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 Breaking Headlines

Today's news...6/24/05

JUNE 24, 2005 -- Callaway Still Seeking New CEO, Strategic Alternatives

Callaway Golf confirmed that it is continuing its previously announced search for a new CEO. As part of that process, the board is also conducting a fullreview of the strategic alternatives for the company, and is working with Lazard to assist in these efforts.

The company also confirmed that it has received unsolicited indications of interest from various parties from time to time. However, no firm offers have been made, no substantive discussions are currently under way, and neither the board nor the senior managemen team has reached any decisions regarding the preferred strategic direction for the company. There can be no assurance that the consideration of various strategic alternatives will lead to any transaction or other action.

Lead independent director Ronald Beard commented, "We feel that this is an opportune time to explore a full range of strategic alternatives that could enhance shareholder value. The board and management continue to work closely to identify our next CEO, who will be taking the reins at a time when the coompany is seeing improving results reflecting the strong market acceptance of its products.enhance the competitive position of Callaway Golf in the market."


The Finish Line Looking Internally For Growth

The Finish Line CEO Alan Cohen admitted during the company's 1Q conference call that significant comp-store gains aren't as easy in the past, especially with Foot Locker getting back in Nike's good graces. He noted that while comps improved only 2%, Finish Line was able to produce EPS at the top end of its guidance. He said this was indicative of Finish Line having a plan in place to increase market and share operating efficiencies, while continuing to provide shareholder value.

1Q net income was $12.7 million, or 26¢ per diluted share vs $10.4 million or 21¢ per diluted share reported in 1Q04. Net sales increased 12.9% to $291.3 million. Comp-store net sales increased 2% on top of a 14% increase reported for 1Q04.

Merchandise inventories on a consolidated basis (including Man Alive) were $259.8 million at May 28, 2005. Finish Line merchandise inventories were $255.6 million compared to $221.6 million at May 29, 2004. On a per-square-foot basis, Finish Line store merchandise inventories increased approximately 3%.

Cohen said that going forward Finish Line will focus on: Customer segmentation at store level; new product opportunities that will differentiate the chain; disciplined inventory management; continued store growth to increase market share; and an expense management strategy.

Cohen said the company has been tracking traffic at a number of its doors to measure conversion rates. There are systems which will help Finish Line to vary its offerings so that the most relevant product is at each of its doors. More relevant assortments, Cohen hopes, will help increase sales and conversion rates. This can be accomplished, he added, without "throwing an army" of new merchandisers on the payroll.

The systems might uncover opportunities for some of the lower tier brands. Finish Line might find demand for some brands in localities, rather than nationally.

This past 1Q saw gross margins improve 30% to 30.1%, There was an 80-bp improvement in product margins and a 10-bp decline in shrink. This was offset by a 60-bp increase in occupancy costs. This was attributed to the 99 new stores opened since 1Q04. They tend to have higher occupancy costs and take three to five years to reach profitability.

Footwear sales were led by the running silhouette. Naturally, Shox dominated the category, but the company noted that it has become easier to sell $100-and-up footwear from more suppliers than Nike. Basketball shoes are real disappointment for Finish Line and others. Cohen did say that the sole exception was Jordan and this included more than retro and game shoes. Athletic casual and kids also performed well. Finish Line said that Reebok has opened the chain for its music-inspired footwear. Boots are an issue outside the urban market.

Finish Line still feels the effect of the decline in fashion-based licensed apparel. Private label continued to improve. The exclusive Maddie collection from Nike has been the best branded performer. (There is some speculation in the trade that the success the company has had with Maddie may lead to a women's format of the chain.)

Success in apparel will depend on growing private label and branded apparel and accessories carrying higher average selling prices.

The company opened a prototype Man Alive door in Richmond. While it sees opportunities in selling more footwear in Man Alive, it will remain an urban apparel chain. Cohen said he expects to offer some of his key footwear brands in the acquisition. Finish Line will open 15 of the Man Alive stores this year.


Sportsman's Guide Withdraws Secondary Offering; Restating Earnings

The Sportsman's Guide has withdrawn its registration statement with the SEC for a proposed public offering of 2,500,000 shares of its common stock. Company management cited uncertain market conditions as reasons for the withdrawal. A recent negative piece on the Motley Fool site was very critical of the proposal: "(T)he company wanted to sell 2 million shares in a secondary offering. Why on earth would a company simultaneously buy 10% of its share float while issuing 40% of those same shares? If the company needs the cash, then why would it buy a single share back? Given the recent withdrawal of the ‘05 stock plan, the timing of this filing strikes me as quite suspicious. At any rate, while I believe that Sportsman's Guide still constitutes a bargain from a financial perspective, further monkeying by management will change my mind in a hurry."

The Sportsman's Guide also announced it will change its accounting for Buyer's Club membership fees and restate certain previously issued consolidated financial statements.The restatement will increase net earnings for the quarters ended March 31, 2005 and 2004 by $161,000, or 2¢ per diluted share, and $141,000, or 1¢ per diluted share, respectively. The restatement will also increase net earnings by approximately $2,000 and $35,000 for FY04 and FY03, respectively, with no impact on diluted earnings per share in either period.

CEO Gregory Binkley commented, "This change is the result of comments we received from the SEC arising from their review of our 2004 Annual Report on Form 10-K, and it only impacts our timing of revenue recognition of the Buyer's Club membership fees. Based on our discussions with the SEC, we have determined that our membership fees were analogous to refundable fees for services and should be deferred and recognized in income on a straight-line basis over the membership term. Under our previous accounting policy we recognized a portion of the club fees in an amount equal to the discount earned by the members on actual product shipments."

The change in the revenue recognition policy related to the Buyer's Club membership fees, when compared to the previous policy, will tend to delay the recognition of fee income especially in 4Q with the first three quarters of the next fiscal year benefiting from the change.


Fleet Feet Sports Comped +10.6% In 1Q

Fleet Feet Sports reported 1q sales of a record $11 million. This was an increase of 17% over 1Q04. The growth was driven by strong comp-store sales increases. They were up 10.6% and a positive 13.3% on a trailing 120month basis. Comps by month were: January +9.3%; February +14.1%; and March +8.7%. Sales by month were: January +15.8%; February +20.7%; and March +14.8%.


Outdoor Retailer Seminar Schedule

OR Summer Market will provide the outdoor industry with seminars, speakers, athlete appearances, product demos, industry parties and gatherings. OR updated its website to include an interactive guide that provides not only dates/times/locations but also bios on seminar speakers and in-depth descriptions of on-site events. When you check out the "Seminars" section in the weeks and months. Visitors will find updates on all Summer Market happenings.

The 2005 OR Summer Market seminar series topics include:

Mouth to Mouth – A discussion on the Growing Trends in Word-of-Mouth Marketing
Date: Thursday, August 11
Time: Noon – 1:00 p.m.
Location: Downtown Marriott – Salon E
Speaker: Anthony Schweizer
Buzz Marketing, viral marketing, blogs, and message boards – the whole thing is getting complex. What does this new era of communication mean for companies and how do these new mediums fit into a company's marketing mix? Consumers are talking; they are talking about your offered brands in your stores, but is it possible to harness all this talk and turn it into action? There is no more important customer acquisition tool in the outdoor industry then the customers themselves.

Outdoor Industry Environmental Sustainability Working Group
Date: Thursday, August 11
Time: Noon – 1:00 p.m.
Location: Downtown Marriott, Salon D
Facilitator: David Bennell
Following up on the success of the OR Winter Market environmental sustainability session, we'll reconvene to update attendees on the progress on several fronts including water-based adhesives in footwear and other products, initiatives on reducing greenhouse gas emissions, packaging reduction initiatives and forest products issues, among other important topics.

A Textile Supply Chain Dialogue: The Global Market Jolt - How to Survive It and Thrive!
Sponsor: FabricLink
Date: Friday, August 12
Time: 7:30 – 9:00 a.m.
Location: Downtown Marriott, Salon E
Moderator: Kathlyn Swantko
Panelists: US Government: James Leonard III, deputy assistant secretary, textiles/apparel/consumer products
Raw Materials Supplier: John Mitchell, VP business development, Outlast Technologies
Fiber/Yarns: James Morelli, VP, American Fibers & Yarns Co.
Product Development: David Parkes, President, Concept III International
Fabric/Manufacturer: Kenneth Shelton, textile development, W.L. Gore
Retail: TBD, Eastern Mountain Sports
General Topics: The Impact of World Market Changes on Supply Chain Relationships; Developing The Vision for Surviving and for Thriving; New Ways of Working Together to Create Innovative Products that Sell; Current Trends In Performance Products; and Anticipating Consumer Desires and Delivering.

Making the Most of a Tradeshow
http://www.profitsplus.org/presentation_trade_show.htm>
Date: Friday, August 12
Time: 7:30 – 9:00 a.m.
Location: Downtown Marriott, Salon D
Speaker: Tom Shay
Surely, attending a tradeshow should be an investment a business makes, expecting to see dividends from their time and money. Yet so many businesses experience a tradeshow as just an expenditure. Tom Shay, who has participated in tradeshows for over 40 years as a vendor and as a buyer, shares with attendees what it takes to make the most of a show.

Light, Fast and Profitable? The Real Benefits, and Costs, of Merchandising Lightweight Gear
Sponsor: Backpackinglight.com
Date: Friday, August 12
Time: 7:30 – 9:00 a.m.
Location: Downtown Marriott, Salons A-B
Speaker: Ryan N. Jordan, Ph.D.
Contrary to popular belief, simply stocking so-called "lightweight" gear in your retail store is not a cure-all for boosting poor sales in hiking, backpacking, and mountain gear. Smart strategies for merchandising lightweight gear focus on developing it as a high-end niche for your customer base.

ASTM Meeting: Sleeping Bag, Tent and Backpack Standards
Sponsor: OIA
Date: Friday, August 12
Time: 7:30 – 9:00 a.m.
Location: Downtown Marriott, Salons Alta-Snowbird
Task Group: ASTM
An American Society for Testing and Materials task group meeting for sleeping bags, tents and backpacks. You can pick up an agenda at OIA booth #5600. Anyone interested in standards is welcome to attend the meetings and help write new standards or update current standards. However, you must be a member of ASTM to vote on the standards; to join ASTM, visit their website at www.astm.org. To RSVP, please email Cathy Howland at [email protected]

Small Businesses Don't Die, They Just Fade Away!
Date: Friday, August 12
Time: Noon – 1:00 p.m.
Location: Downtown Marriott, Salon D
Speaker: Tom Shay
Reports from the US Census Bureau show as companies have downsized, and individuals decide they want to own their own business, there are more and more new small businesses being started. Yet, some 95% will not be in business to have their 5th anniversary sale, and only half of those will celebrate their 10th anniversary.

Green Steps Association - Session on Sustainability
Date: Friday, August 12
Time: Noon – 1:00 p.m.
Location: Downtown Marriott, Salon E
Speaker: Scott Leonard, Indigenous Designs
This session is designed for those interested in advancing the principles of sustainability within the industry. Green Steps Association members and non-members are welcome to participate. Topics include: Culture, fair trade, natural fibers, the role of the retailer and manufacturing practices. A resource panel will be available to address questions related to these issues. GSA will provide resources, encouragement and examples from within the industry.

Open To Buy: The Key to Profitability
Sponsor: OIA
Date: Friday, August 12
Time: Noon – 1:00 p.m.
Location: Downtown Marriott, Salons A-B
Speaker: Roy Turner
Join OIA for lunch during a seminar for retail owners and managers on the three rules of the buying game! This seminar will review strategies for building profits, calculating open to buy dollars, turn rates and markdowns. The event is perfect for retail veterans and new buyers alike and will provide a non-competitive atmosphere to share successful business ideas and strategies. To RSVP, please email Cathy Howland at [email protected]

Trends of the Active and Outdoor Industry for Spring/Summer 2007
Date: Saturday, August 13
Time: 7:30 – 9:00 a.m.
Location: Downtown Marriott, Salon D
Speaker: Britt Bivens
Ever wonder what inspires the designers and product managers of major brands? Join a trend presentation by Promostyl that will look at major influences on the industry and how they translate into product and apparel. This not to be missed presentation is usually available to behind the scene insiders who determine color and styling that will set the mood for the next year.

Doing Business with the US Military, Exhibitor Seminar
Date: Saturday, August 13
Time: 7:30 – 9:00 a.m.
Location: Downtown Marriott, Salon E
Speaker: Fred Chan
US Special Operations Command (USSOCOM) and other military Services (Army, Navy, Marine Corps and Air Force) seek to procure various commercial off the shelf (COTS) and modified COTS products from the vendors that exhibit at the OR Show. The Defense Federal Acquisition Regulations (DFAR) governs the process by which the military procures commercial equipment and services. This seminar will help explain the sometimes intricate process by which the military procures products or services from a commercial vendor.

Marketing to Women, A Salomon Case Study
Date: Saturday, August 13
Time: Noon – 1:00 p.m.
Location: Downtown Marriott, Salon E
Speaker: Ali Sacash
Who comprises the women's market? Before launching its new women's campaign, Salomon studied the women's market for more than two years. One favorite topic: how women shop for their gear and apparel. And the findings are very different according to the different archetypes of women who participate in outdoor sports.

Trends of the Active and Outdoor Industry for Spring/Summer 2007
Date: Saturday, August 13
Time: Noon – 1:00 p.m.
Location: Downtown Marriott, Salon D
Speaker: Britt Bivens
Ever wonder what inspires the designers and product managers of major brands? Join a trend presentation by Promostyl that will look at major influences on the industry and how they translate into product and apparel. This not to be missed presentation is usually available to behind the scene insiders who determine color and styling that will set the mood for the next year.

Systematic Hiring, How to Hire the Best
Sponsor: OIA
Date: Saturday, August 13
Time: Noon – 1:00 p.m.
Location: Downtown Marriott – Salons G-H
Speaker: Roy Turner
In today's retail environment, is the customer still your most valuable asset or could it be your employees? Effective hiring can be directly related to sales growth within any retail group and can help to promote customer loyalty through better customer service. Join OIA for lunch as they host a seminar that teaches the basics of a systematic hiring process including detailed job descriptions, staffing summaries, and applicant appraisal and comparison forms. Excellent for single or multiple store retailers, this program will help make sure that your next employee decision is the best for the job. To RSVP, please email Cathy Howland at [email protected]

4th Morning Keynote Presentation: B2B Panel Discussion
Sponsors: OR and OIA
Date: Sunday, August 14
Time: 7:30 – 9:00 a.m.
Location: Downtown Marriott – Salon F
Moderator: Frank Hugelmeyer
Over the past three years, a group of outdoor industry companies have worked to make the communication of information between retailers and vendors a more streamlined, cost-effective and higher quality process. This cost-saving initiative utilizes XML standards with the goal of having retailer POS systems talk with vendor systems, and vendor systems talk with customer POS systems. Panel discussion will cover how your company can benefit from this cost saving and innovative initiative designed to make your business more efficient. Panel members include:
Ken Meidell, CIO, Cascade Designs
Michael McGregor, VP/operations, Cloudveil Mountain Works
Mitch Baker, director, IS and E-Commerce, Summit Hut
Ray Commins, director of IT, Petzl America
Tim Smith, special buying programs, REI

Outdoor Retailer Summer Market 2005 will be held in Salt Lake City, Utah from August 11-14 at the Salt Palace Convention Center, with the Open Air Demo scheduled on August 10th, the day prior to the Show. Registration details for Summer Market 2005 and more information on Outdoor Retailer tradeshows can be found at http://www.outdoorretailer.com.


Brian Kelly has been promoted to category marketing manager, football and soccer, of Spalding. "Brian has consistently performed at a high level in his management and day to day operations of the football and soccer businesses," stated Bob Llewellyn, director of marketing. "Spalding's football business, in particular, has benefited greatly from Brian's day to day attention as he spearheaded the partnerships with the Arena Football League, Pop Warner, and the launch of the extremely successful J5V Advance, a ball that has signaled Spalding's expanded efforts into the institutional marketplace."


Morgan Stanley will have to pay billionaire Ronald Perelman an aditional $123 million. The judge added interest charges to the $1.447 billion of damages won in a jury trial last month. Perelman, claimed the firm defrauded him in the 1998 sale of Coleman Co. to Sunbeam Corp. Morgan Stanley must post a $1.8 billion bond before any appeal.


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Quick links: One-click access to topics in this article.

Categories
Supply chain
Branded apparel
Seminars
Sporting goods industry
Customer service

Companies
The Finish Line Inc.
Marriott International
Callaway Golf Company
Man Alive
Summer Market

Concepts
Downtown Marriott
Salon D
Salon E
Strategic Alternatives
merchandise inventories

People
Alan Cohen
Ronald Beard
Tom Shay
Cathy Howland
Topics





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