Phoenix Footwear Group, Inc. saw net sales for the third quarter increase 6.4% to $36.5 million from $34.3 million last year. Organic growth for the quarter was 8.8%. Top line sales growth was led by strong results at Royal Robbins and Chambers Belt, partially offset by weaker than expected sales at Tommy Bahama and the Group’s military footwear division, Altama.

Gross margin in the third quarter of fiscal 2006 was 36.0%, compared to 36.7% in the third quarter of 2005. Operating costs increased to $11.1 million, compared to $9.8 million in the third quarter of fiscal 2005. Operating income for the third quarter was $2.1 million, compared to operating income of $2.8 million in the third quarter of fiscal 2005. The decline in operating income was primarily due to new re-design efforts at the Tommy Bahama footwear division.

Altama's net sales for the third quarter of fiscal 2006 decreased 39.0% to $3.8 million, compared to net sales of $6.2 million for the third quarter of fiscal 2005. The decrease in net sales during the third quarter resulted primarily from a reduction in the Department of Defense product deliveries. Altama’s DoD contract expired on September 30, 2006 and the company submitted a bid for a new five-year contract in August.

The company currently has a strong backlog of approximately 200,000 pairs, or $10 million, of firm military boot delivery orders from the DoD and others to be delivered during the fourth quarter of fiscal 2006 and the first quarter of fiscal 2007. In spite of the declining sales to the military, the company has seen some success by diversifying its offering into work boots, with the initial inventory order completely selling out.

Royal Robbins Q3 sales were $9.5 million, an increase of 28.6% over the prior year’s third quarter sales of $7.4 million. The move to direct sales in Canada considerably improved the brand’s sales and margins. Management said that Royal Robbins continues to see healthy sell-through at all of its major accounts, particularly REI. Management expects Royal Robbins’ growth to moderate through the first half of 2007 due to the closing of the brand’s Dick’s Sporting Goods and Academy Sports accounts as well as the anniversary of the move to direct sales in Canada in the beginning of the year. The company still feels it will see growth out of the brand in 2007.

PXG’s net income for the third quarter was $343,000, or 4 cents per share compared to net income of $981,000, or 12 cents per share for the previous fiscal year.