Tuesday, May 24, 2005 -

Weekly News 3/11/05

MARCH 11, 2005 -- Bad News Overshadows Saucony Record FY Results

Saucony delivered record FY sales and earnings. Revenues rose 22.2% to $166.7 million, while the net was up 22.7% to $10.4 million. That was the end of the good news. In 4Q, it lost money for a number of reasons. One was that results included a charge of $2.3 million to address previously unknown environmental conditions at its East Brookfield, MA, distribution facility (asbestos contamination). The contamination might have taken place decades before Saucony took over the property. 4Q and FY results included approximately $344,000 and $1.1 million of professional fees, respectively, associated with assessment of internal controls as required under Sarbanes-Oxley, and $292,000 and $592,000, respectively, of legal and other professional fees related to the review of strategic alternatives and related matters.

But what might have sent the stock plunging after hours on Thursday was the backlog numbers. Open orders scheduled for delivery within the next five months (January 1-May 27) increased only 1% to $54.1 million. The open order backlog for delivery in the next 12 months increased 2% to $61.3 million. The company was hurt by some mall channel accounts in 4Q and the trend continues into this FY. Other accounts are up double-digits in the orders. The company is forecasting sales revenue for this FY that barely beat the prior year's sales. How will this affect the possible buyout of the firm? Certainly the price will be lower than hoped. CEO John Fischer said the review of strategic alternatives will continue and perhaps come to a conclusion one way or the other over the next few months.

Adidas-Salomon 2004 Sales Rose 7%

In 2004, currency-neutral sales for the Adidas-Salomon Group grew 7%. In euros, sales grew 3% to reach EUR 6.478 billion in 2004 compared to EUR 6.267 billion in 2003. COB/CEO Herbert Hainer declared, "Our teams, athletes and products took center stage at the years most exciting sporting events, and our Group delivered impressive sales growth as well as record gross margin and earnings."

Operating margin increased 110 basis points to 9.0% Net borrowings reduced by EUR 352 million. The company also had the highest year-end backlog growth in two years. In North America, backlogs increased 7% on a currency-neutral basis (flat in euros), supported by growth in both footwear and apparel. Adidas currency-neutral backlogs in Asia increased 44% (+39% in euros), underpinned by increases particularly in China and Japan.

Brand Adidas was the driver of the Group's sales growth. Revenues increased 8% on a currency-neutral basis, mainly due to improvements in the Sport Performance division, in football and all major apparel categories. Salomon sales grew 2% on a currency-neutral basis with increases coming from both the winter and summer sports categories. The apparel, cycling and nordic categories delivered a particularly strong performance. TaylorMade-Adidas Golf sales grew by 5% on a currency-neutral basis, driven by double-digit increases in the metalwood and apparel categories, as well as solid growth in footwear. Currency effects from a strong euro, especially versus the dollar, negatively impacted sales in euro terms. Adidas sales in euros increased by 5% to EUR 5.174 billion from EUR 4.950 billion in 2003. Salomon revenues declined 1% to EUR 653 million in euros versus EUR 658 million in 2003. TaylorMade-Adidas Golf sales in euros were down 1% to EUR 633 million in 2004 versus EUR 637 million in 2003.

TSA Sales Were Flat In 4Q

The Sports Authority's 4Q sales were $713.8 million compared with $712.0 million in the prior year's 4Q. Comp-store sales decreased 2.2% from last year's results, in line with previous guidance. Net income for the fiscal year ending January 29, 2005 was $47.3 million, or $1.79 per diluted share, excluding the effect of after-tax merger integration costs of $13.3 million, or $0.50 per diluted share, compared to $2.11 per diluted share in the prior year, excluding the effect of after-tax merger integration costs of $26.7 million, or $1.37 per diluted share, and income related to non-recurring events and a related tax benefit of $1.9 million, or $0.10 per diluted share. Pro-forma combined earnings for the prior year was $1.58 per diluted share.

Total sales for FY04 were $2.44 billion compared to $1.76 billion in the prior year. YTD comp-store sales for the combined company decreased 2.0 % from last year's combined company results.

For FY05, TSA is forecasting comparable store sales of approximately 2% and diluted EPS of $1.90 to $1.95, excluding the impact of any lease accounting adjustments, the expensing of stock options and based on 26.5 million diluted shares. TSA is expecting the impact of the lease accounting adjustments to reduce diluted EPS approximately $0.08 to $0.10 for the fiscal year. The company is currently analyzing the impact of expensing stock options in anticipation of the adoption of Financial Accounting Standards Board Statement No. 123R. This analysis is not yet complete however, based on current information, TSA anticipates the impact in the 2H05 to be a reduction of diluted EPS of approximately 2¢-4¢. The company currently expects to open 14 new stores, relocate four stores and close six stores during the year.Reebok Rapped For 50 Cent Connection

An regular columnist at the New York Daily News urged the city and state controllers to sell off their combined 400,000 shares Reebok stock for its support of 50 Cent, whose posse recently got into a shoot-out with another posse at a New York radio station in which one posse member was shot. Errol Lewis took Reebok to task for running ads for the former drug dealer everywhere, including the Cartoon Network. Louis wrote: "I asked Reebok to explain how using 50 Cent as a company rep squares with the firm's Standards of Business Conduct, in which Reebok promises to act 'with the utmost integrity in all that we do.'

"A Reebok spokeswoman responded by describing the Reebok brand as celebrating 'individuality and authenticity,' and stating that '50 Cent epitomizes the position in unique and exciting ways.'

"Wonderful. Reebok's pitchman has one song in which, to the sound of gun clip being racked, he raps lyrics 'come and take your life away.' Advance clips from a new video show a cartoon image of 50 Cent firing away." Lewis also cited Vivendii Universal and Emmis Communications for their support o 50 Cent. The city and state own 500,000 shares of the latter. They also own 976,000 shares of Vivendi. The Philadelphia-based Racial Unity has called for a boycott of Reebok, Lewis said.

Remember the good old days when a shoe company only had to worry if an endorser beat up his girl friend or got caught with a couple of grams of coke? Now they worry if their spokespeople will get shot and killed. But then they can still come out with commemorative shoes. Worse would be if tye spokespeople actually kill someone.

Dick's Closes 4Q04 With Earnings Of $43 Million

Dick's Sporting Goods reported 4Q04 net income, excluding merger integration and store closing costs, gain on sale of investment (GSI Commerce), and a lease accounting charge, of $43.4 million, or 81¢ per share as compared to earnings guidance of 77¢-78¢ per share. This compares to net income of $26.0 million, and EPS of 50¢ in 4Q03.

Including after tax merger integration and store closing costs of $7.5 million, or 14¢ per share, and gain on sale of investment of $6.6 million, or 12¢ per share and a cumulative lease accounting charge of $2.6 million, or 5¢ per share of which 1¢ per share was attributable to this year, Dick's reported 4Q net income of $39.9 million or 75¢ per share.

4Q includes an after tax cumulative lease accounting charge of $2.6 million, or 5¢ per share of which $471,000, or 1¢ per share relates to the current year. In connection with the recent attention placed on lease accounting, Dick's reviewed and discussed with its independent auditors, and concluded its lease accounting policy was not consistent with accounting standards. The company has changed this policy such that the commencement date of the lease term will be the earlier of the date rent payments begin or the date it takes possession of the property for the initial setup of fixtures and merchandise. Further, it is continuing to review with its auditors the accounting treatment of tenant allowances.

Total sales for the quarter increased 66% over last year to $788.0 million due to a comp-store sales increase of 1.1%, the opening of new stores and the inclusion of Galyan's operations in this year's quarterly results. Galyan's stores will not be included in the comparable-store base until 13 months after the completion of the re-branding and re-merchandising effort expected to occur by the end of 2Q05.

During 4Q, Dick's opened five stores and closed four stores (one Dick's store and three Galyan's stores) bringing the total stores opened for the year to 29 and the total stores closed for the year to six (three Dick's stores and three Galyan's stores). The stores that opened 4Q04 include: Easton, PA (the 2nd store in the Allentown market); two stores in Indianapolis, IN (the sixth and seventh branches stores in Indianapolis); West Mifflin, PA (the ninth store in the Pittsburgh market) and Portsmouth, NH. The one Dick's store that closed was in Cleveland due to its overlap with a Galyan's store, and the three Galyan's stores closed were all in Indianapolis. As of January 29, 2005, the company operated 234 stores approximately 13.5 million square feet, in 33 states.

Hibbett Has First $100 Million Quarter

Hibbett Sporting Goods' 4Q sales increased 17.4% to $107.1 million compared to $91.2 million in 4Q04. Comp-store sales increased 5.2% in 4Q05. Preliminary net income for quarter increased 26.8% to $8.2 million compared to $6.5 million. EPS increased 29.6% to 35¢ compared to 27¢ in the prior year. The report is preliminary in that Hibbett must review and restate its numbers for the past few years as a result of the February SEC opinion that has made retail CFOs' lives miserable. (See Gander Mountain item below.)

FY05 sales increased 17.6% to $377.5 million. Comp-store sales increased 5.7% in FY05. Preliminary net income increased 25.6% to $25.6 million from $20.3 million. EPS increased 24.4% to $1.07 from 86¢ in the prior year

Standard & Poor's will add Finish Line to the S&P SmallCap 600, replacing Yellow Roadway. The change will be effective after the close of trading March 11.

Jim Weber Takes It To The Street
MAY 23, 2005 -- Brooks Sports president and CEO, Jim Weber, talked recently at an investment meeting for Russell Corp., its new parent. Weber discussed his bullishness over the running category, and provided the latest update on the renaissance of Brooks.

Weekly News 5/20/05
MAY 23, 2005 -- Honolulu Marathon Offers Booths For Vendors; Smartwool Hires Marketing Director; Champs And Lady Foot Locker Shine In FL First-Quarter Results; Dick's Conversion Of Galyan's Completed Three Months Early; Hibbett 1Q EPS Soar 39.4%; Profits At Shoe Carnival Rise 31.2%; ASG Adds AND 1; Polo Ralph Lauren Acquires Ralph Lauren Footwear from Reebok.

Weekly News 5/13/05
MAY 17, 2005 -- Saucony's Profit Plunge 25%, Sales down 11%; Reebok To Sponsor NYC Track & Field Event; New Balance To Sponsor Maine Games 5K Race Series; Four Brooks Athlete's Land On U.S. Marathon World Championships Team; Billionaire Herz Family Siblings Buy 16.9% Puma Stake. Briefs: Nike,

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