R.G. Barry Corp., the parent of Dearfoams, reported earnings and sales declined in the second quarter and first half ended Dec. 29 due to soft footwear sales although the overall consolidated performance was in line with its previously-reported expectations for its fiscal 2013 year.
For the half ended Dec. 29, 2012, the company reported, on a consolidated basis:
- Net earnings of $11.4 million, or $0.99 per diluted share, down 13.6 percent from $13.2 million, or $1.17 per diluted share, in the first half of fiscal 2012;
- Net sales of $95.7 million versus net sales of $105.8 million one year ago;
- Gross profit as a percent of sales at 43.3 percent up from 42.8 percent in the first half of fiscal 2012; and
- Selling, general and administrative expenses of $22.9 million versus $23.3 million in the comparable period one year ago.
Consolidated quarterly results included:
- Net earnings of $5.3 million, or $0.46 per diluted share, versus $6.4 million, or $0.56 per diluted share, in the second quarter of fiscal 2012;
- Net sales of $48.5 million compared to net sales of $55.6 million in the equivalent period last year;
- Gross profit as a percent of net sales 42.4 percent up from 41.4 percent one year ago; and
- Selling, general and administrative expenses down 3.9 percent at $11.9 million versus $12.4 million in the second quarter last year.
The company said the 13.7 percent year-over-year decrease in first half net footwear sales to $77.8 million reflected reductions in certain seasonal programs and generally soft July-to-December 2012 retail business in some channels. Footwear net sales for the quarter were $39.5 million versus $47.9 million in the equivalent period last year.
Footwear segment gross profit as a percentage of first half net sales at 40.5 percent rose 40 basis points from the comparable period of fiscal 2012; and quarterly gross profit as a percentage of net sales expanded to 39.7 percent from 38.5 percent in the second quarter one year ago. The increases were due primarily to changes in product and customer mix.
The segment generated a first half operating profit of $20.7 million, down $4.1 million from last year; and a second quarter operating profit of $9.8 million down from $12.3 million in the second quarter of fiscal 2012.
Six-month net sales in Accessories segment rose 14.1 percent in both new and existing channels to $18.0 million versus $15.7 in the equivalent period of fiscal 2012. For the quarter, accessories net sales were up 17.1 percent at $9.0 million.
Accessories gross profit dollars for the half rose by 8.9 percent to $10.0 million, although gross profit as a percentage of net sales contracted by 270 basis points to 55.4 percent compared to one year ago. For the quarter, gross profit was $4.9 million, up 7.6 percent from the prior year. The changes in gross profit reflected both a shift in product mix and increased shipments to retailers versus the comparable periods of fiscal 2012.
Segment operating profits of $1.6 million for the quarter and $3.4 million for the half were basically flat versus last year as a result of increased shipping costs related to higher sales and to increased expenses from the Companys continuing investment in its brands and long-term growth strategy.
We continue aligning our business for tomorrow while consistently producing operating efficiencies today that place us among the best in our industry, said Greg Tunney, President and Chief Executive Officer. During the first half of this year we introduced baggallini into new channels. We extended the distribution of our Foot Petals brand. And, we launched an international growth initiative.
Jose Ibarra, Senior Vice President Finance and Chief Financial Officer added, Our 6-month consolidated gross profit as a percentage of net sales expanded by 50 basis points despite the 9.5 percent drop in six-month net sales. Consolidated expenses for the half were down nearly 2 percent year-over-year, even as we continued investing in our brands. We ended the important holiday selling season with our inventory levels and mix properly positioned for the remainder of this year; and our cash and short-term investments at the half were up 14 percent from one year ago at $41.4 million.
We continue refining the elements of our business that are within our control; and we are confident in the viability of our operating model. The Company is financially healthy and well-positioned to continue its focus on strengthening existing brands through investment and acquiring new brands for our expanding portfolio, he said.
unney concluded, We expect to finish our year among the best-performing companies in our category, but fiscal 2013 will be the first time in seven years that we have not posted top-line growth. Our decision to exit certain seasonal footwear programs, the elimination of a key mens slipper program and general retail softness in our replenishment footwear business all will negatively impact our overall annual performance to a greater extent than we originally envisioned. We expect our Accessories segment to meet or exceed its growth and profitability objectives for fiscal 2013, but those gains will only partially offset anticipated declines in footwear.
While we are disappointed by these short-term issues, our approach to operating this business remains laser-focused on the future. We are committed to our strategies and confident that they will, over time, generate continuing innovation, efficiency, growth and profitability for our consumers, customers and shareholders.
RG Barry’s primary brands include: Dearfoams slippers dearfoams.com; baggallini handbags, totes and travel accessories baggallini.com; and Foot Petals premium insoles and comfort products footpetals.com.