Ashworth says it continues to explore strategic alternatives and options, including the sale of the company, acting through the U.S. investment bank of Houlihan, Lokey, Howard & Zukin. One of its major shareholders, Discovery Equity Partners, has suggested that a sale of the California-based golf apparel company could yield $168 million, which would compare with Ashworth’s year-end stock market capitalization of $118 million, just below that of its main competitor, Cutter & Buck. Indicating that K2 or VF Corp. may be interested in acquiring Ashworth, an analyst was quoted as giving a likely purchase price of about $133 million.
Meanwhile, Ashworth has reported continuously depressed results for the 4th quarter ended Oct. 31. Its revenues increased by 14.5 percent to $55.3 million, but the company posted a net loss of $2,240,000, compared with net income of $1.9 million in the year-ago period. Gross profit dropped to $19.2 million from $20.1 million, indicating a gross margin of 34.6 percent. Lower sales of full-margin products, inventory consolidation and higher operating expenses, due to an expansion of its network of outlet stores, hurt Ashworth’s margins in the period. The company posted a negative 5.4 percent operating margin in the quarter, as compared with a positive 7.3 percent margin one year ago.
In addition to slimming down inventory, during the period Ashworth’s realigned management sought a more balanced product mix for its retail business and tried to improve operations at its embroidery and distribution center in the USA, which services other companies as well.
Targeting net profit of $6.7-7.8 million for the current financial year on sales of $210-220 million, the management is promising better designed and more technical products, fewer inventory markdowns and greater efficiency in its U.S. operations.
For its full fiscal 2004/05 year, the company saw its net revenues rise by 18.3 percent to $204.8 million, partly due to its acquisition in July 2004 of Gekko Brands, a supplier of headwear that has developed hats and caps under the Ashworth and Callaway brand names. Headwear bookings in the golf channel now amount to $2.2 million.
However, Ashworth recorded a net loss of $729,000 for the past year against a profit of $8.2 million. The operating margin dropped to 0.7 percent from 9.5 percent in the prior year. While domestic revenues rose by 19.0 percent to $171.9 million, the international segment chipped in a 14.6 percent increase to $32.9 million. Ashworth Europe’s revenues grew by 22.5 percent to $23.4 million, with a 12.2 percent increase for the 4th quarter.
In the 4th quarter, company-owned store sales jumped by 87.5 percent to $2.4 million because of five added new doors. Revenues from Gekko were up by 18.9 percent to $12.1 million. In the domestic golf channel revenues grew by 16.1 percent to $21.5 million, but other retail channels recorded a drop of 7.2 percent to $5.5 million in the USA..
Sales of Ashworth branded products increased by 15.4 percent to $31.3 million in the quarter, mainly due to a rise in lower-margin sales. Revenues from Callaway apparel products grew by 8.5 percent to $12.0 million, mostly in the USA.
