The strong U.S. dollar hampered the financial results of the Australian multi-brand skate company for the first half of its fiscal year ended on Dec. 31. The net income was down by 9 percent to 3.9 million Australian dollars (€2.3m-$2.7m). This happened despite a net gain of A$ 3.7 million (€2.2m-$2.6m) from the sale of the U.S.-based Dwindle group to Highline Industries in August, with Globe retaining distribution rights for the brand in Australia, New Zealand, the U.K. and Spain.
The brands marketed by Dwindle include Almost, Blind, Dusters California, Kryptonics and Enjoi. Globe said that the sale of this business division was part of an ongoing strategic overhaul of the group’s brand mix, aimed at reducing the number of smaller brands in its global operations. It believes that the company now has a much better balance of apparel, footwear and skateboard hardgoods brands, proportionate with the revenues of each product category.
The group’s revenues remained flat during the six-month period in reported terms at A$ 78.0 million (€46.1m-$50.9m). They declined by 2 percent in constant currencies, but excluding the divestiture of Dwindle, they grew by 7 percent. The management said the growth was driven by the North American and European divisions.
Over the past six months, although North American sales dipped by 3 percent in reported terms to A$ 23.0 million (€13.6m-$15.0m), they soared by 26 percent organically, driven by the Salty Crew, Impala, Globe and FXD brands.
In Europe, Globe’s revenues improved by 7 percent in constant currencies to A$ 12.6 million (€7.4m-$8.2m), also boosted by the same brands. However, sales in Australasia were off by 1 percent to A$ 42.4 million (€25.0m-$27.7m), due to a decline in the streetwear division.
The management highlighted the launch in December of its so-called of “dot boards” – its first line of electric skateboards – after many years of research and development.
The group’s gross margin was down by 1.1 percentage points to 45.7 percent in the first half, while the operating profit (Ebit) declined by 5 percent to A$ 4.2 million (€2.5m-$2.7m), including the one-off profit from the sale of Dwindle. The company said that the strengthening of the U.S. dollar was a major factor in the lower profitability, with the deterioration in the exchange rate resulting in a A$ 2.5 million (€1.5m-$1.6m) reduction in gross profit, which was only partially offset by product cost reductions and price increases. In addition, the increase in Washington’s tariffs on Chinese imports had a negative impact on gross margins in the U.S.
Looking at the rest of the financial year, the company warned that it will continue to face significant headwinds from the stronger U.S. dollar and continued uncertainty around tariffs in the USA, as well as the impact of Australian bushfires on consumer demand and the potential impact on the supply chain from the coronavirus outbreak. Globe expects sales to remain flat compared with the previous year, while profits are expected to be below last year by around 15 percent as a result of one-off items, environmental factors and downward pressure on margins.
