Hit by double-digit sales declines in its winter sports and diving units, Head reported total revenues down by 7.2 percent to €57.2 million for the first quarter ended March 31. In constant currencies, the drop was over 10 percent. The company ended with a net loss of €11.8 million compared with a loss of €3.6 million last year. The gross profit margin sank by 2.2 percentage points at group level to 38.1 percent.
Despite better snow conditions throughout much of the world in the first three months of 2009, Head’s winter unit did not benefit. Unit sales of skis slid by 17 percent to 48,300 pairs and boot sales slipped by nearly 24 percent to 38,000 pairs. Sales of bindings and helmets did increase some. Overall winter sports segment sales fell by 10.1 percent to €13.9 million. An ongoing trend toward rental gear on the slopes meant Head has stronger demand for boots than skis across Europe, the company said.
Currently, Head is forecasting lower pre-season winter sports orders, especially for skis and bindings, in the U.S. and Japan. Segment pre-season bookings are currently off by 9 percent year-over-year.
Elsewhere for the quarter, turnover from racquet sports fell by nearly 3.8 percent to €31.2 million as unit sales of racquets declined by almost 23 percent to 404,000, which could not be offset by a 2.8 percent rise in ball unit sales or the strengthening dollar. Category bookings are said to be flat.
Head’s racquet sports business seems to be in contrast with the global pricing trends of last year. The company estimates that sales of tennis racquets around the world fell by 7 percent in euros to €280 million at wholesale, while unit sales remained stable at 9.8 million. A similar pattern apparently occurred in tennis balls, whose sales remained stable at 24 million dozen units while their value fell slightly to €180 million.
Diving revenues fell by 12.9 percent in the period to €12.1 million, with orders off by about 20 percent compared with last year. Head isn’t forecasting a recovery for the diving segment in 2009. Licensing revenues fell by 5.5 percent to €1.5 million.
Geographically, European sales overall were down by 7 percent to €37.1 million. This included a drop of 1.4 percent to €20.9 million in Austria and a drop of 7.1 percent to €8.5 million in Italy. Asian sales were off by 9 percent to €2.4 million; and North American sales were dropped by 8 percent to €17.7 million.
Head will have to be more aggressive in the management of its working capital in the second half of the year, but still may face the need to generate additional cash or secure additional credit facilities. But Head’s pending exchange offer, if successful, is expected to lower the company’s cash interest expense. It is extending the date of its private exchange offer on €135 million of 8½ percent Senior Notes for new 10 percent Senior Notes until May 22; the offer was due to expire this week.