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Today's news...3/17/05

MARCH 17, 2005 -- Nike Net Soars 36.5%, Futures Up 9.6%

Nike Inc. reported third quarter net income rose 36.5%, to $273.4 million, or $1.01 per diluted share, from $200.3 million, or $0.74 per diluted share in the prior year.

Revenues for the third quarter increased 14% to $3.3 billion, versus $2.9 billion for the same period last year.

"This was our sixth consecutive quarter of double-digit revenue and earnings per share growth," said William D. Perez, Nike's new president and ceo. "These consistently strong results were driven by excellent performance across geographies and brands, coupled with favorable trends in foreign exchange rates. In addition to another strong quarter for our U.S. business, emerging international markets such as China, Russia and Brazil produced significant growth. While the core Nike Brand fueled the majority of our growth, Nike Golf, Converse and Cole Haan were also major contributors to our positive results."

The company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from March 2005 through July 2005, totaling $5.2 billion, 9.6% higher than such orders reported for the same period last year. Approximately one point of this growth was due to changes in currency exchange rates.*

By region, futures orders for the U.S. were up nine percent; Europe increased seven percent; Asia Pacific grew 14%; and the Americas increased 22%. In Europe, two points of the increase were due to currency exchange rates. Currency exchange rates contributed to the growth in Asia Pacific and the Americas by approximately two points and one point, respectively.*

Perez continued, "Global consumer demand for Nike brand footwear and apparel continues to be strong, as evidenced by the growth in futures orders. Demand in the U.S. market remains particularly robust, as Nike product innovation continues to drive the trend toward performance footwear and apparel in this market."*

In the U.S., revenues increased nine percent to $1.3 billion versus $1.2 billion for the third quarter of fiscal 2004. U.S. athletic footwear revenues increased 10% to $849.6 million. Apparel revenues increased 5% to $345.8 million. Equipment revenues increased 12% to $72.8 million. U.S. pre-tax income increased 10% to $259.5 million.

In the the Europe, Middle East and Africa region, revenues for grew 18% to $1.0 billion, up from $878.6 million for the same period last year. Nine points of this growth were the result of changes in currency exchange rates. Footwear revenues increased 14% to $615.3 million, apparel revenues increased 24% to $351.3 million and equipment revenues increased 18% to $67.3 million. Pre-tax income rose 28% to $219.3 million.

Revenues in the Asia Pacific region grew 18% to $472.8 million compared to $402.2 million a year ago. Five points of this growth were the result of changes in currency exchange rates. Footwear revenues were up 11% to $237.9 million, apparel revenues increased 25% to $188.3 million and equipment grew 23% to $46.6 million. Pre-tax income was up 16% to $100.4 million.

Revenues in the Americas region increased 10% to $143.7 million, an improvement from $131.1 million in the third quarter of fiscal 2004. Currency exchange rates resulted in a three-percentage point increase in this growth rate. Footwear revenues were up 13% to $99.6 million, apparel revenues decreased 5% to $33.5 million and equipment improved 34% to $10.6 million. Pre-tax income grew 49% to $23.2 million.

Other revenues, which include Converse Inc., NIKE Golf, Bauer NIKE Hockey Inc., Cole Haan, Hurley International LLC and Exeter Brands Group LLC, grew 20% to $389.6 million from $325.1 million last year. Pre-tax income increased 724% to $23.9 million.

Gross margins were 44.1% compared to 42.1% last year. Selling and administrative expenses were 31.3% of third quarter revenues, compared to 30.7% last year. The effective tax rate for the third quarter was 33.9%.

At quarter end, global inventories stood at $1.7 billion, an increase of 4% from February 29, 2004. Cash and short-term investments were $1.6 billion at the end of the quarter, compared to $914.7 million last year.

Weakness In Fashion Sports Apparel Pulls Down G-III Apparel

Blaming weakness in fashion sports apparel, G-III Apparel Group eported net income of $703,000, or $0.09 per diluted share, for the twelve months ended January 31, down from $8.4 million, or $1.14 per diluted share, last year.

Sales decreased to $214.3 million from $225.1 million last year

G-III Apparel cut its losses in its fourth quarter ended Jan. 31, to $2.7 million from $3.1 million a year ago. Sales increased 10.7% to $38.4 million from $34.7 million.

For the full year, gross profit percentage decreased to 24.6% from 27.9% in the prior year due primarily to lower full-priced sales of fashion sports apparel and lower commission fee income. Gross profit as a percentage of net sales during the fourth quarter increased to 16.5% from 13.5% in the fourth quarter of last year due to lower off-price sales in this year's quarter compared to last year.

Morris Goldfarb, Chairman and Chief Executive Officer said, "This past year in outerwear was difficult as the fall selling season was disappointing for retailers. Due to early lackluster retail sales, the retail environment became highly promotional causing us to sell more goods at off price and to provide higher levels of allowances than was anticipated. This was coupled with a significant decline in full price volume in our fashion sports area. In response to these factors, we have reduced our head count and focused our efforts on our stronger businesses."

He added, "Our core sports business is off to a strong start this year. New initiatives we have undertaken in non-leather outerwear have demonstrated early traction in both the men's and women's area. We are pleased to take over the Kenneth Cole men's outerwear business and now have the license for Izod men's and women's outerwear as well. In addition, we just recently signed a license to launch a collection of young contemporary women's outerwear under Beyonce and Tina Knowles' House of Dereon brand. Each of these is a fine addition to an already compelling collection of branded outerwear and should benefit us as the year progresses."

K2 Shifts Worth Bat Manufacturing To China

K2 Inc. has announced plans to relocate Worth Inc.'s bat operations in Tullahoma, OK, to existing K2 facilities near Guanzhou, China.

Robert Parish, Worth's former president and now president of Rawlings Sporting Goods, which is also owned by K2, said the decision to move Tullahoma's operations to China was difficult but necessary.

"Although we made every effort to preserve Worth's Tullahoma operations, this move is now essential to the integration of Rawlings and Worth and reflects K2's overall strategy of consolidating manufacturing within the Company's existing facilities in China," he said in a company press release. "We believe this decision, although very difficult, is required for the long-term health and success of our organization.

"I would like to personally thank everyone in Tullahoma for their tremendous dedication and contributions to the success of the brand over the years."

The press release says the transition is expected to be complete by the summer of 2006, with the first round of consolidations expected to take place by this summer. All affected employees will be offered severance, job training and assistance finding new employment, the release says.

Hugger-Mugger Sues Gaiam For Internet Trademark Infringement

Hugger-Mugger Yoga Products announced that it has brought suit against Gaiam in Salt Lake City's Federal Court for willful infringement of the Hugger-Mugger trademark.

The lawsuit alleges Gaiam is using the Hugger-Mugger trademark to confuse Internet users and divert Internet business away from Hugger-Mugger to Gaiam. Upon information and belief, Gaiam has contracted with numerous Internet search engines, including Google, MSN, About, Yahoo and Ask, to use the Hugger-Mugger trademark as an Internet search term to direct Internet users to Gaiam's website or product sources. For example, if an Internet user types in "Hugger-Mugger" to conduct a search on Google, the results would produce the following link on the screen:

Hugger Mugger
Yoga, Pilates, Chi & Fitness DVDs, Books,
Mats, Clothing & Much More

Tom Chamberlain, President of Hugger-Mugger, said, "Hugger-Mugger was founded over twenty years ago by Sara Chambers, an early leader in the development of unique products for the practice of yoga. This included the now industry standard of the tapas sticky mat and modern straps, among other innovations. Our good name and reputation are the very foundation of our long-term success."

"Any misrepresentation of Hugger-Mugger as somehow being related to Gaiam, or that its products are sold by Gaiam, is incorrect and reprehensible."

"The use of deceptive and misleading search engine practices to wrongly appropriate trademarks and sales is a direct attack on the legal foundations of business law and fair practices."

"If the emerging area of Internet sales does not follow the same fair practices as other distribution channels, small business will be particularly disadvantaged at the expense of predatory competitors."

"Therefore, we believe this case will be seminal in assuring the rights of all businesses, large and small, against unfair competition."

Hugger-Mugger is seeking injunctive relief and treble damages among other remedies.

Puma Launches "Labratory" Store In Manhattan's Meatpacking District

PUMA announced the global launch of their newest retail store in New York City's Meatpacking District.

Dedicated to PUMA's sport-fashion collections, the store is located at 421 West 14th Street. The PUMA Store Meatpacking District will exclusively house the brand's extensive range of sport-fashion collaborations, specifically 96 HOURS, nuala, Mihara, Starck and Dassler. The store opened its doors in late February 2005 and is a venue where PUMA will exhibit its cutting edge designs and collaborative projects.

Puma said the new store will act as a laboratory or incubator for the brand to experiment with new ideas and infuse the PUMA personality with the design sensibility of experts from various industries. Each collection in the store is created to stand-alone, however, they are being presented as a together under one roof for the first time with the opening of the new store.

"After embarking into the sport-fashion segment in the mid-1990's, we felt it was time to create a PUMA environment that showcases the inherent design of these products," said Jochen Zeitz, CEO and Chairman of PUMA AG. "This store is a first in many respects. PUMA is the first to take the sport-fashion concept a step further by creating a multi-branded store environment. The Meatpacking District store will also provide a setting to connect directly with a cutting edge consumer."

Two distinctive logos, the jumping cat and the formstrip, typically identify PUMA product to consumers. The existing PUMA Concept Stores utilize the jumping cat branding as its focal point for design direction. In contrast, the PUMA Store Meatpacking District takes its lead for interior design from the brand's signature formstrip. Intended to highlight the unique aspects of a multitude of collections in an inclusive space, the store also has a black interior that provides a neutral backdrop to focus consumers on the designs of each range. Each of the fixtures in the store is inspired by sport and it is designed to be a place where all of PUMA's sport-fashion brands can intersect and interact in a unique way. This is shown through new graphics that incorporate the individual logos of all of these collections.

Puma said New York, specifically the Meatpacking District, draws the right clientele to support a retail environment dedicated specifically to PUMA's sport-fashion collections. Known for embracing design and progressive thought, New York is also the center of fashion for the United States.

Shoe Pavilion Returns To Profitability

Shoe Pavilion, Inc. reported net income of $1.0 million, or 14 cents per share, for the fourth quarter ended January 1, compared to a net loss of $60,000, a loss of a penny per share, on a restated basis for the year-ago period. The year-ago period included a before tax charge of approximately $1.0 million for costs associated with the settlement of a wage and hour lawsuit.

For the 52 week year, the retailer reported net income of $2.1 million or $0.30 a share compared to a net loss of $2.9 million on a restated basis a year ago.

Sales increased 11.5 % to $24.8 million in the quarter, and grew 2.6% to $85.8 million in the year.

Dmitry Beinus, Chairman and CEO, stated "We achieved both an increase in comparable store sales as well as improvement in our gross margin. We are particularly proud of our fourth quarter results in which our comparable store sales increased 14.7%. In 2004 we were able to successfully identify the appropriate inventory items to satisfy our customer's demands. During the next eighteen months the Company plans to open between 15 to 20 stores."

Oakley Promotes Krause & Lane to SVP

Oakley has promoted two company veterans to newly created senior vice president positions. Effective immediately, Kent Lane has been named Senior Vice President of Manufacturing and Sourcing and Jon Krause has been named Senior Vice President of Operations.

"We're fortunate to have leaders like Kent and Jon who each share a long, rich history at Oakley and have helped build Oakley into one of the world's most recognized brands," said Oakley Chief Operating Officer Link Newcomb. "Their promotions reflect our appreciation for the contributions they've made and our confidence in their ability to continue to play crucial roles in driving our product strategies and building Oakley's brand identity."

Lane joined Oakley in October 1994 and served as Director of Manufacturing from January 1995 until October 1995. In October 1995, Lane was named Vice President of Manufacturing. Lane has more than 25 years experience in the manufacturing industry at various companies, including Kaiser Steel for six years and Water Factory Systems for eight years.

Krause joined Oakley in November 1996 as Director of Information Technology and was named Vice President of Operations in January 1998. Prior to joining Oakley, Krause was a senior manager with Accenture (previously known as Andersen Consulting) where he spent ten years specializing in information technology and manufacturing operations.

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Copyright 2005 Sporting Goods Business

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Chinese market
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Hugger-Mugger Yoga Products
Gaiam Inc.
Shifts Worth Bat Manufacturing To China

exchange rates
currency exchange rates
pre-tax income
net income
apparel revenues

William D. Perez
Cole Haan
Kent Lane
Morris Goldfarb

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