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Today's news...11/18/04

NOVEMBER 18, 2004 -- Dick’s 3Q Profit Turns Red Due To Merger Integration Costs

Dick’s Sporting Goods reported net 3Q, excluding merger integration and store closing costs, of $2.9 million, or 5¢ per diluted share as compared to earnings guidance of 3¢-$¢ per diluted share before merger costs. Including merger integration and store closing costs, the company reported a 3Q net loss of $1.8 million or 4¢ per diluted share, as compared to net income of $4.7 million, and EPS of 9¢ per diluted share.

Total sales for the quarter increased 60% over last year to $541.0 million due to a comp-store sales increase of 1.5%, 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 the first half of 2005.

Johnson Outdoors Posts 4Q Decline In Operating Profit

Johnson Outdoors posted declines in operating profit and earnings on increased net sales driven by military tents in 4Q. Due to the seasonality of the company's markets, quarterly net sales are historically slower during 1Q and 4Q. 4Q operating profits in the Outdoor Equipment business were offset by sizeable losses in Marine Electronics and Watercraft, and a sharp decline in Diving profitability. Increased net sales, operating profit and earnings for FY04 resulted primarily from strong military tent and Minn Kota sales.

Total company net sales increased 9.2% for the quarter, driven by the Marine Electronics and Outdoor Equipment business units. The company's acquisition of the Humminbird brand added $5.7 million in net sales to the quarter, while related integration activities had a negative impact on operating profit. Outdoor Equipment showed increased net sales (36.1%) and improved operating profits (42.4%) over the same period in the prior year due to increased military tent sales. Although strong in the 4Q, military tent sales are expected to drop 40% to 50% in FY05. Soft market conditions resulted in lower sales and a decline in profitability in Diving. A drop in sales and restructuring costs resulted in losses in the Watercraft business unit.

The conference call got a little testy when two callers expressed their dissatisfaction with CEO Helen Johnson-Leipold's determined resistance to offer any comments on the MBO offer of $20.10 a share that the board approved. One investor said management was "stealing" the company. An investor who holds less than 2% of the company said he has not had enough information from the company to help make up his mind. A prospectus will be issued shortly.

TSA Expands Nautilus Presence In 300+ Stores

An expanded line of strength and cardiovascular fitness equipment from The Nautilus Group will be sold in more than 300 retail operations of The Sports Authority as part of a marketing initiative between the two companies. In addition to substantially boosting the number of Nautilus Group exercise SKUs to nearly 10 per store, the merchandising alliance includes an initial test of a new on-floor branded concept in 15 retail doors in the Northeast.

Designated portions of Sports Authority's on-floor fitness equipment pad labeled "Make Room For Fitness" will showcase high-profile brands and educate consumers how to achieve the best results with their home exercise equipment. The assortment will include stationary bicycles, home gyms, and conventional strength and cardiovascular equipment, bearing either Schwinn Fitness or Bowflex brands. The companies also will introduce new promotional programs for the high-volume winter shopping season. People shopping at Sports Authority will see Bowflex brands on free weights, strength cages, and cardiovascular products, in addition to the highly popular home gyms that use power rods for muscle resistance.

REI's Online Wedding Registry A Winner

Recreational Equipment, Inc., which launched an integrated online, phone and store gift registry this spring, has seen registry sales to engaged couples, their families and friends increase 70% in first eight months. Rather than crystal glasses and silver serving bowls, favorite winter gear gifts in November for weddings include: Tubbs 21 Adventure Snowshoes for women; REI Adjustable Snowshoe Poles; Roxy Snowboards for women; REI Cabin Fever Micro Fleece Pants; REI One Gloves; and REI Groove Jackets.

"This is a service that our customers really wanted from us," said VP/multi-channel programs Joan Broughton. "Gift registry sales have gone up more than 70% since we launched the improved service. We expect that phenomenal growth to continue as we approach the traditional wedding planning season early next year."

Couples planning weddings can create a gift registry at home, at REI.com or by phone, or select gear in a store using hand-held scanners to register items. Once created, the registry can be easily monitored and edited online. When a gift is purchased anywhere in the country the integrated database is updated in near real time.

Illinois Supreme Court Supports Firearms Industry

A unanimous Illinois Supreme Court rejected the City of Chicago's attempt to blame gun makers for the criminal misuse of firearms within the city. In rejecting Chicago's case the court ruled that gun makers do not owe a "duty to the city of Chicago or its residents to prevent their firearms from ending up in the hands of persons who use and possess them illegally."

The court concluded that the "matter of regulating the manufacture, distribution, and sale of firearms" was best left to the legislature, not the courts. "Today's decision is the latest in a long list of appellate court decisions that have rejected politically motivated 'junk' lawsuits that have tried to blame the makers of well-made, lawfully sold firearms for the actions of criminals," said Lawrence Keane, SVP/general counsel for the National Shooting Sports Foundation. "Chicago's reckless lawsuit was premised on a thoroughly discredited legal theory."

The National Shooting Sports Foundation chose Cyndi Dalena to direct its shooting sports development programs. Dalena was promoted to her new position following a successful stint as national coordinator of NSSF's high-profile STEP OUTSIDE program. Dalena will now oversee the organization’s popular and growing Scholastic Clay Target Program, Scholastic Rifle Program, and NSSF's involvement in the ESPN Great Outdoor Games. NSSF also selected Melissa Schilling as its new STEP OUTSIDE national coordinator. In her new role, Schilling will work directly with NSSF's most high-profile program that encourages outdoor enthusiasts to introduce newcomers to target shooting, archery, hunting or fishing.

Susquehanna Financial maintained net neutral rating on Brown Sho, but reduced its EPS estimates. Its 4Q EPS estimate was reduced from 78¢ to 54¢, and FY04 EPS estimate from $2.58 to $2.41. "We believe that BWS will likely experience several near-term challenges that could limit the company's ability to register incremental top- and bottom-line improvements over the next two quarters, including: 1) the need to revitalize its children's wholesale business, which is expected to turnaround in 2H05; 2) the anticipated difficulty of implementing a successful repositioning strategy of the Bass brand; 3) integration of the US and Canadian Naturalizer retail operations; and 4)the product adjustments needed in its Naturalizer wholesale merchandise line to reflect recent fashion shifts."

Prudential Financial reiterated an overweight rating on Quiksilver while raising its estimates for the company. The target price has been raised from $30 to $35. Wedbush Morgan maintained a buy rating on Quiksilver, while its estimates for the company. The target price has been raised from $32.00 to $33.00. However, BB&T downgraded Quiksilver to hold from buy.

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Sporting goods industry
Mergers & acquisitions

3Q Inc.
Johnson Outdoors Inc.
Nautilus Group

net sales
military tent
merger integration
military tent sales

Sporting Goods
Cyndi Dalena
Helen Johnson-Leipold
Joan Broughton
Lawrence Keane

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