Russell Corp Points to Brooks as Key Q1 Driver for Growth…

Russell Corporation may have transitioned itself from an apparel manufacturing company to a sports apparel and equipment marketing company over the last five years, but it is its latest foray into the world of athletic footwear that fueled growth in the most recent quarter ended 4/3. Excluding the impact of acquisitions since last year’s first quarter, total consolidated sales rose just 3.0% for the period. Brooks Sports, which RML acquired at the end of 2004 and rolled under its Athletic group, had a 30% sales increase in the period as it capitalized on the hot performance running market.(Click Here to View Chart)

The Spalding, AAI, and Huffy Sports businesses are now operating under the Spalding Group umbrella, utilizing a shared back-end. AAI and Huffy are apparently operating as a single unit.

Excluding the $54 million contribution from Brooks and other acquisitions, the company’s domestic Athletic group posted a decline of approximately 9.3% to $103.1 million from $113.6 million in the year-ago period. Total domestic sales would have increased just 2.3% for the period. Much of the impact there is from the loss of the MLB license, which was awarded to Majestic Athletic in an exclusive deal commencing this year. Russell Athletic, net of MLB, was said to be “flat”.

Excluding the MLB impact, RML feels that company-wide organic sales were up 5% over a year ago. According to a company release, organic gains in the quarter were led by JERZEES with Activewear sales increases in the Artwear channel in the mid-teens.

Lower manufacturing costs and contributions from acquisitions helped improve gross margins for the period. SG&A was up 110 basis points to 23.5% of sales, due primarily to “higher relative SG&A expenses associated with recent acquisitions.” The quarter also includes about two cents per share in expenses related to Sarbanes-Oxley.