Huffy Corporation chairman and CEO Don Graber pointed to the Gen-X acquisition and new customers in its service business as the key drivers for the sales and earnings growth for the second quarter. That left little positive for the companys bike and team sports business. The Bike division was down 6% and the Sports unit was down 8%, but the company did not feel they lost share in the quarter as retailers looked to better inventory management to keep the shelves clean.
Although the business grew almost 26% in the quarter, the company had hoped for growth in the 30s, but retailers pushed orders back after a slow spring. Management feels the market has “probably bottomed out” and that retailers seem “less pessimistic” for the back half of the year and “fairly optimistic for 2004.
HUF said they are fully supporting Kmart, with the discount retailer accounting for less than 10% of total Huffy business versus 38% in 2001. The company said they lost no share at the discounter, but saw further customer diversification with its broader stable of brands.
The 340 basis point improvement in gross margins were also seen as a direct result of Gen-X and the service business as a larger percentage of total sales.
The earnings improvement includes income from discontinued operations of 6 cents a share, due to the reversal of charges taken in Q4 2002 related to the class action settlement agreement with Washington Inventory Service and other parties. The final settlement related to WIS proved to be less costly than originally estimated, resulting in the gain from discontinued operations reported in Q2.
The company sees stronger futures orders for winter products in the second half of the year versus the backlog for H2 2002. Back half sales account for 55% to 58% of total year sales.
The company said it is comfortable with full year sales estimates in the $470 million to $480 million range and EPS of 55 to 65 cents.
>>> Product and customer diversification was critical to Huffys future…
