Ashworth reports Q2 and YTD fiscal 2008 financial results
Ashworth Inc, a leading designer of on-course golf apparel and golf-inspired lifestyle sportswear, announced unaudited financial results for its second quarter ended April 30, 2008.
Allan H. Fletcher, Chief Executive Officer of Ashworth, said, "We are pleased to report a profit for the second quarter. Throughout the second quarter, we continued to implement the strategic initiatives the Management team believes will eventually produce the desired results. Although we've seen some signs of improvement in our core golf distribution channel, we still believe the turnaround will take more time, sharp focus and strong execution. Our Management team is committed to doing the things we believe will, in time, position the Company for sustainable and profitable growth."
"During the past few months we have faced difficult retail markets as well as a deteriorating economy, but we have taken steps designed to improve the Company's operational efficiency and inventory productivity over time and we are optimistic about the future of Ashworth."
Summary of Second Quarter Results:
Consolidated net revenue for the second quarter ended April 30, 2008 decreased 3.4% to $57.8 million as compared to $59.9 million for the second quarter of 2007. The Company reported consolidated second quarter net income of $0.9 million, or $0.06 per diluted share, compared to a net loss of $2.5 million, or $0.17 per diluted share, for the same quarter of the prior year.
In the second quarter of fiscal 2007, the Company recorded a tax charge of $2.9 million or $0.20 per diluted share to establish a valuation allowance against deferred tax assets. Domestic net revenue (including Gekko Brands, LLC) decreased 5.1% to $44.8 million from $47.2 million for the same period of the prior year. International net revenue (including Ashworth, U.K., Ltd.) increased 2.9% to $13.1 million from $12.7 million for the same period of the prior year.
In the second quarter of fiscal 2008, the Company's consolidated gross margin increased 340 basis points to 42.2% as compared to 38.8% in the second quarter of fiscal 2007. The increase in consolidated gross margins was due to an improved gross margin in the Company's Domestic segment driven by a higher average selling price as compared to the same period of the prior year as well as a reduction in overhead expenses.
Consolidated selling, general and administrative (SG&A) expenses increased 4.3% to $22.8 million for the second quarter of fiscal 2008 as compared to $21.8 million for the second quarter of fiscal 2007. As a percent of net revenues, SG&A expenses were 39.4% for the second quarter of fiscal 2008 as compared to 36.5% for the same period of the prior fiscal year. The increase is largely due to increased consulting fees, primarily associated with athlete endorsements, design consultants and the consulting agreement for the services of our CEO.
Also contributing was an increase in royalties due to a higher concentration of revenues from licensed products, an increase in commissions due to a higher concentration of revenues from independent sales representatives and the expense related to the employment and non-compete agreements entered into with the principals of Gekko on June 4, 2007. The increases were partially offset by a decrease in salaries and wages, primarily performance based bonuses.
Revenues by Channel/Segment:
Total revenues in the domestic golf channel in the second quarter increased 2.3% to $22.3 million from $21.8 million for same period last year. This is the third consecutive quarter in which revenues in the golf channel have increased. The increase in the second quarter was primarily driven by higher revenues from on-course golf retailers, partially off-set by lower revenues from off-course and off-price golf retailers over the comparable prior year quarter. The Company continues to experience competitive pressure and the effects of market consolidation in off-course specialty golf retail. As part of the Company's effort to restore sales growth, management is implementing new sales management processes in both the on-course and off-course channels of distribution.