Skullcandy, an American producer of fashionable headphones that are also sold in sporting goods stores, has acquired Kungsbacka 57, the Swedish company that has been distributing its products in Europe. Skullcandy, which recently went public, is setting up a European sales office in Switzerland that should become fully operational after a transition phase early next year.
Skullcandy is taking over the European business for $18.6 million, including customer lists and $2.9 million worth of inventories and $700,000 in sales taxes. 57 North AB, the Swedish parent company of Kungsbacka 57, had an exclusive distribution contract with Skullcandy until November 2013. Under the new deal, it will help in the transition and it will subsequently retain the right to distribute the brand in the consumer electronics channel in the Nordic countries through 2016. Two directors of the company will join Skullcandy.
Following an arbitration procedure, Skullcandy negotiated a settlement with its European distributor one year ago that would have called for its continued involvement until 2013. Because of the arbitration process, its sales to 57 North declined considerably in 2010.
The American company plans to invest a lot in local advertising and promotion to improve its market presence. It also plans to launch e-commerce websites in key markets.
Skullcandy went public on July 19. Its first financial report since the IPO shows that its net income jumped by 106 percent to $4,258,000 in the quarter ended June 30, as compared to the same period a year ago. Gross margins were essentially flat at 51.1 percent of sales, which increased by 46.4 percent to $52.4 million, of which $10.3 million were generated outside the U.S. and $4.3 million through its own web store.
The company is projecting implied net earnings of between $15.4 million and $16.6 million for the full financial year on sales of between $208 million and $218 million.
