The Hockey Company Holdings Inc. sees little potential impact to its equipment business in 2004 from a potential NHL work stoppage, but the apparel end of the apparel business would surely take a hit if the league and the players cant agree on a new collective bargaining agreement that is due to expire in September. THC should know by May 18 if they should put a hold on apparel production, which is the deadline for the NHL to inform the players association of its intention to terminate the existing deal.
The NHL released a report Thursday that its 30 teams combined for $272.6 million in operating losses last season. The NHL Players Association immediately challenged the results. The league is also contending that players got 75% of operating revenue last season, up from 57% in 1993-94.
Poor NHL television ratings are reportedly giving the networks pause and the league is looking at being limited to cable networks only in the United States in the very near future, further limiting revenues.
Despite the looming shutdown, management is still predicting that overall company results will “continue to be solid and profitable”.
Fourth quarter sales increased 12.0% to $68.7 million compared to $61.3 million in the year-ago period. Gross margins improved 470 basis points to 44.8% of sales versus 40.1% in Q4 2002. Net income was up 6.8% to $4.7 million compared with $4.4 million a year ago.
Sales in Canada increased 28.1% for the quarter to $25.2 million from $19.9 million in the year-ago period. U.S. Sales declined 2.7% to $25.7 million from $26.4 million LY. Europe and Other International, which is primarily made up of Sweden, Finland and Russia, increased 17.4% to $17.5 million from $14.9 million in Q4 2002.
For the year, sales were up 3.1% on a constant dollar basis, with the weaker U.S. dollar providing benefit to sales in Canada and Europe. Net income, net of the exchange gain on long-term debt, was $8.4 million, or 85 CN cents per share, compared with $6.0 million, or 83 CN cents per share, in 2002.
Equipment sales were up 17.7% to $166 million from $141 million in 2002, with the biggest gains coming in the stick and skate categories. Equipment margins were up two percentage points to 42%.
The company said apparel sales “got off to a slow start” in the first half of the year as small market teams advanced further into the NHL playoffs affecting sales of replica jerseys. First half ales were down 7.8%, but rebounded in H2 posting a 9.4% increase on sales of the NHL “Vintage” series jerseys. Total year apparel sales were up 4.2% to $74 million from $71 million in 2002. Apparel margins were up 200 bps to 51%.
A new skate that features replaceable blades may be a nice addition for sporting goods stores that dont offer sharpening services. The company estimates that players using the skate will spend an extra $120 on replacement blades over the life of the skate. This will clearly impact the specialty hockey shop guy that specializes in service, but will also offer more choice for players as those specialists disappear. THC said they believe the patented technology will ultimately be “widely adopted by hockey players of all skill levels”. Over 100 NHL players have switched to the skate already.
>>> While the company has indicated that equipment may not be hurt, a lack of NHL players showing off the new skate technology could slow its adoption
