Tennis lifts Head

Brisk sales of tennis products have enabled Head to deliver another quarter of robust sales. After a surge of 17.1 percent in the first quarter, the Austrian company's sales jumped by 6.9 percent to €62.5 million in the second quarter. Adding up the two quarters, Head achieved a turnover of €132.6 million in the first half of the year, up by 12.1 percent in euros and by 8.9 percent in constant currencies.

The rise was driven by sales of racquet sports products, which advanced by 9.9 percent to €37.0 million for the second quarter. However, this was not quite as spectacular as the sales increase of 21.3 percent achieved by Head in racquet sports in the first quarter, driven by North America, because European racquet sales were dampened by rainy and cold weather in the second quarter.

Head's racquet sports business still expanded by 15.7 percent to €79.3 million for the entire first half of the year, owing to exchange rate changes and a more favorable product mix for both racquets and balls. The company pointed out that it introduced several products in the first quarter and that it did not expect the upsurge in sales to continue in the second half.

Meanwhile, sales of winter sports equipment remained almost unchanged at €9.3 million in the second quarter, as Head sold more skis but the product mix was less favorable for skis and bindings. Sales of winter sports equipment advanced by 2.6 percent to €22.8 million in the first half, with increases in all product categories except snowboards. This half is relatively unimportant for the category, mostly consisting of closeout sales and delivery of OEM bindings.

More importantly, the Austrian company warned that its orders of winter sports equipment had declined at a double-digit rate, with snowboards and skis worse affected than boots. Head might still have done better than the market so far, since it pointed out that some international retailers had reduced their orders by 20 to 25 percent as a means to reduce their inventories after the mild weather in the last winter.

When it comes to diving, the company's sales inched up by 2.5 percent to nearly €15.7 million in the second quarter. For the first half they jumped by 6.7 percent to €28.4 million, supported by strong product ranges in computers and regulators. The rise in demand mostly came from North America and Asia.

Sportswear sales amounted to nearly €1.3 million for the second quarter, almost unchanged, but they increased by 42.4 percent to €3.3 million for the first half, on the back of robust summer sportswear sales. As for licensing revenues, they amounted to just €1.0 million in the quarter and €2.6 million for the first half, which was an increase of 12.8 percent.

Then again, Head's gross margin shrank by 2.3 percentage points to 36.7 percent in the quarter, as it continued to invest in its sportswear business and suffered from an increased cost of sales for tennis balls. As selling and marketing expenses climbed by 12.2 percent, Head's adjusted operating loss nearly doubled to €6.4 million for the second quarter. It ended the three months with a net loss of nearly €7.9 million, which was worse than the loss of €5.3 million suffered for the same quarter in 2011.

For the first half of the year, the Austrian company's gross margin slipped by 1.1 percentage points to 39.9 percent. The lower utilization of its Alpine production facilities contributed to an increase in the cost of sales, along with investments in Head's sportswear division.

Head's adjusted operating loss slightly widened to €9.0 million in the first half, compared with €8.7 million for the same six months in 2011. However, chiefly owing to lower interest and finance expenses, the company still ended the six months in slightly better shape than last year, with a net loss of €10.1 million, compared with almost €13.0 million in 2011.