Russell Corporation revised its earnings expectations for the 2003-third quarter and 2003-fiscal year, primarily citing difficult conditions in the Artwear channel. Previously, the Company had indicated that earnings per share for the 2003-third quarter were expected to be in the range of $.72 to $.85 per share versus $.72 per share reported in the 2002-third quarter. The Company now forecasts earnings for the 2003-third quarter ending October 5, 2003 to be in the range of $.47 to $.53 per share.
“During the 2003-third quarter, pricing in the distributor market of the Artwear channel decreased substantially,” said Jack Ward, chairman and chief executive officer. “We believe excess capacity and higher inventory levels in the pipeline are driving a considerable part of the significant price reductions in the channel. Our current projections assume continued highly competitive pricing.”
“Our athletic and outdoor business in aggregate continues to perform well in 2003 and we project it will substantially exceed 2002-fiscal year results,” said Ward. “Russell Athletic has made excellent progress this year based on strong product innovation, marketing programs and increased levels of consumer advertising, including a marketing partnership with ESPN ABC Sports for sponsorship of the Bowl Championship Series. The Spalding acquisition also continues to exceed expectations.”
Previously, the Company had indicated that sales for the 2003-fiscal year were expected to be in the range of $1.25 billion to $1.28 billion and earnings in the range of $1.60 to $1.75 per share.
The Company now anticipates sales for the 2003-fiscal year to be in the range of $1.22 billion to $1.25 billion, an increase of 5% to 7% over the previous year of $1.16 billion.
Earnings for the 2003-fiscal year are now forecasted to be in the range of $1.25 to $1.35 per share, compared to $1.06 per share in the 2002-fiscal year. The range for fiscal 2003 earnings excludes any special expenses that may be necessary for additional cost reduction activities.
Earnings per share for the 2002-fiscal year included an after-tax charge of ($.39) per share associated with the early retirement of debt, an after-tax charge of ($.10) per share due to an increase in the bad debt reserves, and an after-tax gain of $.05 per share from the sale of non-core assets. Excluding these items, earnings in the 2002-fiscal year would have been $1.50 per share.
“While we have significantly lowered our cost structure at Russell, our accomplishments have been offset by pricing pressure in both the Artwear and mass retail channels, coupled with increased raw material costs and the economic slowdown,” added Ward. “In 2003, we anticipate absorbing over $40 million in price reductions and over $25 million in additional costs for new product features and higher operating expenses, including raw materials, wages, medical, pension, insurance, taxes, utilities, and the added costs of stock compensation expense. We will continue to aggressively reduce costs in all areas of our business and will comment more on our action plan during the quarterly conference call on October 30, 2003.”