The street appears to like the job Cutter & Buck CEO Fran Conley is doing, rewarding the company with a 17.6% jumps in CBUK shares for the week to close at $8.00 on Friday. They also appeared to be placing a bet that she was going to stay on for awhile.
The company swung to profitability in its fiscal first quarter ended July 31, 2003 versus a loss in the year-ago period. CBUK posted net income of $1.1 million, even after a $1.7 million charge for pre-tax expenses tied to last year's restatement of earnings since 2000. The $3.2 million pretax profit from the remaining wholesale business for the quarter was almost triple the $1.3 million pretax profit in fiscal Q1 LY.
Sales were off 1.3% for the quarter, but were essentially flat to last year on a continuing business basis. The numbers in 2002 included $750,000 of direct sales in Europe that is now serviced by a licensee.
The 310 basis point improvement in gross margin to 45.0% is not expected to be par for the course going forward. The quarter is a smaller quarter for sales and sees less liquidation of goods. Management did say that “everything did go right” for them in the quarter that enabled them to post the GM gain.
As for the companys legal issues, management said not to look for a “quick resolution” to the Genesis Insurance case. The D&O insurance carrier dropped the company after the missteps of the former management team led to Conleys red flag to the SEC and the restatement of results. The company still has coverage from the two “excess insurance” carriers, Lumbermans and Executive. CBUK feels they are in the drivers seat in the Genesis action and could drop the case at their sole discretion.
On the DOJ front, CBUK does not see any penalties and or fines for the company in an investigation that appears to be centered on the former executives.
