Ashworth reports Q3 financial results
Ashworth Inc announced unaudited financial results for its third quarter ended July 31, 2008.
Summary of Third Quarter Results:
Consolidated net revenue for the third quarter ended July 31, 2008 decreased 8.7% to $45.2 million as compared to $49.5 million for the third quarter of 2007. The Company reported consolidated third quarter net loss of $9.6 million, or $0.65 per basic and diluted share, compared to a net loss of $5.7 million, or $0.39 per basic and diluted share, for the same quarter of the prior year.
Included in the third quarter fiscal 2008 quarterly loss is a non-cash tax charge of $1.3 million or $0.09 per basic and diluted share as compared to a non-cash tax charge of $1.4 million or $0.10 per basic and diluted share in the third quarter fiscal 2007, to increase the valuation allowance against the Company's deferred tax assets. The quarterly loss for the 2008 period also reflects an increase in inventory write-down taken in the United Kingdom of $0.6 million.
In the third quarter of fiscal 2008, the Company's consolidated gross margin decreased 330 basis points to 34.9% as compared to 38.2% in the third quarter of fiscal 2007. The decrease in consolidated gross margin was driven by increased discounting, higher product costs as a result of fixed overhead allocated to lower sales volumes, higher material and transportation costs, a higher volume of off-price sales, and increased inventory reserves.
The Company's off-price sales were at significantly higher discounts during the third quarter of 2008 as compared to the same quarter of the prior year. In addition, the European channel experienced larger discounts within its resort, golf and retail customers.
Consolidated selling, general and administrative (“SG&A”) expenses increased 4.4% to $22.8 million for the third quarter of fiscal 2008 as compared to $21.8 million for the third quarter of fiscal 2007. The increase is largely due to increased consulting fees, primarily associated with a review of the Company's operations, cost structures and strategic plans.
Also contributing to higher SG&A expenses were increases in tradeshow/tournaments/sales meeting expenses and an increase in royalties as a result of a higher concentration of revenues from licensed products, partially offset by lower commissions.
Revenues by Channel/Segment:
Total revenues in the domestic golf channel in the third quarter increased 5.5% to $18.2 million from $17.2 million for same period last year. This is the fourth consecutive quarter in which revenues in the golf channel have increased. In the third quarter of fiscal 2008, net revenues increased from both on-course and off-course golf retailers over the comparable prior year quarter.
This growth is the result of the implementation of new sales management processes, in both the on-course and off-course channels of distribution, and a strengtheningof the sales team in both quantity and quality. However, as a result of the difficult economy, retail sell-through during the third quarter of 2008 has been below expectations and we expect revenues from this channel to decrease for the remainder of the fiscal year as compared to prior year periods.