Head estimates that winter sports orders are up by only around 5 percent for the new winter season across the ski industry, although the wholesale volume of alpine skis sold to the trade for the 2012/13 season declined to about three million pairs.
It also estimates, based on external data, that the tennis racquet market declined by 8 percent in Europe and 10 percent in the U.S. in the first six months of this year, whereas the tennis ball market was slightly up in both regions, indicating a positive trend in participation.
In diving, Head says that the U.S. and Asia have showed continued growth, while in contrast European markets have remained challenging because of the ongoing economic crisis in Southern Europe and political turmoil in Egypt.
| Head Consolidated Income Statement | |||
| (‘000 Euros, Quarter ended Sept. 30) | |||
| 2013 | 2012 | % | |
| Winter Sports | 49,166 | 52,518 | -6.4 |
| Racquet Sports | 32,522 | 34,251 | -5.0 |
| Diving | 12,021 | 11,127 | 8.0 |
| Sportswear | 1,056 | 985 | 7.2 |
| Licensing | 1,061 | 992 | 7.0 |
| Sales deductions | (2,796) | (2,904) | -3.7 |
| NET REVENUES | 93,029 | 96,969 | -4.1 |
| Cost of Sales | 54,946 | 58,528 | -6.1 |
| Selling & Marketing | 23,818 | 23,480 | 1.4 |
| General & Administrative | 6,899 | 6,901 | -0.0 |
| Net Compensation | (177) | 133 | -233.1 |
| Net Interest | 787 | 1,255 | -37.3 |
| Other Income | 481 | 414 | 16.2 |
| Pre-Tax | 7,238 | 7,086 | 2.1 |
| Tax Expense | 2,386 | 2,055 | 16.1 |
| NET PROFIT | 4,852 | 5,031 | -3.6 |
| Earnings/Share-Diluted | 0.06 | 0.06 | 0.0 |
In this context, Head's sales increased by 0.9 percent in local currencies in the first nine months of the year, but in terms of euros they fell by 1.0 percent to €227.2 million, with declines of 5.1 percent in winter sports and 1.5 percent in sportswear, partly offset by increases of 0.4 percent in racquet sports, 2.3 percent in diving and 5.6 percent in licensing.
At constant exchange rates, Head's sales of winter sports products would have declined by only 2.4 percent. While revenues from skis increased, ski boots and snowboards were down. This was mainly due to the timing of shipments and the situation should reverse in the fourth quarter, Head pointed out, noting that its bookings of alpine ski products are still 10 percent ahead of a year ago overall on a currency-neutral basis.
Net earnings were off slightly to €4,792,000 for the nine-month period, compared with €5,012,000 a year ago. Gross margins improved to 39.8 percent during the nine months across the group, mainly due to lower costs for tennis balls and ski bindings. On the operational side, the company spent more on advertising in the racquet sports and diving divisions.
In the three months ended Sept. 30, the group's total revenues decreased by 4.1 percent to €97.0 million as compared to the year-ago period, with decreases of 6.4 percent in winter sports and 5.0 percent in racquet sports, partly offset by increases of 8.0 percent in diving and 7.1 percent in sportswear.
In addition to the development outlined for the first nine months of the year, Head mentioned other specific factors for the quarter such as lower volumes of ski bindings delivered under contract manufacturing agreements. The gross margin improved to 40.9 percent in the quarter, partly due to lower costs for diving products. The operating profit declined to €7.5 million from €7.9 million a year ago. The net profit declined to €4,852,000 from €5,031,000.
The forecast for the full year calls for modest sales growth, tempered by currency fluctuations, and for largely flat operating results.
