A weak snow sports market continued to dampen sales and margin growth at Easton-Bell Sports Inc. in the third quarter, when net sales came in essentially flat despite a 6.2 percent increase in Team Sports sales.



Net sales reached $213.3 million in the third quarter ended Sept. 29, 2012. European sales declined by $4.5 million, or 15 percent, during the quarter and are off 4.7 percent through the first three quarters.
Despite off-price sales of snow sports inventory, Easton-Bell was able to grow gross margin by 10 basis points (bps) to 35.7 percent by reengineering products, reducing overseas manufacturing costs and selling more, higher-margin Team Sports products. SG&A expenses reached 26.4 percent of net sales, up 80 basis points (bps) despite cautious spending on product development. Net income declined 21.8 percent to $3.7 million.

Team Sports net sales increased $7.2 million, or 6.2 percent, compared to the third quarter of 2011. The increase was 6.4 percent in currency-neutral (c-n) terms. New equipment orders were up 43 percent year-on-year, driven by double-digit growth in sales of Riddell football products and increased sales of Easton Mako hockey sticks introduced earlier in the year. 


At Riddell, average selling prices (ASPs) for varsity helmets increased as the company moved players to Revolution Speed family of helmets and to the 360 degree helmet. Riddell’s consumer sales increased 11 percent as it comped against the 2011 NFL lockout and sold more to Dick’s Sporting Goods and Sports Authority.

The gains at Riddell and Mako were partially offset by lower sales of Easton baseball bats, which surged a year earlier with the initial sell-in of BBCOR-compliant bats. Easton estimates it has grown its share of the bat market by 500 bps in the specialty channel on the strength of the Power Brigade line. Easton’s hockey business was affected by the current NHL lockout, although sales of its new RS2 stick line were solid.


“We’re definitely…not seeing as much pull through in the retail channels,” President and CEO Paul Harrington told analysts during the company’s earnings call. Slower sales could also reflect “a fair amount of stick launches across the industry this year. It is having an effect.”


Apparel orders were up 75 percent from market share gains, including those coming from the successful integration of a competitor.


Action Sports net sales decreased $6.4 million or 6.7 percent (6.5 percent c-n), due primarily to a 30 percent decline in sales of Giro snow products in both the U.S. and Europe. The decline was partially offset by higher sales of Cycling helmets and rapid expansion of Bell’s power sports helmet business, where sales increased 86 percent thanks to SKU and distribution expansion.


Cycling benefited from favorable summer weather worldwide, although Harrington said some sporting goods and mass retailers that expanded their assortments did not get the sell-through they expected. Despite limiting new helmet introductions during the quarter, Easton-Bell said ASPs held across both the Bell and Giro brands in all channels. Retail inventory levels for both brands are healthy. 


Harrington said that the company may change how it brings high end cycling products to market in the wake of the Lance Armstrong doping debacle.


“I think it will affect how we go to market and how relevant the tour is,” said Harrington. “Our sponsorships, things like that.”


Easton-Bell ended the quarter with $148.7 million in inventory, up 2.2 percent from the third quarter ended Oct. 1, 2011.