APRIL 29, 2004 -- Russell Corp.'s Q1 net sales were $251.8 million, a 10% increase. But Russell's net profit plunged 85% to $531,000 vs a profit last year of $3.4 million. Q1 earnings were reduced by $.05 per share from the unfavorable impact of LIFO inventory accounting resulting from declining product costs.
During the quarter, Russell reduced excess inventories with manufacturing short time and higher inventory closeout costs. The incremental costs of these actions versus prior year were $0.07 per share. With these steps, Russell has brought its inventory in line, and inventory levels, including the Spalding acquisition, increased by only 5% over prior year.
"Given our sales projections and the improved performance of our manufacturing operations, we feel positive about the year despite the lower first quarter earnings," said Jack Ward, COB/CEO. "We continue to forecast earnings per diluted share for fiscal 2004 to range between $1.40 and $1.60, even with the LIFO charges and continued pricing pressure in Activewear. Also, with additional manufacturing cost reduction projects that have been identified, we now forecast cost reductions to be over $60 million in 2004 versus the $50 million originally projected."
Q1's incremental sales reflected the Spalding and Bike acquisitions whic- accounted for $22.7 million of the increase, with sales in the base business flat versus prior year. Base business unit volume increased 9%; however, the increase in unit sales was offset by continued pricing pressure and product mix in Activewear.
Gross profit was $64.6 million, or a 25.7% gross margin, for the 2004 first quarter versus a gross profit of $62.8 million, or a 27.6% gross margin, in the prior year. During the 2004 first quarter, gross profit was positively impacted by ongoing cost savings and acquisitions. These benefits were more than offset by pricing pressure and product mix in Activewear, higher raw material costs for cotton and polyester, manufacturing short time and higher inventory closeout costs, and the unfavorable impact of LIFO accounting.
"We are reaffirming our 2004 fiscal year sales to be in the range of $1.26 billion to $1.30 billion versus $1.186 billion in 2003," said Ward. "Sales for the second quarter 2004 are projected to range from $285 million to $295 million."