Russell Corporation’s net income for the 4th quarter ended on Dec. 31 rose by 15 percent to $11,825,000, in spite of a 21.6 percent decline in operating income, while revenues increased by 6 percent to $354,631,000. Boosted by Brooks Sports, which contributed revenues of $27 million in the quarter, sales in the sporting goods segment sales rose by 17.2 percent to $169.8 million, but sales of activewear dipped by 2 percent to $170.7 million. The operating margin of the sporting goods division fell by 450 basis points to only 2.6 percent of sales, in spite of a positive contribution from Brooks and from Spalding’s Irish-based licensing division.
For the full year, net income fell by 28.2 percent to $34,430,000. The gross margin dropped by 60 basis points to 27.4 percent and operating income fell by 16 percent to $84.4 million.
Revenues climbed by 10.5 percent to $1,434,605,000 for the year, but they declined by 2.1 percent on an organic basis. Sales of sporting goods went up by 20 percent to $699.7 million, but 18 percentage points of the increase – or around $125.9 million – was contributed by Brooks. Huffy generated a loss for the year due to flat sales outside the sporting goods channel. Spalding was down by 8 percent. Russell Athletic achieved single-digit annual sales growth and Moving Comfort was up by nearly 15 percent. Sales of activewear improved by 2 percent to $674.2 million.
Looking ahead, the company is expecting flat sales in the 1st quarter and a tough ride in the 2nd quarter. It is budgeting an indicated net profit of $36.4-41.4 million for the year, reduced to $10.6-19.5 million by restructuring charges related to a recent decision to move sourcing to Honduras. Total revenues should grow to a range of $1.45-1.48 billion, in spite of expanded distribution of sporting goods.
Spalding plans to have 250 stores in China by the end of 2006. It has bought back the Spalding apparel license, but it has no intentions to exploit it this year except for selling it in a single sporting goods chain in the Fall. The company will either manufacture the line or license it out in 2007.
After introducing its “Never Flat” basketball on to the American retail market in November, Spalding is continuing to increase consumer exposure to the new product and its performance characteristics. According to Spalding, the ball remains inflated for at least one year, or 10 times longer than standard basketballs. Spalding drew some promotional attention during the NBA All-Star Weekend as a school teacher in Arizona dribbled its Never Flat basketball for 26 straight hours, setting a Guinness World Record. Joseph Odhiambo, 46, bounced Spalding’s ball through the streets of Houston and in the George R. Brown Convention Center, the main venue for the weekend festivities. He broke the previous record by about 2 hours.
