Head’s operating and net income soared by more than 60 percent in the 3rd quarter, reaching levels of €15,351,000 and €9,633,000, respectively, on 11 percent higher revenues of €111,946,000 accompanied by an improvement of 270 basis points in the group’s gross margin to 40.6 percent.
For the first nine months of this year, Head posted a loss of €75,000 on 5.5 percent higher revenues of €243.5 million, compared with a rested net profit of €1,977,000 that had been almost exclusively due to extraordinary gains.
Improved logistics resulted in better availability and earlier shipments in the winter sports segment, whose quarterly revenues grew by 19.7 percent to €70.4 million, outperforming other important brands. Europe accounted for 79 percent of the turnover. Segment sales rose by 18.0 percent to €100.2 million for 9-month period ended Sept. 30, thanks also to good product offerings and good snow conditions in the past season, which reduced retailers’ inventories. A better product mix helped to lift gross margins in this segment to 36.7 percent in the nine months and to 40.1 percent in the latest quarter.
In terms of volume and including contract manufacturing, Head shipped 314,000 pairs of skis during the 9-month period, up from 248,000 pairs in the same period a year ago. Deliveries of bindings grew to 961,000 pairs from 850,000 pairs. Ski boots were up to 304,000 pairs from 283,000. Unit shipments of snowboards rose to 177,000 from 140,000.
Head’s racquet sports divisions enjoyed better margins on racquets but experienced higher raw material cost pressures on its tennis ball business in the first nine months of this year, depressing the gross margin slightly to 38.7 percent of the period, but it came out higher than a year ago in the latest quarter, settling at 37.7 percent against 35.9 percent.
Division sales declined by 4.8 percent to €33.4 million in the quarter, but they were up by 1.8 percent to €106.3 million for the nine months, mainly because of a slightly stronger U.S. dollar. North America and Europe represented 48 and 38 percent of quarterly sales for the division, respectively. Head delivered a total of 1,542,000 racquets in the first nine months of 2006, up from 1,467,000 units a year ago. Shipments of balls increased to 5,347,000 dozens from 5,098,000 dozens, and the launch of its new Head brand of balls in Europe and Asia was favorably perceived.
Sales of diving products dipped by 5.3 percent to €38.0 million in the 9-month period, but jumped by 26.9 percent to €10.1 million in the latest quarter, and full-year turnover should come out flat. The sales decline was related to the group’s intentional reduction of its Dacor business, which came to represent only 2 percent of segment revenues in the latest quarter, against 93 percent for Mares and 5 percent for Sporasub. Gross margins improved vastly in the diving division, moving from 35.1 percent to 38.5 percent of sales for the nine months and from 21.5 to 35.9 percent for the quarter, reflecting a new margin-enhancement strategy that will be pursued further in the longer term.
Licensing revenues fell by 24 percent to €1.2 million as Head terminated its footwear license, which will be replaced with its own distribution, and ceased a U.K. apparel license that will be replaced in 2007.