Performance Sports Group expects to report a loss in its fourth quarter ended May 31 due to challenging retail market conditions that caused it to cancel some orders as well as a related increase in bad debt reserves.
During the fourth quarter of fiscal 2016, adverse retail market conditions continued to drive credit-related issues. Under the circumstances, the company determined it appropriate not to fulfill several customer orders which resulted in lower than expected sales. In addition, the company anticipates higher than expected bad debt reserves which will be finalized during its fiscal 2016 audit.
“The continued challenging market conditions created customer credit issues that exceeded our expectations,” said Amir Rosenthal, president of PSG Brands andiInterim CEO. “In response to these developments, we took actions during the quarter to reduce shipments to customers that were not settling their outstanding payments in line with our requirements.”
As a result of these factors, Performance Sports Group expects to report an Adjusted EPS loss for fiscal 2016 compared to its prior guidance of $0.12 to $0.14 per diluted share. Actual results will be provided with the company’s fourth quarter earnings release in August.
Despite the current market environment, Performance Sports Group’s asset-based revolving loan (ABL) balance is approximately $94.3 million at the end of fiscal 2016, representing a 29 percent reduction compared to the $132.1 million balance outstanding at the end of the second quarter of fiscal 2016. This decrease is consistent with the company’s previously stated guidance of a $35-$40 million reduction from the second quarter. The company expects to end fiscal 2016 with approximately $424.8 million in debt, essentially unchanged compared to $423.3 million at the end of fiscal 2015. Inventory at the end of fiscal 2016 is expected to be approximately $157 million compared to $175 million at the end of fiscal 2015.
“We reduced our ABL balance during the second half of the fiscal year by approximately $38 million from the end of the second quarter, ending the year well below our $100 million target,” Rosenthal said. “We expect to reduce inventory by approximately $18 million at the end of fiscal 2016 compared to fiscal 2015 despite a challenging retail environment. We also continued to make progress on our multi-year supply chain cost savings initiative, achieving our $3 million cost saving target for the fiscal year.”
For the fourth quarter, the company expects to report revenues of approximately $133 million, down 10 percent compared to the same quarter last year. On a constant currency basis, fourth quarter revenues are expected to decline by approximately 8% to $136 million.
For fiscal 2016, the company expects to report revenues of approximately $587 million, down approximately 10 percent compared to fiscal 2015. On a constant currency basis, fiscal 2016 revenues are expected to decline by approximately 5 percent to $620 million.
All figures are in U.S. dollars.
Performance Sports Group Ltd.’s brands include BAUER, MISSION, MAVERIK, CASCADE, INARIA, COMBAT and EASTON.
