US: Russell Corp "disappointed" with 2005
Russell Corporation has said it is disappointed with its 2005 results, despite reporting a rise in sales and earnings in its fourth quarter.
The company said fourth quarter sales reached US$354.6m, an increase of 6.2% over the same period a year ago. Earnings grew to $11.8m, or $0.36 per diluted share, versus $0.31 per diluted share reported in the fourth quarter of 2004.
The sportswear group said sales for the quarter included $27m in incremental sales from Brooks, the only acquisition owned for less than a year. Beyond Brooks, sales gains were strongest in the Artwear business, which experienced growth in the quarter in the mid-teens.
Gross profit for the fourth quarter of 2005 was $99.9m, or a 28.2% gross margin as a percent of sales, versus a gross profit of $97.1m, or a 29.1% gross margin, in the prior year.
"The positive impact of increased unit volumes in Artwear and higher margins associated with Brooks was generally offset by a shift in product mix and increased year-over-year costs for polyester, transportation and energy. Losses at Huffy Sports also negatively affected results," the company said.
For the full year, net sales increased $136.4m to $1.435bn, a 10.5% increase over the prior year's sales. Excluding the sales from acquisitions owned for less than a year, sales were $1.271 billion.
"As indicated earlier, we were disappointed in our 2005 financial results. Despite certain areas of our business having record performances, such as international apparel and Brooks, we did experience disappointing sales overall in our Sporting Goods segment.
"Unfilled orders earlier in the year contributed to weaker sales results for the balance of the year for Russell Athletic. Additionally, sales weakness in Mossy Oak continued throughout the year, with declines of approximately 20% from 2004," said Jack Ward, chairman and chief executive officer.
"We feel positive about our many growth opportunities and our cost reduction initiatives outlined in January. We also have already begun to see the benefits from our lean manufacturing initiatives and have experienced a broad base of support for these efforts throughout our operations," said Ward.
"Russell's brands remain solidly positioned with our customers, and we continue to build on our reputation for quality, authenticity and performance, particularly with our primary brands, Spalding, Russell Athletic, Jerzees and Brooks."
The company reaffirmed its previous annual guidance for 2006. Russell expects sales for fiscal 2006 to be in the $1.450 to $1.480 billion range. As previously announced, Russell expects GAAP earnings per fully diluted share of $0.32 to $0.59, as charges associated with the previously announced restructuring are estimated to be in the $0.66 to $0.78 range for 2006. Excluding those charges, ongoing earnings are expected to be in the $1.10 to $1.25 range.
However, the company reported that it expects to report a loss in the first quarter of 2006 in the range of $0.29 to $0.41, as approximately half of the expected 2006 restructuring charges are scheduled to impact the first quarter. Ongoing earnings are expected to be in a range from ($0.02) to $0.04 per share for the quarter reflecting the company's planned shift in method for accounting for inventory.
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