent. Operating cash flow came in flat at CHF19.5 million, even after the company used CHF10.5 million in cash to restructure Lafuma Group.

The Group ended the year net debt-free with net cash and cash equivalents of CHF31.2 million and an equity ratio of 53.8 percent, up 460 basis points from a year earlier.

Weak euro seen slowing profit growth
Calida said the sharp increase in the value of the Swiss franc and the significant weakening of the euro against the U.S. dollar, together with weakening demand in Southern Europe and France, present major challenges for the Millet Mountain Group and Oxbow over the next two fiscal years. That’s because both divisions incur the majority of their production and procurement costs in U.S. dollars while sales are earned mainly – or even exclusively in the case of Oxbow – in euros. 

To counter these currency headwinds, Calida will turn its attention to simplifying and centralizing Lafuma, Millet and Eider’s operating entities outside Europe. It also sees an opportunity to increase their retail, outlet and Internet sales, which already account for 22.7 percent of the Millet Mountain Group’s revenues, but are underperforming in terms of profitability. Finally, Calida expects to enhance sourcing operations, including three production plants Millet Mountain Group owns in Hungary, Tunisia and China “which exhibit considerable potential for optimization.”

“Measures have already been initiated to mitigate the negative currency developments as much as possible,” Calida said. ”Nevertheless, much lower operating results are to be expected for 2015 if the currency situation does not significantly improve.”