The second quarter was tough for Head, which had to unveil declining sales and profits after strong results in the same period last year. Sales for the quarter were down by 5.3 percent to €63.8 million and the company reported a loss of €4.1 million for the period, compared with an inflated profit of €3.2 million last year.
The sales decline was felt across all of Head’s business units. Racquet sport sales dropped by 2.1 percent to €36.6 million for the quarter, mainly because Head had benefited from the launch of its Flexpoint technology last year, which raised average prices.
On the other hand volumes have been rising in the racquet sports sector since the beginning of the year. Head sold 1,083,000 tennis racquets and 3.7 million dozens of balls for the period, compared with 981,000 racquets and 3.5 million dozens last year. According to the group, the market for tennis racquets has been expanding at an estimated rate of 5 percent for the 1st half of this year, the only exception being Japan where sales apparently declined by 2 percent in the first 4 months. Head’s total racquet sports sales rose by 5.1 percent to €72.9 million for the six months.
Winter sport revenues declined by 6 percent to just under €9.6 million for the quarter. Yet again the first-half figures showed a jump of 14 percent as Head enjoyed sales increases in all categories at the beginning of the year and benefited from the launch of its new protective equipment range.
Sales in the diving business decreased by 5.1 percent to €16.8 million for the quarter, as Head continued to exit the unprofitable Dacor business and lacked a major launch like the Limited Edition of last year.
The licensing business went down with the rest, falling by 32.7 percent to €2.2 million. This was attributed to the fact that Head terminated its footwear license as well as its apparel license in the UK.
Gross margins dropped to 40.9 percent group-wide for the quarter, down from 44.4 percent. The hit stemmed for the most part from lower prices for tennis racquets and higher raw material costs for tennis balls. The same factors pushed Head’s gross margin down to 40.1 percent for the first half, compared with 40.7 percent for the same period last year.
On the earnings side, the comparison with last year is distorted by gains on the sale of property which amounted to nearly €5.9 million last year, partly offset by restructuring costs of €2.4 million. These exceptional elements also affected the results for the 1st half, which showed a widened loss of €9.7 million, against €3.8 million last year.