VOLUME 1 | ISSUE 4 AUGUST 1, 2016NEWS, ANALYSIS AND INSIGHT FOR THE ACTIVE LIFESTYLE EXECUTIVE

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NORTH AMERICA PROPELS COLUMBIA SPORTSWEAR IN Q2

(Con’t Pg. 2)

Columbia Sportswear Company (Nasdaq: COLM) grew sales 2 percent in the second quarter and beat profit expectations powered by growth of its Columbia, Prana and Mountain Hardwear brands in North America, but weak-ness elsewhere in the world left it short of expectations.

While Columbia reiterated its full-year fore-cast, it was cautious about increased promotion-al activity in the U.S. retail environment as well as weakness in Asia. Investors on the company’s July 29 conference call also noted a 12-percent bump in inventories. All things considered, Columbia Sportswear’s stock slipped 6 percent the day following the afternoon release.

The company reported that net sales reached $388.8 million in the second quarter end-ed June 30, up 2 percent in both reported and currency-neutral terms compared with the second quarter of 2015. Operating loss grew 31.1 percent to $11.8 million, but the quarter is the company’s smallest, historically accounting for a mid-teens percentage of annual net sales and therefore the least indicative of business trends.

“Our successful first-half results were high-lighted by solid growth from three of our four major brands and improved gross margins in a challenging global environment,” said Columbia Sportswear CEO Tim Boyle. “High-sin-gle-digit wholesale growth and low-20-percent direct-to-consumer growth in the U.S.,

combined with mid-20-percent constant-cur-rency growth in Europe-direct markets and 20 percent constant-currency growth in Canada, demonstrate that we gained market share in each of these important geographies during the first half of 2016.”

The company’s total apparel, accessories and equipment division net sales increased 4 percent (both on a dollar and currency-neutral rate) to $321.5 million, but total footwear net sales declined 4 percent (both in dollars and currency- neutral) to $67.3 million.

North America Offsets Declines OverseasGrowth was driven by North America and part-ly offset by declines in the wholesale business in the rest of the world. In the United States, sales grew 8 percent to $228.8 million, con-sisting of mid-teen percentage growth in the company’s direct-to-consumer channels and low single-digit percentage growth in wholesale channels. In Canada, net sales grew 20 percent (27 percent currency-neutral) to $13.6 million.

That growth was offset by declines in the rest of the world. Net sales declined 1 percent (2 percent currency-neutral) in the Europe, Middle East and Africa (EMEA) region, as a low-double-digit percentage decline in net sales to distributors more than offset high teens growth (mid-teen currency-neutral) in the company’s Europe-direct business. In the

Latin America and Asia Pacific (LAAP) region, net sales declined 10 percent (11 percent currency- neutral), due primarily to declines in Korea and China versus gains in Japan.

Columbia, Prana Offset Sorel, Mountain HardwearTotal Columbia brand net sales increased 3 percent (2 percent currency-neutral) to $333.4 million in the quarter and were up 6 percent for the first half, reflecting broad-based strength in sportswear, the PFG fishing apparel brand and rain wear, along with trail and PFG footwear, officials said. In Europe, direct sales of apparel and footwear each grew in excess of 20 percent, with trail footwear and rainwear being the strongest categories. Sales in Japan were up mid-single digits. This growth was partially offset by continuing declines in Ko-rea and parts of LAAP and EMEA, where the strong dollar hurt distributor sales. Sales for the Columbia brand declined 1 percent in China (although they gained 1 percent, currency- neutral) in the first half.

Global Prana brand net sales increased 23 percent (23 percent currency-neutral) to $32.2 million, and were up 16 percent through the first half, due primarily to U.S. growth, boost-ed by a major expansion of its swimwear line.

At Mountain Hardwear, net sales declined 20 percent (20 percent currency-neutral)

Photo courtesy Columbia Sportswear

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NEWS, ANALYSIS AND INSIGHT FOR THE ACTIVE LIFESTYLE EXECUTIVE

to $17 million and were down 9 percent (-7 percent currency-neutral) for the January to June period, despite 14 percent growth in North America. The decline over-seas, which was due in large part to a con-tinuing contraction of South Korea’s large and very crowded outdoor market, is ex-pected to moderate to low-double-digits for the full year.

Total Sorel brand net sales declined 19 percent (16 percent currency-neutral) to $3.5 million, but were up 22 percent (25 percent currency-neutral) in the first half, thanks to a strong sales in the first quarter of its fall and winter products, and delivery of it new spring line to select, mostly U.S., whole-sale customers. Sorel has begun delivering advanced wholesale orders of its fall line, which features a higher proportion of lighter weight, less weather-sensitive fashion styles like the updated Joan wedge collection.

Columbia Sportswear ended the quar-ter with inventories of $653.6 million, up 12 percent from a year earlier, consisting primarily of current fall 2016 and spring 2016 product. The company generated $102.7 million in operating cash flow in the first half of 2016, and finished the quarter with $428.8 million of cash and short-term investments, up 2.7 percent.

Reiterated Forecast, with a Few CautionsColumbia reiterated its forecast for the full year despite acknowledging that there will likely be higher levels of promotional activ-ity in the United States due to recent retail bankruptcies and store closures.

“We’ve been modeling the year some-what more promotionally than we had in prior periods,” Boyle told investors during the company’s conference call. “We expect there to be additional promotional activity.”

As for the Sports Authority liquidation, specifically, Columbia Sportswear CFO Thomas Cusick said the company had been prudent when managing their inventory since the fourth quarter of 2015. “So we believe that we’ve got the inventory that would have otherwise ended up in Sports Authority well-distributed and its disposi-tion is calculated in the guidance we gave you today,” he said. Boyle added that the distribution of extra inventory was includ-ed across the company’s wholesale and direct-to-consumer channels. He later noted that the softening in Asia, specifically Korea, was a bigger concern than the retail situation in the United States.

Columbia’s full-year 2016 forecast calls for a mid-single-digit increase in net sales and operating income and a high-sin-gle-digit increase in net income, including approximately 1 percentage point negative effect from changes in foreign currency exchange rates, on a base of 2015 net sales of $2.33 billion. Gross margins are expected to improve by up to 10 basis points, while selling, general and administrative expenses (SG&A) are forecast to increase slightly fast-er than net sales and increase the SG&A to net sales ratio by 15 to 45.

The forecast presumes high-single-digit growth at Sorel in the back half, when the brand earns 90 percent of its revenue. It also anticipates a successful launch of insulated jackets, gloves and more rain shells featuring Columbia’s new Outdry Extreme waterproof breathable technology, which places the membrane on the exterior rather than the interior of the garment to prevent wet outs.

“At next week’s Outdoor Retailer Summer Market in Salt Lake, we’ll be highlighting the extension of the Outdry Extreme platform into soft shells and trail footwear for spring 2017,” Boyle said. Also on display at OR with be a “dramatically redesigned Moun-tain Hardwear booth, which is part of a new marketing campaign designed to communi-cate the brand’s determination to regain its status as a premiere Alpine sports brand.

“Mountain Hardwear’s newly assembled product design and merchandising teams are working hard to reinvent the product line, as rapidly as possible, with a deep line-up of innovative, high performance prod-ucts targeted for introduction to consumers beginning in full 2017,” Boyle said. Earlier this year, Columbia appointed former Fjall-raven North America executive John Wall-brecht to lead the brand’s turn-around.

Columbia is also looking for a bump at next month’s UTMB ultra-running race in France, where the company is a presenting sponsor. Columbia’s brands sponsor 25 athletes from the United States, Hong Kong, Japan, Neth-erlands, New Zealand, Switzerland, China, Spain and Scotland expected to compete.

“UTMB is the perfect global event to showcase Columbia’s elevated commitment to the trail running category,” Boyle said. “Our new trail running collection took the best features of Montrail, the original trail running brand, and forges in with the best features of our Columbia trail running line to create a versatile assortment of high- performance shoes for endurance athletes.”

3 SGB EXECUTIVE | AUGUST 1, 2016 © SportsOneSource, LLC

WEEKLYMARKETTRENDREPORT<<SSIOUTDOORHARDGOODS>>

WeekEnded:7/23/2016

OUTDOORHARDGOODSSALESSUMMARY• OutdoorHardgoodsintheweekendedJuly23sawasignificant

surgewithdouble-digitsalesincreasesascontinuedstronggrowthinthecorebackpackingandpaddlesportscategoriesandanotherspikeinRec&LeisureEssentialsdrovegains.

• TechnicalPacksandBags,SleepingBags,PadsandTentsallsawgrowthfortheweekrangingfromlow-singledigitstohigh-singledigits.Averagesellingprices(ASPs)sawmodestincreasesinthesecorecategories.SingleBurnerStovessalesincreasedsubstantiallyinthetrailing4-weekperiod,furtherindicatingashiftawayfromcarcampingandtowardsbackpacking.

• WaterBottlescontinuetobeasourceofpositivityinthemarket.Thecategorywasthedriverforthedouble-digitsalesincreasesintheoverallAllHydrationgrouppresetfortheSpring/Summerseason.Inthecategory,theintroductionofYetiwaterbottleshasshownthatarisingtideliftsallboatsasbrandslikeHydroflaskcontinuetodowell.

• LifestyleDaypackshavepostedmarginallypositiveunitnumbersinthefirstweekoftheBack-to-Schoolseason.Thesenumbersarearelieffromtheweaknessthatthecategoryhasexperiencedthissummer.ASPshaverisenintheSpecialtyRetailerssegmentandfallenintheNationalAccountsandVolumeRetailersegments.

YEAR-OVER-YEARSALESVARIANCE

LASTWEEK TRAILING4-WEEKS YEAR-TO-DATE TRAILING52-WEEKS

UNITS $ UNITS $ UNITS $ UNITS $

ALLOUTDOORHARDGOODS -1.9% +10.4% -4.2% +7.7% -9.1% +4.9% -11.7% -1.3%

ALLBACKPACKING/CAMPING +0.6% +9.7% +1.0% +11.0% -6.9% +11.1% -8.1% +13.2%

TECHNICALPACKS&BAGS +10.0% +15.0% +4.0% +14.2% +1.1% +10.3% +1.3% +10.1%

KNIVES/TOOLS -13.7% -7.9% -8.3% -5.7% -14.0% -7.3% -17.6% -11.1%

CLIMBINGGEAR -9.2% +21.3% -4.4% +18.9% flat +23.9% +4.8% +18.6%

HYDRATION -1.8% +22.4% -1.5% +19.0% -3.2% +14.0% -5.7% +6.3%

PADDLESPORTS +11.8% +2.8% +20.0% +13.0% +8.5% +9.5% +1.0% +5.8%

CATEGORYFOCUS--OUTDOORHARDGOODS--TRAILING13-WEEKS• OutdoorHardgoodshashadasuccessfulsummerwith

strongsalesinbothBackpackingandRec&LeisureEssentials.InBackpackingandRec&LeisureEssentialstherehasbeenacleartrendtowardhigherperformanceproductssuchasYeti,MSR,Osprey,andBlackDiamond.

• TheactivitytrendsthatcontinuetoshowthroughMarketShareareClimbingGearthroughBlackDiamond,KayakingthroughHobieCat,andHammocksthroughEaglesNest.

• IntheTopSellerschartthereisanalmostevenrepresentationofthebrandsthatareintheTop10inmarketshare.Thereisafullbuy-intotheEaglesNestOutfittershammocksystemwithboththeDobuleNesthammockaswellastheAtlasStrapsmakingtheTop10onthechart.

• InKayaks,whileHobiedoesextremelywellwiththehigherpricepointsinthesportingboatssubcategories,thereisconsiderablediversitythroughoutthebroaderTopSellerschartoutsideoftheTop25withmultiplepricepointsandbroaderusekayaksrangingfromrecreationaltofishingrepresented.

MARKETSHARE:OUTDOORSPECIFICHARDGOODS 13-WKRANK

OUTDOORSPECIFICHARDGOODS:TRAILING13-WEEKSBRAND 13-WKCY 13-WKPY POINTCHG BRAND MODEL ASP

THULE 7.3% 9.3% -2.04 1 EAGLESNEST DBLNESTHAMMOCKDH0 $62.78

PRIVATELABEL 7.2% 3.4% +3.80 2 HOBIECATCOMPANY HOBIEOUTBACK840 $2,261.47

OSPREYPACKS 6.0% 5.2% +0.76 3 OSPREYPACKS AOSPATMOS65AGPACK015265 $220.60

YAKIMA 4.5% 6.2% -1.67 4 EAGLESNEST ATLASSTRAPAST001 $28.34

GARMIN 4.5% 4.6% -0.19 5 GARMIN FENIX3HR $588.36

EAGLESNEST 3.4% 3.3% +0.08 6 HOBIECATCOMPANY HOBIEPROANGLER14852 $3,240.44

BLACKDIAMOND 2.9% 2.5% +0.42 7 MSR MSRHUBBAHUBBANX $353.20

MSR 2.8% 2.0% +0.81 8 THULE THUT2PRO-2BIKE2 $496.73

YETI 2.8% 1.3% +1.49 9 MSR MSRGUARDIANPURIFIER $327.24

HOBIECATCOMPANY 2.8% 3.4% -0.61 10 GARMIN FORERUNNER235 $285.36

ThisWeeklyTrendReportisproducedeachweekbyTheSportsOneSourceGroupexclusivelyforSSIDatasubscribersandretailreportingpartners.AlldataiscompiledutilizingSSIData’scomprehensiveplatformthatpresentsweeklyretailPOSdataacrosstheFootwear,Apparel,LicensedProducts,Sports&FitnessandOutdoormarketsegments.

ForinformationonSSIDataandSOSResearchproductsfromTheSportsOneSourceGroup,call303.997.7302,emailto:SSIData@SportsOneSource.comorvisit:www.SSIVantagePoint.com.

4 SGB EXECUTIVE | AUGUST 1, 2016 © SportsOneSource, LLC

The sporting goods giant raised its full-year forecast for a fourth time this year after deliv-ering healthy double-digit growth in its second quarter and benefiting from a special payment to bring an early close to its sponsorship deal with England’s Chelsea soccer club.

Led by double-digit growth rates across all key regions and all major categories, Adi-das’ preliminary results showed revenues in the second quarter climbed 21 percent on a currency-neutral basis and 13 percent in euro terms to €4.4 billion ($4.9 billion). As a result of a higher gross margin as well as operating expense leverage, operating profit jumped 76.9 percent to €414 million ($460 million).

Net income from continuing operations in the quarter jumped 99 percent to €291 million ($323.1 million). Basic earnings per share from continuing and discontinued operations amount-ed to €1.45 ($1.61) in the quarter, reflecting a 100 percent increase over the prior-year level.

The earnings hike was helped by the early termination of the Chelsea F.C. contract, which lifted the Q2 other operating income by a mid- to high-double-digit million euro amount.

In May, Chelsea agreed to pay Adidas an undisclosed sum to terminate their 10-year £300 million kit sponsorship deal six years early. The Daily Telegraph at the time said the

ADIDAS AGAIN RAISES FY OUTLOOK ON Q2 MOMENTUM

termination was expected to cost Chelsea around £40 million in compensation. Nike reportedly has agreed to pay $60 million a year to replace Adidas.

But the overall strength in top-line sales reflects a continued resurgence in Adidas’ sales as longtime CEO Herbert Hainer prepares to hand the reins of the sporting goods giant to former Henkel AG CEO Kasper Rorsted in October.

While not offering details on its sales drivers in the quarter in the preliminary report, Adidas is expected to gain a major boost from UEFA Euro 2016. Adidas was an official sponsor of the event. It also supplied 9 of the 24 teams (37 percent) competing in the tournament, while Nike had 6 (25 percent) and Puma had 5 (21 percent). Four other kit suppliers account-ed for the remaining jerseys. Last month, Adi-das said that it expected sales of soccer boots, shirts and balls to rise 14 percent to a new record of €2.5 billion ($2.77 billion) in 2016.

Also expected to remain strong are Adidas Originals and Neo, with its overall lifestyle busi-ness drawing attention through partnerships with Kanye West and Pharrell Williams. The run category, which has been reawakened with the launch of Boost cushioning technology, has also recently been seeing robust growth as well as direct-to-consumer, particularly e-commerce sales.

Adidas appears to be regaining share lost to Nike over the years, with sales in the latest quarter more than double what Nike showed in its most recent pe-riod. However, a recent survey performed by UBS showed that Adidas’ brand perception in the U.S. is still significantly below Nike and Under Armour. Nike’s business is more than five times larger than Adidas in North America.

For the full year, Adidas now projects curren-cy-neutral sales to grow at a rate in the high teens in 2016, up from previous guidance calling for an increase of around 15 percent. As a result of the stronger-than-expected top-line development and further operating leverage, net income from continuing operations is now forecasted to increase at a rate between 35 and 39 percent, to a level between €975 million and €1.0 billion in 2016. Previously, net income was expected to expand around 25 percent. Adidas’ operating margin is now projected to increase to a level of up to 7.5 percent in 2016, up from around 7 percent previously.

Adidas’ operating margin remains well below rivals, and incoming CEO Rorsted is expected to particularly focus on improving the margin rate after making it a focus at Henkel. In their latest years, operating margin rates for Nike was 13.6 percent and Under Armour, 10.3 percent.

Adidas’ full results for the second quarter will be published on August 4.

Photo courtesy Adidas

5 SGB EXECUTIVE | AUGUST 1, 2016 © SportsOneSource, LLC

Deckers Outdoor Corp. (NYSE:DECK) reported an ugly first quarter as its losses widened and sales fell sharply. But at least they were a lot less ugly than expected.

Results were impacted by a timing shift this year due to its ERP implementation that caused some sales to be recorded in Q4 of last year instead of the first quarter, as forewarned when the company reported fourth-quarter results. Some orders also shifted into Q2 this year, in line with the new product launch timing, and further pressure was seen on DTC retail sales.

Revenue in the quarter exceeded guidance by nearly $5 million, driven by more regular sales and fewer closeout sales in the quarter than expect-ed. And due to that higher-than-expected revenue, improved gross mar-gins and the timing of certain expenses, its net loss came in much better than expected. On Friday in mid-day trading, shares of Deckers were up $1.72 to $65.15.

Most encouragingly, while elevated inventories in the marketplace and generally weak brick & mortar traffic held back the gains, Deckers brands showed momentum in key areas. For Ugg, sandals are particularly taking off. Sport sandal are seeing healthy demand for Teva, the Clifton 3 just launched to a strong response for Hoka One One and the Yoga Sling remains a hot item for Sanuk.

“Fiscal 2017 got off to a solid start,” said Dave Powers, president and CEO, Deckers Brands. Net sales decreased 18.4 percent to $174.4 million.

UggIn its Fashion Lifestyle group (Ugg and Koolaburra), Ugg’s sales fell 19.8 percent to $91.9 million. The decline was driven by a shift in the timing of order shipments between quarters which impacted global wholesale and dis-tributor sales, a decrease in DTC comparable sales and fewer close-out sales.

Ugg saw strong demand for its spring and summer collections, espe-cially the sandal category, which grew 70 percent compared to last year. The success caused Ugg to land on the top 10-selling spring and summer footwear brands for many key accounts for the first time ever. Said Pow-ers, “We are building on this momentum with expanded collections and based on initial conversations with wholesalers we feel confident about the brand’s prospect for continued growth next spring.”

For fall/winter, the main focus is on the launch of the Classics fran-chise, which includes New Classic, Classic Slim, Luxe, Classic Cuff and Classic Street. The New Classic adds water- and stain-resistant treatment

as well as improved comfort and traction delivered by its TreadLite outsole. Added Powers, “We are pleased with the reads from our initial launch and are excited as we prepare for this key selling season when the bulk of the market-ing and PR will hit to drive brand heat at the most important time of the year.”

In men’s, a new, humorous campaign starring Tom Brady that will encourage men to “do nothing” in their downtime is being launched to support Ugg’s slippers and loungewear businesses.

Koolaburra by Ugg will launch this fall with 12 styles at price points ranging from $39 to $90. The brand will be available at retailers such as Kohl’s and Shoe Carnival. Stated Powers, “We are excited to see how consumers react to the product, which will help us assess the long-term market opportunity for this brand.”

Hoka One One In the Performance Lifestyle group (Hoka, Teva and Sanuk), Hoka’s sales grew only 1.8 percent following double-digit growth the last several quar-ters. The slower growth in Q1 was expected as the newest iteration of the Clifton, the brand’s top-selling shoe, was launched in July instead of June like last year. Added Powers, “The early results for the Clifton 3 are sur-passing the Clifton 2, a great sign for health of this burgeoning franchise.”

The Clayton also earned Editor’s Choice from Runner’s World. Stated Powers, “The success of our recent launches gives us added confidence in our product pipeline and our ability to further grow market share in the run specialty channel.”

Hoka will have two athletes supporting the brand at the Rio Olympics and is an official sponsor at the Kona Ironman US Championships.

Combined net sales of Deckers Other Brands, which include Hoka, decreased 11.6 percent in the quarter to $21.1 million, primarily attribut-able to discontinued brands. In February, Deckers announced it was clos-ing the Ahnu office outside San Francisco as it sought strategic alternatives for that brand.

TevaTeva’s sales were down 17.3 percent in the quarter to $34.7 million. The drop reflected challenges booking closeout sales caused by the EPS implementation and also marketplace challenges from higher footwear inventories in the channel, which impacted the spring re-order business. Sales still came in better than expected due to gains across Teva’s sport sandal category. High-profile collaborations, such as one with Derek Lam

Photo courtesy Ugg/Deckers Outdoor Corp.

DECKERS OUTDOOR’S UGLY, BUT UPBEAT QUARTER

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6 SGB EXECUTIVE | AUGUST 1, 2016 © SportsOneSource, LLC

that sold at Athleta, are helping the brand boost average selling prices. In the back half of the year, the Arrowood collection of sneaker boots will be launched at Dillard’s, Zappos and on Teva.com.

Sanuk Sanuk’s sales slumped 20.2 percent to $26.7 million, which was in line with internal expectations, as the brand was similarly impacted by elevated in-ventories in the marketplace. Continued success was seen with its Yoga Sling collection, whichincluded new higher-priced premium styles as well this year. The brand also saw a “great response” to men’s casual styles.

Sanuk has completed its transition from Irvine, CA to Decker’s corpo-rate headquarters up north in Goleta. Magnus Wedhammar, formerly SVP of product at Sperry with experience at Converse and Nike, was also just hired as its general manager. Said Powers, “We look forward to Magnus’s impact on repositioning the brand and developing new product and marketing to reignite sales.”

Company-wide Numbers Companywide wholesale and distributor net sales for the quarter fell 24.3 percent to $116.1 million due to the order timing issues and few-er close-outs. Powers said he is “encouraged by the changes” made by Stefano Caroti, who was appointed omni-channel president last October. Deckers also hired Tracy Paoletti, former VP of sales at Asics, as VP of sales for Ugg.

DTC sales were off 3.6 percent to $58.3 million with same-store sales decreasing 7.3 percent. Powers said that like many other retailers, Ugg’s brick-and-mortar locations continue to be challenged by weak traffic, especially in the U.S. The continued promotion of Classics to make way for the new Classic lineup also contributed to the negative comp. As part of its retail optimization efforts, Ugg closed six stores during the quarter of the approximately 21 targeted for closured during fiscal 2017.

Domestic sales slumped 18.6 percent to $109.5 million while interna-tional net sales were down 18.2 percent, to $64.9 million. The net loss wid-ened to $52.3 million, or $1.84 a share, from $46.0 million, or $1.43, a year ago. The loss was expected to be in the range of $2.10 to $2.20 that had been expected. The company typically shows a loss in the first two quarters with the majority of Ugg’s sales occurring in the second half.

Besides the above-plan sales, the bottom line was helped by an improve-ment in its gross margins rate to 43.7 percent from 40.5 percent. The lift was slightly better than expected with the overall improvement traced to a lower proportion of closeout sales, a higher proportion of sales from DTC and improved international margins.

SG&A expenses rose $4 million to $155 million due to higher fixed costs from additional retail stores and higher depreciation related to its ERP implementation. But the increase was less than expected, primarily as a result of a delay in marketing spending to the third quarter. As a percent-age of sales, SG&A expenses was 88.6 percent compared to 70.3 percent for the same period last year.

Looking ahead, Deckers continues to expect sales for the current fiscal year to be in the range of down 3 percent growth to flat. Earnings are also still expected in the range of $4.05 to $4.40. This excludes any pretax charges that may occur from any further restructuring charges, which are expected to be in the range of $10 to $15 million in fiscal year 2017.

For its current second quarter, sales are projected to be up 1 to 3 percent. EPS is expected to improve to a range of $1.12 to $1.22, which compares to $1.11 for the same period last year. With the majority of its sales in the second half, Deckers said the majority of its earnings increase in fiscal 2017 will come in the third and fourth quarters.

Rocky Brands Inc. (Nasdaq:RCKY) reported a loss in the second quarter on a sharp decline in wholesales due to weak economies in regions im-pacted by low oil and commodities prices.

David Sharp, Rocky Brands’ president and CEO, said similar to the first quarter, elevated inventories in the western, work and hunting channels negatively impacted sales and margins in its wholesale business. The com-pany’s stock price fell more than six percent following the news July 29, hovering around $11 per share.

“Softening of local economies, especially those where oil and gas explo-ration had been significant and weak store traffic across retail contribut-ed to our poor performance,” Sharp said. The company’s brands include Rocky, Georgia Boot, Durango, Lehigh, Creative Recreation and the licensed Michelin brand.

The wholesales decline was partially offset by a significant gain in mil-itary sales. Added Sharp, “However, our need to ramp up our internal production capabilities to meet the increase in military footwear demand resulted in additional costs, including labor and training, that have tempo-rarily pressured gross margins.”

The net loss came to $1.8 million, or 23 cents per share, compared to net income of $2 million, or 26 cents, in the second quarter of 2015. Revenues fell to $62.6 million from $68.6 million a year ago. Wholesales tumbled 23 percent to $41.5 million. Retail sales improved 2 percent to $10.4 million while military segment sales more than doubled to $10.7 million from $4.5 million in the same period a year ago.

Gross margins eroded to 26 percent of sales from 32.9 percent a year ago.The 700 basis point decrease was primarily driven by increased costs related to the ramp-up in production capabilities to meet the increased military footwear demand. Military segment sales carry lower initial gross margins than wholesale and retail segments; therefore the increase in mil-itary segment sales in the quarter reduced the overall blended margin. SG&A expenses increased to 30.1 percent of sales from 28.3 percent in the year-ago quarter primarily related to lower variable expenses associated with the decrease in wholesale sales.

Concluded Sharp, “While we are disappointed in our recent results, we continue to be confident that the strategic course we’ve set for the compa-ny will lead to improved profitability and greater shareholder value over the long term.”

WEAKNESS IN OIL-DEPENDENT REGIONS DIPS ROCKY BRANDS

Photo courtesy of Rocky Brands

7 SGB EXECUTIVE | AUGUST 1, 2016 © SportsOneSource, LLC

West Marine, Inc. (Nasdaq:WMAR) reported net revenues dipped 0.6 percent in the second quarter ended July 2, despite growing com-parable stores sales of 1.1 percent thanks to torrid e-commerce growth.

The California-based retailer, which operated more than 250 stores in 38 states at quarter’s end, reported sales of $251.6 million. Pre-tax income slipped 1.9 percent to $36.4 million compared to the second quarter of 2015. Earnings per diluted share increased a penny to 86 cents.

“We are pleased with the progress of our growth strategies, including a 27-percent increase in e-commerce and solid increases in our Waterlife store sales,” said CEO Matt Hyde. “These results were in contrast to a challenging retail environment and unfavor-able weather patterns seen earlier in the quar-ter. We believe that our growth strategies have us on track to deliver our 2016 sales and profit targets.”

E-commerce sales reached 10 percent of total sales, compared to 7.9 percent for the same period last year, but still below the 15 percent the company is targeting. Sales through Waterlife stores, which offer a broad-er selection of apparel, footwear, accessories, fishing products and paddle sports, accounted for 48.6 percent of sales, up from 45.1 percent last year. Sales of those targeted categories increased 3.3 percent compared to the same period last year, while sales of core boating products slipped 1.7 percent.

Gross margin slipped 30 basis points to 35.5 percent, while selling, general and administrative expense decreased by $800,000, in part thanks to a partial settlement from the Deepwater Horizon Settlement program. Net income was $21.6 million, or 86 cents per share, compared to $20.9 million, or 85 cents per share, in the second quarter of 2015.

The company ended the period with 1.7 percent less inventory and $45.4 million more in cash and cash equivalents, or $89.6 million, compared to a year earlier. West Marine reiterated full-year 2016 guid-ance of total revenue growth in the 1 percent to 4 percent range, and pre-tax profit growth of 50 percent over 2015 full-year results.

WEST MARINE Q2 SAVED BY E-COMMERCE

Brunswick Corp. (NYSE:BC) is doubling down on its fitness equipment segment, including Life Fitness, Cybex and Hammer Strength, as it reported another strong quarter of results from the category and announced an additional acquisition.

The Lake Forest, IL-based company, also known for its boating and billiards equipment, signed an agreement to acquire Germany’s In-door Cycling Group (ICG), which specializes in the design of indoor cycling equipment.

Terms of the transaction were not disclosed, but officials said ICG’s 2015 revenues were approximately €37 million ($41 million). The deal is expected to close late in the third quarter. ICG CEO Bernd Puerschel will continue to lead the brand and report to Life Fitness President Chris Clawson.

“Our vision is to build and augment our product and technology portfolio to estab-lish a strong leadership position in the global group exercise market,” Brunswick CEO Mark Schwabero said. “Group exercise is a growing sector of fitness and represents another import-ant adjacency that we have targeted to expand our fitness business.”

He continued, “Blending ICG’s integrated technology and programming capabilities in the indoor cycling space, with our broader Life Fitness product assortment, is an important component of our strategy to grow our fitness business, and consequently, Brunswick.”

ICG is Brunswick’s second fitness purchase of the year, after acquiring the Cybex brand for $195 million in January. The company’s goal is

to double the size of its fitness operations by 2020, Schwabero said.

“Our fitness business continues to benefit from solid demand, particularly in the glob-al health club and hospitality markets, he said. “This foundational core growth, combined with favorable trends in the rehabilitation and active aging category, as well as increased participa-tion in group exercise activities, is providing a healthy marketplace in which to execute our fitness strategy.”

Moving to its second-quarter 2016 results, the company reported net sales up nearly 9 percent to $1.24 billion. Quarterly net income came in at $108.1 million, or $1.17 per diluted share, up from $107.6 million, $1.14 per diluted share, during the same period a year ago.

Brunswick’s fitness segment sales jumped 32 percent to $229.8 million in the second quarter, largely due to its recent acquisitions, but organic growth was healthy as well, thanks to strong sales to health clubs, the federal government and in Europe and Asia, rising 12 percent (minus acquisitions) for quarter ver-sus the same period a year ago. Operating earn-ings for the segment rose to $24.1 million for the quarter versus $23.2 million a year ago.

In the the company’s other segments, marine sales rose 4 percent to $719.7 million and boat-ing sales rose 5 percent to $368.1 million.

Looking ahead, the company expects 2016 sales growth to be between 10-11 percent, including about 5-percent growth from acqui-sitions. Officials maintained their EPS range of between $3.40-$3.50.

BRUNSWICK BANKS ON FITNESS WITH ANOTHER ACQUISITION

Photo courtesy Life Fitness/Brunswick Corp.

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Amer Sports lost only €14.7 million during the second quarter ended June 30 despite company closings in the sporting goods industry.

Although Sports Authority and Sport Chalet launched liquidation sales at more than 500 stores during the quarter, the Finnish company was able to grow its net sales 6 percent, its consolidated gross margin 60 basis points to 44.7 percent, its earnings before income taxes (EBIT) by €3.5 million and reduce its loss by €3.3 million or 18.3 percent. All this happened while Amer Sports added 225 jobs (including 119 in the Americas) and increased spending by €14 million to open stores and distribution centers, plus accelerate its digital transformation and expand production.

“The second quarter is traditionally our smallest, however we delivered a solid 6-percent growth despite short-term, adverse business impact due to U.S. customer disruptions, which especially impacted ball sports,” explained Amer Sports President and CEO Heikki Takala. “During the quarter we executed a significant distribution center expan-sion in both the U.S. and EMEA, and moved Arc’teryx into a larger pro-duction facility in Canada.”

Amer Sports net sales reached €477.4 million in the quarter, up 6 percent in currency-neutral terms from the year-earlier quarter. Organic growth was 5 percent, led by sales of footwear and apparel, which came primarily for the outdoor segment’s Arc’teryx and Salomon brands.

These numbers look good considering many sporting goods compa-nies are blaming disappointing second-quarter results on the demise of Sports Authority and Sport Chalet.

Outdoor Gets Lift from Apparel, Footwear and a U.S. AcquisitionOn the sales side, growth was once again driven by apparel and footwear sales at the flagship outdoor segment. Outdoor sales grew 10 percent (13 percent currency neutral), with apparel and footwear accounting for 86 percent of the growth. Organic sales were up 9 percent due largely to sales of Salomon and Arc’teryx apparel and footwear.

Year-over-year growth in apparel sales accelerated to 18 percent (24 percent currency neutral), while growth in footwear moderated to 12 percent (15 percent currency neutral). The growth came primarily from Salomon and Arc’teryx, which entered the footwear business last year. Growth accelerated from 8 percent to 20 percent at the cycling seg-ment, reflecting revenues from Enve Composites LLC, a fast-growing Utah-based maker of high-end carbon wheels, components and accesso-ries that generated about $31 million in sales in 2015. Sales declined at the segment’s other two businesses, winter sports and sports instrument. Pre-season sales of Salomon and Atomic skis (and other winter sports equipment) fell 3 percent and were off 5 percent for the six months ended June 30 after one of Western Europe’s warmest winters in years.

Sales of Suunto smartwatches and other instruments declined 8 percent (minus 6 percent currency netural).

The Americas, where sales grew 16 percent (21 percent currency netural), accounted for 41.8 percent of the outdoor segment’s growth in the quarter, while EMEA accounted for 30.9 percent and Asia Pacific 27.2 percent. Excluding restructuring costs, major write-downs and other non-recurring items, the segment generated EBIT of minus €16 million, compared with minus €18.7 million in the second quarter of 2015.

Ball Sports and Fitness DownSales for ball sports declined 2 percent (flat, currency netural) as a decline at the company’s Wilson tennis and golf business more than off-set an increase in the team sports business, which includes Wilson and Louisville Slugger. Amer Sports said sales were hurt by U.S. retail bank-ruptcies, which dragged down sales in the Americas by €2 million, but still edged up 1 percent, currency neutral. Sales grew 5 percent in EMEA and fell 13 percent in the Asia Pacific. EBIT excluding non-recurring items dropped 31.2 percent to 4.7 percent of net sales from 6.7 percent of sales a year earlier. Lower gross margin accounted for a little more than half that decline.

At the fitness segment, which consists primarily of Precor, sales de-clined 1 percent (up 1 percent currency neutral), as a 2-percent decline in the Americas and 7-percent decline in EMEA offset 9-percent growth in the Asia Pacific. EBIT excluding non-recurring items was 11.8 percent to 5.6 percent of net sales, compared with 6.2 percent in the year earlier quarter.

Outlook IntactDespite the tumult in the retail industry, Brexit and slowing growth in China, Amer Sports affirmed its outlook for 2016. It still expects net sales to increase and EBIT margin, excluding non-recurring items, to improve in currency-neutral terms.

“During the quarter we executed a significant distribution center expansion in both the U.S. and EMEA, and moved Arc’teryx into a larger production facility in Canada,” noted Takala. “These changes added short-term CapEx and OpEx; however they support our mid/long-term growth. Our outlook for the year remains positive, supported by robust pre-orders in most businesses, with the exception of winter sports equipment, where we expect a modest decline following the challenging previous winters. Our initiative pipeline for the fall/winter season is stronger than ever with strong joint business plans with our retail partners, continuous B2C expansion and a robust innovation rollout across the brands.”

AMER SPORTS OUTSHINES PEERS IN A TOUGH Q2

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Cabela’s Inc. (NYSE:CAB) is now for sale – with some reports suggesting a potential merger with Bass Pro – the hunt-and-fish retailer perhaps gave its purchase price a little boost June 28, reporting its first quarter of positive compara-ble store sales since the third quarter of 2013. Cabela’s latest earnings came just short of Wall Street’s targets.

On a conference call with analysts, Cabela’s officials also noted that with the exception of the fourth quarter of 2015, internet and cata-log sales grew for the first time since the third quarter of 2013. While the company nonethe-less maintained its guidance for the year, oth-er signs of progress included an improvement in expense leverage and growth in its financial services business.

“Our multiyear restructuring efforts, aimed at lowering operating expenses, have continued to exceed our expectations,” said Tommy Millner, Cabela’s CEO, on the call. As a result, Cabela’s invested the savings into customer-facing price and promotion activities to the benefit of sales growth.

“We used this opportunity to drive merchan-dise sales both in stores and online, improve inventory turns, grow market share, and sell through some of our slower-moving inventory,” said Millner.

For the quarter, total revenue increased 11.2 percent to $929.9 million. Revenue from retail store sales increased 13.3 percent to $644.9 million, internet and catalog sales increased 3.3 percent to $141.3 million and financial services revenue increased 8.1 percent to $135.1 million. U.S. comparable store sales grew 2 percent and consolidated comparable store sales increased 1.5 percent.

Net income decreased 5.7 percent to $37.8 million, or 55 cents a share. Adjusted for non-recurring items, earnings inched up 1.7 percent to $40.8 million, or 59 cents. The latest quarter’s net results included impair-ment and restructuring charges and other

items amounting to 4 cents a share. Wall Street’s consensus estimate had been 61 cents.

The same-store gain at retail was attributable to strength in firearms, optics, fishing, shoot-ing, camping, power sports and home and gift categories. While apparel and footwear cate-gories “improved meaningfully from previous trends, we continued to face softness in these cat-egories through the second quarter,” Millner said.

Internet and catalog growth likewise benefit-ed from strength in shooting, optics, camping, home and gifts, power sports and fishing, as well as hunting apparel. Casual apparel and footwear categories remained soft, but sell-throughs have improved with heightened promotional activity.

Beyond the lower pricing, Millner said sales are benefiting from its Vision 2020 initiative, which in part features an increased emphasis on four categories – hunting, fishing, camping, and recreational shooting – as part of a refocus on core consumers. Said Millner, “We rolled out this new vision in the third quarter of 2015 and see the potential to continue expanding market share in the outdoor industry while growing organi-cally through customer loyalty and by providing rich customer experiences in every channel.”

Merchandise gross margins in the quar-ter decreased 290 basis points to 32.9 percent as a result of the more aggressive pricing and increased discounts, as well as merchandise mix changes and the timing of promotions.

Cabela’s said the aggressive pricing was possible due to expense management initiatives, which led to selling, distribution and administrative (SD&A) expenses on a GAAP basis to be reduced 280 basis points in the quarter to 35.5 percent of sales. On a non-GAAP basis, SD&A expenses were reduced 330 basis points to 35 percent.

“Our expense and process improvement activities have exceeded our expectations,” Millner said. “It is important to note that the sec-ond quarter marks the third consecutive quarter of expense leverage at Cabela’s and the rate is accelerating. We have not only lowered our

expense levels, but have also implemented pro-cess improvement activities to ensure that these savings are permanent. We are in the early stage of many of these initiatives and expect ongoing benefit in the balance of 2016 and beyond.”

As reported, Cabela’s has organized teams to evaluate new ways to reduce both its store operating cost and capital expenditures. These efforts include the new store opening process, from site selection to construction cost to oper-ational efficiencies.

With the success in reducing expenses, Cabela’s indicated it has no plans to halt its ex-pansion efforts, which had already been scaled back from the 13 opened in 2015. Said Millner, “We continue to believe that opening new stores will provide our shareholders with an attractive return on capital at the sales-per-square-foot per-formance we saw from our 2015 class of stores.”

Six new stores have opened so far this year, including Lexington, KY; League City, TX; Short Pump, VA; Centerville, HO; Farming-ton, UT and Abbotsford, British Columbia. The openings have mostly performed in line with expectations and two more stores will open in the third quarter in Avon, OH, and Ottawa, Ontario. Six more stores will be added in 2017, and Cabela’s still sees room to expand its retail footprint in North America to 200-225 stores. It ended the quarter with 77 stores, including 68 in the U.S. Millner also noted that with its continued expansion into new markets, it is not cannibalizing comps.

Cabela’s Club had a strong quarter despite an increase in the loan loss reserve. Due to higher delinquency rates, the reserve for loan losses in-creased by $9.2 million in the quarter. During the quarter, growth in the average number of active credit card accounts was 7.3 percent and growth in average balance per active credit card account was 7.7 percent. The average balance of credit card loans grew 15.5 percent to almost $5 billion. For the quarter, net charge-offs were 2.13 percent. The overall 8.1 percent gain in

CABELA’S DELIVERS FIRST QUARTERLY COMP GAIN IN MORE THAN TWO YEARS

Photo courtesy Cabela’s

(Con’t Pg. 9)

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financial services revenue was driven by increases in interest and fee income as well as in-terchange income, both of which were partially offset by the increase in the provision for loan losses.

Looking ahead, Cabela’s said it continues to expect a high-single-digit growth rate in revenue and a high-single-digit or low-double- digit growth rate in EPS as compared to full-year 2015 adjusted earnings per diluted share of $2.88.

Regarding the sales talks, Millner again said the company won’t be talking about the pro-cess until the review is completed. In December Cabela’s board noted that it had initiated a pro-cess to explore strategic alternatives.

“That process has continued and is ongoing,” stated Millner. “I hope you can appreciate that we will have no further comments related to the review unless further disclosure is appropriate or required.”

The New York Post reported in mid-July that Cabela’s was about to be acquired by Bass Pro Shops. Back in April, reports arrived that Bass Pro has partnered with Goldman Sachs to ex-plore a bid. The sales talks came after activist hedge fund investor Elliott Management dis-closed an 11 percent stake in Cabela’s last year and began pushing for a sale or divestiture of its ancillary operations, such as its credit card business.

Asked in the Q&A session whether the heightened promotional cadence in the quarter was in part due to liquidation efforts at Sports Authority, Millner said it was a “purposeful decision” to boost sales.

“We knew we were accelerating our savings as a result of all the hard work folks have done in our company for the last year,” Millner said. “And we just made a purposeful decision to get competitive across the board, both in promo-tion and in price, to drive top line.”

As a result, Cabela’s operating margin rate improved 40 basis points and the sales picked up broadly across categories. Added Millner, “Our customers really reacted favorably in transaction trends, retention rates and mul-tichannel customer visits. All of those things reacted really well to our decision to get very competitive.”

Regarding Sports Authority, Millner said he doesn’t believe Cabela’s hasn’t felt any pressure on sales, in part because Sports Authority had a heavy concentration of locations in California and Florida, where Cabela’s has no stores. But he also believed that Sports Authority “served a different customer” and was never a direct com-petitor to Cabela’s.

Sequential Brands Group (Nasdaq:SQBG), which recently closed on the acquisition of the Gaiam yoga brand, said total revenue for the second quarter expanded 69.3 percent to $34.2 million. The company’s revenues largely represents royalty payments from licensees.

The gains were driven by the expansion of its Avia and And1 brands at Walmart, CEO Yehu-da Schmidman said on a conference call with analysts. Both brands were acquired in 2014 from Caleres Inc.

Avia’s range at Walmart includes activewear and sneakers while And1 focuses on boys’ sneakers and t-shirts. The core licensees of Avia are E.S. Originals, Inc. (ESO) for footwear and Delta Galil U.S.A. Inc. for apparel. Licens-ees for And1 include ESO for footwear and High Life, LLC for apparel. Sequential Brands also owns Martha Stewart, Emeril Lagasse, Joe’s Jeans, William Rast, Revo, Ellen Tracy, DVS and Heelys.

Regarding the just-acquired Gaiam brand, Schmidman sees the potential to add “signifi-cant market share” in hardgoods for Gaiam with “even larger growth potential” in softlines, a cat-egory introduced a few seasons ago.

“Studies show that over 235 million people in the U.S. practice yoga today, up 76 percent in the past four years, and another 80 million people aspire to practice yoga,” Schmidman said. “With these stats and the demand that we see from our channel partners, we see a strong future for the brand within our active division.”

Sequential Brands reported a net loss of $100,000, or less than 1 cent a share, during the period, but that was an improvement over a loss of $1.3 million, or 3 cents a share, a year earlier. On a non-GAAP basis, net income improved to $3.6 million, or 6 cents per share, from $3.3 mil-lion, or 8 cents per share, in the prior year’s com-parable quarter. Adjusted EBITDA improved to $17.3 million compared to $12.4 million in the prior year’s comparable quarter.

Photo courtesy Sequential Brands

SEQUENTIAL BRANDS Q2 BOOSTED BY STRONG ATHLETIC SALES TO WAL-MART

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The sudden resignation of GNC Holdings Inc. CEO Michael Archbold threw much up in the air for the nutritional supplement chain as it pulled its yearly guidance and remained mum on the status of its ongoing stra-tegic review. The latter could include an upcoming sale of the business.

The company’s stock price (NYSE:GNC) fell more than 20 percent on June 28, following the leadership shake-up. Archbold, who had been tasked to lead a turn-around, had been with the company less than two years. But for all the uncertainty, GNC also provided some assurance and stability, immediately tapping former PetSmart CEO and Chairman and GNC board director Robert Moran to fill the CEO role on an interim basis.

All this came as GNC reported its second-quarter 2016 earnings results, which Morgan called “disappointing.”

Revenue for the quarter fell 2.4 percent to $673.2 million as same-store sales dropped 3.7 percent at GNC’s company-owned domestic stores (including GNC.com) and decreased 6.6. percent at its franchise locations. Second-quarter net income fell to $64 million, or 94 cents per diluted share, versus a net income of $67.4 million, or 79 cents per diluted share, during the same period a year ago. Adjusted EPS, excluding the benefit of a $16.9 million pre-tax gain related to the sale of 86 company-owned stores to franchisees, was 79 cents for the second quarter versus an adjust-ed EPS of 77 cents a year ago. The company remains on track to meet its 2016 goal to refranchise 200 company-owned stores, officials said.

“We are focused on addressing those areas where we can drive a mean-ingful impact on the business in the shortest period of time,” Moran said. “We clearly have work to do to reverse the current trends, but I am confi-dent in our business and the GNC brand and I am committed to working closely with our talented team to deliver improved performance. As we do so, we will continue the previously announced comprehensive review of strategic and financial alternatives.”

By region, GNC saw its sales fall 2 percent in North America to $570.9 million. “Our all store promotional events were not enough to off-set the unexpected decline in retail traffic late in the quarter,” officials said.

Domestic franchise revenue dropped 2.1 percent to $86.5 million due to lower wholesale sales and royalties. “Our franchisees did not participate in all corporate promotions and our expanded assortment initiative has been adopted by approximately half of our franchise stores compared with the significant majority of our corporate stores,” officials said, noting the steeper drop in same-store sales at franchisee locations. GNC had been making efforts to attract more health-and-fitness conscious nutritional customers, trying to shed its previous body-building-only image.

International sales, which include franchise locations in 50 countries, including China, fell 2.5 percent to $43.1 million for the second quarter with same-store sales falling 1.6 percent. Wholesale sales and royalties from franchisees decreased, primarily relating to Mexico, Turkey and Chile, offset by gains in China.

Revenues for GNC’s manufacturing and wholesale segment — products it makes under its own brand and for other third-party custom-ers — increased 5.3 percent to $59.2 million, largely on gains of sales to those third-party customers.

Looking ahead, the company pulled its previous guidance — which it had projected 2016 EPS between $2.80 to $2.90, already lowered from a a previous range of $3.15 to $3.35 — saying it needed time to evaluate the business under the new leadership.

“The decision to suspend our fiscal 2016 guidance in no way detracts from our commitment to move quickly to deliver improved performance,” Moran said. “We remain confident in GNC’s long-term prospects but believe it is prudent to suspend guidance as we identify actions to address the challenges we are currently facing in our business.”

Photo courtesy GNC

GNC CEO RESIGNS AMID RETAILER’S STRATEGIC REVIEW; GUIDANCE PULLED

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¥166.4 BillionIn Shimano’s total sales, down 15.3 percent from the year before, for the six months ended June 30. The Japanese company is not optimistic about the future of bike spending, stating they expect sales to fall twice as fast as this due to a global oversupply of bicycles.

€299.1 MillionRecorded by Puma in Q2 apparel sales, which climbed 19.5 percent, mainly due to success in its teamsport division — fueled by UEFA Euro and high growth in other product categories.

$229.8 MillionIn Q2 sales for Brunswick Corp.’s fitness division, up 32 percent from a year ago thanks to acquisitions including Cybex, and up 12 percent on an organic basis minus the acquisitions.

40,000 Golf CoursesIncluded in Garmin’s Approach X40 golf-specific smart watch with distances to the green. This and other new wearable products helped push the company’s fitness Q2 revenues up 34 percent.

1,100 Locations Owned and Operated by Kohl’s where Under Armour will expand its presence. The sportswear company will initially launch at 600 stores, getting rack space alongside its top competitor Nike.

90 PercentDecline in Ray-Ban sales by a particular online client beginning with an ‘A,\’ with others e-tailers decreasing sales of 50 to 70 percent, according to Luxottica’s EVP of Wholesale, Paolo Alberti, after the company introduced MAP policies across its proprietary brands.

36 Percent Drop in GoPro inventory from the first quarter to $90 million, marking the action camera brand’s lowest level in two years. This, combined with a 20-percent rise in sales from the first to second quarter, led GoPro Founder and CEO, Nicholas Woodman, to predict a return to profitability by Q4.

23 PercentIncrease in Prana’s Q2 brand sales thanks to a major expansion into swimwear. Parent company Columbia Sportswear saw total sales rise 2 percent for the quarter.

13th StoreOpened by Italian luxury active lifestyle brand Moncler S.P.A. in San Francisco, which, along with shop-in-shops in finer U.S. department stores in New York, aided in a strong 23-percent gain in U.S. revenue growth for the first half of the year.

4th TimeAdidas has raised its full-year 2016 guidance. The three stripes will publish its second-quarter figures August 4, but predicts double-digit growth in all key regions and all major categories.

1.8 PercentIncrease in Hoka brand sales at Deckers Outdoor Corp., following double-digit growth the last several quarters. The slower growth rate was expected as its newest iteration of the Clifton, the brand’s top-selling shoe, was launched in July instead of June like last year.

BY THE NUMBERS

NEWELL’S OUTDOOR UNIT SEES FISHING OFFSET WINTER WEAKNESS IN Q2

Newell Brands Inc. (NYSE:NWL) reported that its outdoor solutions segment, formerly Jarden Outdoor Solutions, eked out a 0.5 percent organic gain in sales in its second quarter.

Growth in its Pure Fishing business largely offset weather-related declines at winter-sensitive businesses such as K2 Sports, Volkl and Marker, officials said.

Now described on Newell’s website as “the largest hardgoods sporting equipment company in the world,” the segment’s other larg-er brands include Coleman, Rawlings, AeroBed and Jostens. Pure Fishing’s brands include Abu Garcia, All Star, Berkley, Chub, Fenwick, Gulp!, Hardy, Hodgman, Johnson, JRC, Mitchell, Penn, Pflueger, Sebile, SevenStrand, Shakespeare, SpiderWire, Stren, Trilene and Ugly Stik.

Newell acquired Jarden Corp. in mid-April. Net sales at the outdoor solutions segment were $953.4 million, up 53.6 percent compared with the prior year, due largely to Jarden Corp.’s acquisition of Jostens last year. Reported operating income at the segment was $55.4 million, re-flecting the contribution of Jostens, partially offset by inventory step-up and integration and other costs related to Newell Brand’s acquisi-tion of Jarden in April.

Reported operating margin was 5.8 percent of sales. Year-ago com-parisons weren’t provided. Normalized operating income, which excludes restructuring charges and other non-recurring items and cur-rency effects, was $215.7 million, or 22.6 percent of sales, with good Jostens performance in the seasonally important second quarter con-tributing to segment margins.

Newell is widely expected to sell some of the outdoor solutions seg-ment’s winter sports brands as part of its announced plans to divest product lines with annual sales of $250 million to $300 million over the next two to three years.

The outdoor solutions segment also includes Marmot, Campingaz, Dalbello, ExOfficio, Invicta, Neff, Squadra, Stearns and Zoot.

Photo courtesy of Pure Fishing

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AISLE TALK

Aventuron, a distributor in the bicycle and outdoor industries, partnered with Orange Bikes, making the product available in the U.S. and Canada.

Callaway Golf Company reported a 6.5 percent increase in net sales in the second quarter and a 140-percent increase in earnings per share.

Chaco signed on as a member of the Outdoor Industry Women’s Coalition (OIWC).

Downlite, a major down and feather processor, is expanding its RDS supply chain in both Europe and Asia on July 27.

DSW Inc. launched DSW Kids in more than 200 stores and 40 states across the country. The retail expansion will include footwear for kids of all ages, from infants and toddlers through teens.

Gildan Activewear Inc. signed a definitive agreement to acquire Peds Legwear Inc. for $55 million.

H&H Shooting Sports, Inc. appointed Leroy Ussery as President.

Ibex Outdoor Clothing is partnering with The Renewal Workshop to refurbish Ibex’s “unsellable” returns and excess inventory.

Maui Jim, sunglasses manufacturer, added Jace Lipstein as a worldwide brand ambassador.

Nemo Equipment, the outdoor gear manufacturer, announced Mike Welch as its new North American Sales Director.

Nike is reducing the price of LeBron James’ Nike signature sneakers. The upcoming LeBron 14 shoe will sell for $175, down from the $200 price tag for the LeBron 13.

NikeLab reignited its NikeLab Gyakusou collaboration with Japanese fashion designer and Founder of Undercover, Jun Takahashi, in a new capsule of minimalist run-wear.

The NSGA’s Board of Directors named David Labbe as their Chairman for the next two years.

PolyOne Corporation acquired Gordon Composites on July 27.

Princeton Tec completed the initial phase of its move into new headquarters in Pennsauken, NJ.

Sport Chek opened its newest flagship retail location at CF Sherway Gardens in Toronto on July 28.

SRAM and RockShox announced the retirement of Greg “HB” Herbold on July 26.

Under Armour’s most recent SVP and Executive Creative Director for Women’s and Concept divisions, Leanne Fremar, was appointed SVP and Executive Creative Director for Starbucks Corp.

Moncler S.P.A. reported its revenues grew 23 percent to nearly $60 million in the Americas in the first half, thanks in part to the opening of its 13th U.S. store in San Francisco and shop-in-shops in finer U.S. department stores in New York.

The Italian maker of luxury outerwear and ski apparel reported reve-nues reached €52.5 million in the Americas, which was up 20 percent in currency-neutral terms from the first half of 2014. This came from solid growth in both wholesale and its direct-to-consumer channels. In Febru-ary, Moncler opened shop-in-shops at a Bergdorf Goodman, Saks in New York City and a Neiman Marcus in Long Island.

Retail sales growth was driven by strengthening comparable store sales and accelerated in the second quarter with the opening of two stores, in-cluding its first in San Francisco. The company now operates 21 stores in the Americas, including 14 in the United States, where its newest store opened in Washington D.C. earlier this month. It also reopened a refur-bished store in Miami during the period.

Founded as a skiwear brand in France, Moncler has expanded rapidly into fashion under its Chairman and CEO Remo Ruffini, an Italian who acquired the brand in 2003 and took it public in 2012. Though its roots are in winter sports, it is expanding into knitwear and footwear and now operates stores in such tropical destinations as Miami and Honolulu.

Moncler’s total revenues reached €346.5 million in the first half, an in-crease of 17 percent in both reported and currency-neutral terms.

Global retail sales grew 22 percent (22 percent currency) to €245.9 mil-lion, or 71 percent of revenue, thanks in part to same-store sales growth of 6 percent. Organic growth was aided by new store layouts that have enabled double-digit growth in knitwear sales. The company also said it saw good results with a footwear assortment it tested at five stores that will roll out to 25 more stores by September.

Wholesale revenue was up 7 percent (6 percent c-n) to €100.6 million, or 29 percent of revenue.

Adjusted EBITDA reached €78.3 million compared to €70.9 million in the first of half 2015 and adjusted EBITDA margin of 22.6 percent. Net income reached €33.6 million, or 9.7 percent of sales. Moncler ended the period with net financial debt of €84.9 million, down 51.5 percent from a year earlier.

Ruffini said the brand performed well in all markets across all distribu-tion channels and expects the company to report better results for the full year thanks to expansion plans. In the North American wholesale channel, that will include shop-in-shops at a Neiman Marcus in Los Angeles and a Nordstrom in Toronto. The company plans to open a flagship Moncler store on Madison Ave. in New York City by fall, but expects to limit U.S. store openings in 2017 and 2018 to relocations.

“We are quite satisfied with the network that we’ve built as of today,” said Moncler Group Director Andre Tieghi.

U.S. EXPANSION FUELING MONCLER’S GROWTH

Photo courtesy Moncler

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Sales of Lafuma Group’s Millet, Eider and Lafuma mountain sports products grew 11 percent in the first half of the year, despite Europe’s warm winter, which will make for tough sledding in the back half of the year.

A slump in consumer and tourism spending in France, meanwhile, dragged down sales of the Oxbow surf brand, reported Calida Group, the Swiss apparel company that upped its stake in the Annecy, France-based Lafuma Group to 70 percent on April 1.

“Unfavorable weather, with a very mild winter and a rainy spring, as well as unsettling political developments that reduced the pro-pensity to consume, caused a significant decline in retail traffic in the Group’s main sales mar-kets,” Calida Group CEO Reiner Pichler and Calida Group Chairman Dr. Thomas Lustenberger wrote in their quarterly letter to shareholders. “Terrorist attacks, especially in France, our main market, have made consum-ers insecure. This feeling of insecurity has been exacerbated by the Brexit debate and by the negative decision that the British voters ultimately took about the European Union. All of this had a negative influence on consumer spend-ing, leading to stagnation and in some cases to market shrinkage in the first half of the year.”

Mountain Group Sales Up, Orders DownCalida Group reported sales at the three mountain brands, which it reports as the Mil-let Mountain Group, reached €40.8 million ($45 million) in the six months ended June 30,

compared with €36.8 million in the first half of 2015. The brand group contributed operating income of €4.5 million, up 43.5 percent from the year earlier quarter.

Sales grew 10.9 percent at the flagship Millet brand and 20.6 percent at the Lafuma brand (excluding furniture sales), marking the first period of double-digit growth for either since Calida Group acquired control of Group Lafuma in late 2013. Only the specialty ski brand Eider saw sales go down by 3.2 percent, as a result of the unseasonably warm weather.

Despite the growth, Calida Group said Millet Mountain Group faces a tough fall season.

“Owing to unsatisfactory sales by our retail-ing customers last winter, they still have high levels of inventory in this very seasonal busi-ness,” Calida reported. “As a result, orders this spring for the autumn/winter collection 2016 were subdued and lower than in the previous year. Management is currently developing mea-sures to compensate for this.”

Terror Strikes Weigh on Tourism and OxbowAt Oxbow, which is also part of Lafuma Group, sales fell 5.5 percent to €12.9 million, largely because of lower sales in France, which gener-ates 90 percent of the brand’s sales and where consumer spending and tourism declined in the wake of terrorist attacks. Still, Oxbow was able to boost its operating contributions 27.1 percent, to €2.7 million, thanks to cost cutting and a “good level” of preseason orders for the fall/winter season.

Calida Group increased its stake in publicly traded Lafuma Group from 60 to 70 percent in April in a move that increased its expo-sure to France and reduced its exposure to Switzerland, where many consumers shifted spending to neighboring countries last year to take advantage of the strong franc. That caused the group’s sales to fall 12.9 percent in 2015.

The company takes its name from the Swiss apparel brand Calida, which derives more than 40 percent of its sales from Switzerland, where it operates about 140 stores. The group also owns the apparel brand Aubades, which earns two-thirds of its sales in France.

Strategic Review Due in This FallPichler, named by Calida Group as its CEO April 1, is expected to present the results of a strategic review of all Calida Group’s business to shareholders this fall. In the meantime, it expects trends seen in the first half of the year to continue.

“We are assuming that economic conditions will not improve in the second half of the year, in part because of the still largely unknown consequences of Brexit,” Pichler and Calida Group Chairman Dr. Thomas Lustenberger wrote in their quarterly letter to shareholders. “Negative pre-orders at Millet Mountain Group and investments in the development of the individual brands Millet, Lafuma and Eider will weigh down results for the second half of 2016, and thus for the year as a whole.”

Photo courtesy Lafuma

LAFUMA GROUP SEES TOUGH SLEDDING AHEAD AFTER STRONG 1H

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Garmin Ltd. (Nasdaq:GRMN) said double-digit growth at its fitness and outdoor segments enabled it to blow past Wall Street estimates in the sec-ond quarter and raise its guidance for the full year.

The results show that one of the industry’s GPS leaders is successfully navigating the onslaught of fitness trackers, despite its own previous cau-tions of pressures from the influx. Garmin also continues to successfully move away from its previous reliance on personal navigation devices, much of which the consumer has replaced with smartphones mapping apps.

Investors rewarded the company July 27, sending its stock price up more than 12 percent, to $52 per share and a new 52-week high.

Garmin reported total revenue of $812 million, up 5 percent over the prior year, with fitness, outdoor, marine and aviation collectively growing 20 percent over the year-ago quarter and contributing 70 percent of total revenue. Gross margin expanded to 57 percent compared to 54.2 percent in the prior year quarter, and operating margin expanded to 24.7 percent compared to 21.5 percent in the prior year quarter.

GAAP EPS was 85 cents, up 18 percent over the prior year, and 25 percent higher than Wall Street’s consensus estimate of 65 cents.

“Fitness and outdoor achieved impressive revenue and profit growth driven by our strengthening position in the wearables market,” said Cliff Pemble, president and chief executive officer (CEO) of Garmin Ltd.

Aviation and marine also delivered revenue and profit growth while auto remains a solid base of profit contributions to the overall business.

Fitness Takes OffFitness revenue grew 34 percent in the quarter driven by wearable de-vices, including an expanded assortment of the company’s Elevate wrist heart technology, which is now available in running and outdoor watches as well as activity trackers. During the quarter, Garmin began shipping Vivoactive HR and Vivofit 3 activity trackers as well as the Forerunner 735XT multi-sport-capable running watch, the Vivosmart HR + smart activity tracker with GPS and Vivomove, a fashionable analog watch with activity tracking features and a one-year battery life. Downloads of more than 2,000 watch apps from Garmin’s Connect IQ App store surpassed 13 million since its launch in early 2015.

Garmin estimates its share of the GPS-enabled smart wearable market in the United States at 57 percent, up from 43 percent a year ago. It pegged its share of the U.S. activity tracker market at 10 percent.

Segment gross margin was flat at 56 percent while operating margin improved to 25 percent from 21 percent in the prior year and contributed to a 60 percent growing in operating income.

Outdoor gets Boost from DeLorme, WearablesSales at the outdoor segment grew 23 percent, driven half by wearable devices and half by a full quarter of contributions from recently acquired DeLorme products. Gross and operating margins were 64 percent and 36 percent, respectively, and contributed to a 31-percent increase in operating income.

Product launches during the quarter included the Astro 430 dog tracker, the Oregon 700 line of handheld devices and the Approach X40 golf smart watch during. The golf watch features Elevate heart rate technology and a built-in database that provides distance to the front, middle and back of the green for 40,000 golf courses.

In its marine segment, operating income grew 19 percent thanks to an 8-percent increase in revenue. Gross margins reached 58 percent and operating margins expanded to 26 percent.

$1 Billion in CashGarmin ended the quarter with more than $1 billion in cash and inven-tory valued at $508.3 million, up about 11 percent from a year earlier. Executives said they see no evidence of new products stacking up in its distribution channels and would not comment on their M&A activities.

Thanks primarily to a stronger outlook for its outdoor and fitness segments, Garmin raised guidance for full-year revenue and pro forma earnings per share by 10 and 11 percent, respectively. Revenue is expected to reach $2.9 billion, while earnings per share are forecast to be approximately $2.50. The new forecast assumes promotions in the back half of the year will result in a gross margin of about 55 percent and operating margin of about 19 percent, up 50 and 100 basis points, respectively, from its February forecast.

GARMIN UPS OUTLOOK ON ROBUST WEARABLES SALES

Photo courtesy Garmin

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Puma SE delivered another round of robust results in the second quarter, gaining a boost from a solid performance of its teams at the UEFA Euro 2016 as well as traction gained around its women’s initiatives, led by Rihanna.

For the fourth straight quarter, however, the sizeable gains weren’t enough for the company to raise its revenues or earnings guidance for the year. Earnings continue to be weighed down by the stronger U.S. dollar. The Americas also saw a mid-single digit gain on a currency-neutral basis, marking the weakest performance among Puma’s three regions.

But the brand by all indications continues to make progress with its turnaround, focused on a reposition back on competitive sports after a prior heavy focus on lifestyle fashion.

“We are happy with the development in the second quarter,” said Bjørn Gulden, Puma’s CEO. “Sales developed as expected with dou-ble-digit organic growth. Gross profit margin continued to be under pressure due to the strong U.S. dollar, but based on good cost discipline, we achieved operational leverage and saw nice improvements in both EBIT and net earnings.”

He added, “We continue to see better sell-out of our products in the stores, as we feel con-sumers are getting more interested in our brand and products again. Meanwhile, we continue to

work hard with the leading retailers in order to secure more and better space in their stores.”

The company also owns Cobra Puma Golf and Dobotex, which makes socks and bodywear for Puma as well as socks for well-known brand-name companies.

Revenues in the quarter jumped 12.8 percent on a currency-neutral basis to €826.5 million ($908.3 million) and were up 7 percent on a reported basis.

The gains were led by the EMEA region, which expanded 23.5 percent on a currency-neutral basis, to €321.3 million ($353.1 million) and gained 18.8 percent on a reported basis. All countries within the region showed strong performances, especially in the Teamsport category, which gained extra momentum due to the UEFA Euro 2016.

The Asia/Pacific (APAC) region’s sales ad-vanced 10.3 percent on a currency-neutral basis, to €189.6 million ($208.4 million) and gained 9.1 percent in Euro terms. China was the main driver.

In the Americas region, sales increased 5 percent on a currency-neutral basis to €315.6 million ($346.8 million), with growth in North and Latin America. In its home- currency Euro terms, however, sales decreased 3.9 percent, as the weakness of currencies in

Latin America, notably in Argentina, had a neg-ative impact on reported sales.

Overall growth in the Americas region con-tinues to decelerate on a currency-neutral basis. Sales had risen 5.4 percent in the first quarter. In 2015, Americas sales on a currency-neutral basis grew 8.8, including gains of 7.2 percent in the fourth quarter and 10.8 percent in the third.

By category, apparel led the gains, climbing 19.5 percent on a currency-neutral basis to €299.1 million ($328.7 million) and increas-ing 13.6 percent in Euro terms. The gains were mainly due to success of the Teamsport cate-gory, fueled by UEFA Euro and high growth in other product categories.

Footwear sales came in at €360.2 million ($395.9 million), representing an increase of 7.3 percent on a currency-neutral basis and 0.4 percent on a reported basis. Sportstyle, Fundamentals and Teamsport saw “major gains.”

Sales in Accessories improved 14.1 percent on a currency-neutral basis to €167.1 million ($183.6 million) and added 10.9 percent in Euro terms, driven by a higher demand for backpacks and headwear.

Net earnings in the quarter came to €1.6 million ($1.76 million), rebounding from a loss of €3.3 million in the same period a year ago. EBIT (earnings before interest and taxes)

PUMA GETS BOOST FROM EURO CUP IN Q2

Photo courtesy Puma

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jumped 75.1 percent to €11.9 million ($13.1 million), largely due to the sales growth combined with the only moderate increase in operating expenses.

Gross margins eroded 110 basis points to 45.6 percent, due to the stronger U.S. dollar. Footwear’s margin softened slightly from 42.3 percent to 41.9 percent, Apparel fell from 50.7 percent to 49.5 percent and the Accessories margin declined more strongly, mainly due to the difficult golf market, from 50.0 percent to 46.6 percent.

Operating expenses (OPEX) increased only 3.2 percent to €368.8 million ($405.3 million). The increase is mainly due to investments in Puma retail stores and additional marketing activities associated with the UEFA Euro 2016. Other operating areas and functions kept the costs stable. As a percent of sales, OPEX was reduced to 44.6 percent from 46.2 percent.

In the statement, Gulden said Puma contin-ued to make inroads into becoming the “Fastest Sports Brand in the World.”

He added, “The two major football tourna-ments, Copa America and the UEFA Euro 2016, on the one side and the further accelerated suc-cess of our women’s initiative, ‘The Future is Fe-male,” on the other were the dominating factors for us.”

Puma had five sponsored teams, as well as a number of high-profile players, at UEFA Euro 2016 sporting the brand’s new Tricks boots and gloves.

“We have been leveraging this momentum with our key retail partners,” said Gulden. “Building on the impressive sell-through re-sults of Tricks during the 2014 World Cup, we generated healthy sell-in of Tricks this year. Many key retailers, including Intersport, Dick’s Sporting Goods and Kamo, supported them with very visible in-store executions.”

With an on-field presence of almost 40 percent across all matches, Puma’s five par-ticipating teams secured strong visibility at UEFA Euro 2016 with their kits featuring its apparel technology ACTV Thermo-R. While Switzerland and Slovakia reached the round of sixteen, Italy made it to the quarter final, beating former European Champion Spain. Puma also sponsored Austria and the Czech Republic. At Copa America, Puma sponsored Uruguay.

Among its sponsored players, France’s Antoine Griezmann was voted Player of the Tournament by the UEFA after being the top scorer. Puma player Olivier Giroud was ranked third in the scoring table of the event, while European Champion Portugal’s

Rui Patricio emerged as the Goalie of the Tournament at UEFA Euro 2016.

In other marketing partnerships, Leicester City Football Club became the first Puma team to take the English Premier League title while Puma-sponsored Arsenal FC secured the sec-ond rank. Both teams qualified for the UEFA Champions League.

In the run-up to the Olympic Games in Rio, Puma signed a partnership with the Athletics Association of Barbados (AAB). The Barbados track & field team will first wear Puma appar-el in Rio, and Puma will also support the team through the next two IAAF World Champi-onships. Jamaica, Cuba, Grenada, Dominican Republic and the Bahamas are already in Puma’s Caribbean stable.

Said Gulden, “We are looking forward to great Olympic days in Rio, where fantastic athletes like Usain Bolt will be wearing our innovative and design-driven products.”

On the product front, the Fenty Puma by Rihanna runway show during New York Fashion Week drew “overwhelming reactions,” especially across social media, to support Puma’s overall collaboration with Rihanna. The Fenty Trainer and the Creeper’s new color ways were sold out in days, while the Fur Slide sold out in hours. In a new partnership with reality star Kylie Jenner, the Fierce performance train-ing shoe was launched.

“All of these products generated great sell-in and sell-out results, which continue to strengthen our relationship with key retailers,” said Gulden. “This includes Foot Locker’s women-only banner SIX:02, which has decided to dedicate additional space to Puma shop-in-shops in their stores.”

Other initiatives introduced in the quarter included a partnership with New York City Ballet (NYCB) to become its official off-stage activewear partner. Starting in October 2016, a number of dancers from the New York City Ballet will be featured in several Puma campaigns. The brand also partnered and made a donation to Right To Play, an organization founded by four-time Olympic gold medalist Johann Olav Koss dedicated to educating and empowering children facing adversity.

Looking ahead, Puma continues to expect a currency-adjusted high-single-digit increase of net sales, a gross profit margin on previ-ous year’s level (45.5 percent), an increase in currency-adjusted operating expenses in a mid- to high-single-digit range and an oper-ating result (EBIT) between €115 million and €125 million.

The numbers were ugly, but Wall Street saw promise in a battered GoPro stock (Nasdaq:GPRO), lifting it more than 10 percent July 28 after its second-quarter earnings results.

The action-camera brand saw its second-quarter sales tank 47 percent to $220.8 million, while its quarterly net income swung to a loss of $91.8 million, or a loss of 66 cents per diluted share, versus a profit of $35 million, or 24 cents per share, during the same period a year ago.

Where investors saw hope is the company’s 36-percent drop in inventory from the first quarter to $90 million, marking GoPro’s lowest level in two years, combined with a 20-percent rise in sales from the first to second quarter. That led GoPro Founder and CEO, Nicholas Woodman to predict a return to profitability by the fourth quarter.

“GoPro is well-positioned for the second half of the year,” Woodman said. “We now have a simple product line, a clean retail channel and clear indications of strong consumer demand.”

GoPro officials also noted that its mobile editing apps, Quik and Splice, had doubled their monthly active users since May to 3.7 million and the GoPro Mobile App was downloaded 2.6 million times in the second quarter for a total of 30 million downloads. The big challenge for action-camera brands has been keeping consumers involved in the photo/video process — with many finding that there’s too much work to editing and posting their content.

GoPro is also ramping up its partnerships, signing a recent deal with Reliance Digital, India’s largest consumer electronics retail-er, that will put GoPro’s cameras, mounts and accessories, on the shelves of up to 1,800 stores across the country.

The company maintained its full-year revenue outlook range between $1.35 billion to $1.5 billion.

GOPRO SALES SLICED IN HALF; SWINGS TO Q2 LOSS AS

IT CLEANS UP INVENTORY

Photo courtesy GoPro

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Wolverine World Wide, Inc.’s (NYSE: WWW) stock price bumped up more than 9 percent July 26 after it reported better-than-expected second quarter results and said it was close to selling several underperforming brands.

The maker of Merrell, Sperry, Saucony and Chaco footwear reported diluted earnings per share of 24 cents for the second quarter ended June 18. While the price is the same as a year earlier, that was a penny higher than consensus estimates on Wall Street and came despite a 7.4 percent decline in revenue, which reached $583.7 million. On a currency-neutral basis, revenues fell 6.4 percent and adjusted diluted earnings per share increased 11.1 percent.

The results appeared to validate Wolverine World Wide’s strategy, which essentially calls for growing profits in a slow-to-no-growth world by cutting costs on the one hand, and growing market share on the other.

Outdoor & Lifestyle GroupAt Wolverine’s outdoor and lifestyle group, underlying revenue was down 0.8 percent compared to the prior year, with its Chaco brand posting strong high-teens growth, while Merrell and Cat fell by low-single digits and Hush Puppies dropped by high-single digits.

At Merrell, the performance outdoor category grew mid-single digits globally and picked up market share in the U.S. outdoor market, while the active lifestyle category was, as expected, down double digits. U.S. whole-sale numbers remained sluggish, due in part to going-out-of-business sales at Sports Authority and Sport Chalet, although sales to the brand’s largest strategic retail partners rose in the high teens both at home and abroad.

Wolverine Boston GroupAt the company’s Wolverine Boston Group, underlying revenue declined 8.9 percent versus the prior year, with Saucony up mid-single digits, Sperry down high teens and Keds down mid-single digits. As expected, soft demand for boat shoes hurt Sperry as consumers continued to focus on more athletically-inspired styles. Saucony grew at a double-digit pace in its three largest regions outside the U.S.

Currency Translation Cloaks Margin GainsWolverine World Wide’s gross and operating margins each slipped 40 basis points to 38.8 percent and 7.2 percent, respectively, but improved by

80 and 30 basis points, respectively, on a currency-neutral basis compared with the year earlier quarter. WWW’s strategic plan calls for reaching operating margin of 12 percent by the end of 2018 with no top line growth. Krueger noted that a nearly 20 percent increase in higher margin e-commerce sales contributed to the improvement.

Inventory balances at the end of the quarter were 2.9 percent lower than the prior year, and the lowest for the period since Wolverine acquired PLG brands four years ago. Cash and cash equivalents were $221.7 million. Reported debt was $808 million, which resulted in net debt of $586.3 million at quarter end.

The results came as Wolverine continues to adjust to an era of slower global growth and retail disruption by closing stores, restructuring its operations in Canada and EMEA and consolidating its apparel and acces-sories initiatives, officials said. The company is also putting more emphasis on consumer research in a bid to grab market share.

“We’ve doubled down on investments for consumer research, trend, and advanced concepts and have quickly added new talent to our consumer insights team, along with our brand, product, and marketing teams,” said Blake W. Krueger, Wolverine Worldwide’s chairman, CEO and president. “At the same time, construction has already begun on our first consumer and innovation hub here at our global headquarters.”

The New, New NormalWolverine reaffirmed its guidance for fiscal 2016, which calls for revenues to decline 8 percent to 4.3 percent on a reported basis and 5 percent to 1 percent on an underlying basis. While the company has big expectations for its new Arctic Grip sole technology, which will debut this fall across Merrell and five other brands, its primary focus is on gross margin expan-sion, portfolio management, optimizing DTC operations and controlling operating expenses.

“Over the past few months we have turned a very sharp eye towards our existing portfolio in the context of what we believe to be the new, new normal global retail environment,” Krueger said. “As such, we have made significant progress in reviewing strategic alternatives for our portfolio, which could include the sale of several brands in the portfolio that may not meet our go-forward performance criteria and profit goals. We are also strategically reviewing our entire store fleet against the rising tide of challenges impacting domestic retail stores.”

Photo courtesy Chaco/Wolverine World Wide

WOLVERINE WORLD WIDE’S Q2 ENCOURAGES INVESTORS

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The drop in oil prices continues to hamper active-lifestyle brands that once benefitted heavily from consumers working in the U.S. oil-patch regions and spurred sales in perfor-mance western and work wear.

Like the oil fields they worked on, the pipe-line of business is dialing back until oil and commodity prices recover.

That effect was evident at Boot Barn Inc. (NYSE:BOOT), which reported its earnings plunged 72.5 percent in its fiscal first quarter, end-ed June 25, to $624,000, or 2 cents a share. Reve-nues advanced 39 percent to $133.4 million, but mainly due to last year’s acquisition of Sheplers.

Results were in line with a company forecast, however, calling for earnings in the range of 1 to 3 cents a share, and investors boosted Boot Barn’s shares more than 6 percent, July 27, following the release — a small win for a stock that sits at one-third of its price a year ago.

On a conference call with analysts, Jim Conroy, president and CEO, said the compa-ny managed a 0.4 percent gain in consolidated same-store sales during the period, reflecting strong sales growth in both e-commerce brands, with the Boot Barn stores outperforming the rebranded Sheplers stores. That could suggest the market is finding its bottom, as oil prices have at least stabilized in the past months.

“In our stores, we saw continued growth in many core markets, particularly in the West, but we continued to face sales headwinds in Colorado, Wyoming and North Dakota

associated with the softness of local economies, dependent on oil and other commodities,” Con-roy said. “Same-store sales in our Texas stores continued to be negative, but showed sequential improvement over each of the last two quarters.”

The work category at the Boot Barn chain continued the positive growth experienced in the fourth quarter, reflecting further traction in the merchandising initiatives implemented last year. Men’s and ladies’ western apparel also achieved positive sales by expanding assortments in dresses, skirts and graphic tees in an effort to target the country music festival customer. However, ladies boots were again weak, primarily attributed to the impact of low oil and commodities prices.

At the Sheplers business, same-store sales were up as double-digit e-commerce gains offset a single-digit decline at the Sheplers stores that continued to anniversary heavy promotions in the first quarter of FY16, prior to the Sheplers acquisition. The rebranded stores now feature a significantly larger offering of western boots, work boots and work apparel.

“Although we saw growth in some of the expanded merchandise categories, we did con-tinue to see weakness in western apparel, as we continue to cycle the heavy Sheplers price pro-motion activity in the prior year,” Conroy said. “We expect this trend to continue for a few more months until we begin to anniversary the Boot Barn promotional calendar in our third fiscal quarter.”

The Sheplers segment overall saw an im-proved merchandise margin rate as better pur-chase economies, the introduction of private brands and efforts to reduce promotional activ-ity offset slower-moving apparel sales. Conroy said he feels Sheplers is now “positioned well for profitable sales growth going forward.”

Boot Barn retained its outlook for the current fiscal year. Same-store sales are expected to be between slightly negative to slightly positive. Earnings are expected in the range of 63 to 73 cents per share, which compares to 69 cents a year ago.

For its fiscal second quarter, same-store sales are projected to be slightly negative to slightly positive. EPS is expected to land in in the range of 0 to 2 cents, down from 4 cents in the same period a year ago.

Conroy said consolidated same-store sales were slightly negative in the month of July, while noting that July last year will be the toughest comparison in the second quarter, particularly in the core Boot Barn business.

“We have continued to generate strong sales in our e-commerce channel, particularly at Sheplers.com, and our Western region stores continue to comp positively,” said Conroy. “However, while we hoped we would see some stabilization in sales in Colorado, Wyoming and North Dakota as we anniversary the beginning of the sales erosion in these commodity-impacted markets, that has not yet materialized, and those markets continue to see sales declines.”

OIL PATCH REGION BUSINESS HAMPERS BOOT BARN

Photo courtesy Boot Barn

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Quickly finding a replacement for Sports Authority, Under Armour (NYSE:UA) on Tuesday revealed plans to start selling to Kohl’s starting in 2017.

To the dismay of many traditional sporting good chains that the brand founded its business on, Under Armour has been selling to tradition-al department stores such as Macy’s, Belk and Nordstrom over the last few years, as well as the athletic mall specialty chains, Foot Locker and Finish Line. Although its primary competitors, Nike and Adidas, have been there for years, Kohl’s will mark the first time the 20-year old brand is selling into the mid-tier department store channel.

Another big retail announcement was that Under Armour planned to open a mega-store in the famed FAO Schwarz flagship on New York City’s Fifth Avenue. Both came out while Under Armour reported sec-ond-quarter earnings that largely fell in line with a forecast given on May 31. At the time, Under Armour said a $23 million impairment write-off tied to Sports Authority’s bankruptcy would cause its operating earn-ings to land in the range of $17 million to $19 million. Operating earn-ings came in at the higher end of that range, hitting $19.4 million, albeit dropping 39.3 percent from year-ago levels due to the change.

Revenues in the quarter jumped 27.7 percent to $1 billion, in line with a forecast calling for growth in the high 20 percent range. Among cate-gories, footwear – vaulting 58 percent – was again the standout, led by the Curry signature basketball line.

But the surprise was the move to Kohl’s.On a conference call with analysts, Kevin Plank, chairman and CEO,

described Kohl’s as “one of the top retailers of activewear in the U.S.”

with a “large, loyal consumer base,” mainly women. Plank reiterated that the company is on track to expand its women’s business to $1 billion this year.

“This decision to reach new consumers through Kohl’s is not a chan-nel consideration but a consumer consideration,” said Plank. “We want to reach our consumer where they expect to find Under Armour prod-ucts, and we will continue to partner with retailers that provide us the opportunity to showcase the Under Armour brand.”

The brand will initially launch at 600 Kohl’s stores before expanding to all 1,100 locations.

During the Q&A session, Plank added that there was “nothing reactionary” about the decision to sell through Kohl’s, given its timing following Sports Authority’s abrupt exit. He described it as a “proactive move for us that has been in the works for the last several years.”

Plank noted that several years ago Under Armour did not have the merchandise expertise in place to differentiate its lines across individ-ual channels and to also reach Kohl’s. Steering the effort to expand that capacity has been Kevin Eskridge, who has been the company’s SVP, global merchandising since April 2015. Previously, Eskridge ran China for Under Armour from October 2012, and prior to that led its success-ful outdoor push.

“We believe that there’s a massive opportunity with the consumer that’s walking into those stores and looking for the Under Armour brand, and frankly, they just haven’t been able to find it,” Plank said of Kohl’s.

He further said the brand would “continue to have elevated product in there” at Kohl’s, and the push into Kohl’s should not dilute its margins.

UNDER ARMOUR HEADS DOWN MARKET TO KOHL’S

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Plank added, “We don’t anticipate a big impact to the balance of our other businesses because of the merchandising time, effort and ener-gy that we put in. So we think we are ready for this moment, and we are incredibly excited. And, again, this is just another one of the single chapters in our larger growth story.”

Overall, the decision to start selling to Kohl’s was part of a strategic push to reach a wider range of customers across three areas: channels, categories and geographies.

“We have built our business over the past 20 years through great retail partnerships within the sporting goods channel with partners like Dick’s Sporting Goods and Academy,” said Plank. “And in department stores and malls like partners like Macy’s, Foot Locker, Champs and Finish Line. The authenticity we’ve gained with consumers through those partnerships has helped us become who we are today and posi-tioned us to bring Under Armour to an even broader set of consumers.”

Also as part of the channel push, Under Armour disclosed plans to move into the former FAO Schwarz space on Fifth Avenue in New York City as soon as 2018. The store closed in July 2015. It had been the oldest toy store in the U.S., with a New York City location since 1870.

Plank said it’s part of the firm’s strategy to use “landmark retail space” to tell the Under Armour story, to build its brand and sales. He added, “The approximately 53,000-square-foot space is one of the most recog-nized and high traffic areas in all of New York, and our plan is to build the most breathtaking and exciting consumer experience ever conceived at retail.”

To broaden its customer base around categories, Plank noted that UAS, a premium fashion sportswear line, would launch in September. The line is being developed by Tim Coppens, who previously worked at Ralph Lauren and Adidas but is best known for the namesake fashion collection he runs in New York. The pending launch and hiring was re-vealed earlier this year.

“This is not about being on trend or capturing the athleisure market,” said Plank on the call. “Consumers have the expectation that perfor-mance product is not just functional but is fully executed through fit and style.”

He sees the collection as an opportunity for customers to not just wear the brand on the field or at the gym, but “to wear us to school, out at night and other wearing occasions.”

UAS will reach select high-end wholesale partners, including a limited range at Gucci stores, but will predominantly be a direct-to-consumer (DTC) offering.

In expanding across geographies a primary focus, not surprisingly, is China. Plank noted that the brand is experiencing “powerful growth” in China, with e-commerce sales ahead 157 percent year-to-date. Strong full-price sales are being seen with a focus on basketball, running and training. It’s helped by the government’s support of sports and a Chinese consumer “getting more serious about training.”

China’s strong women’s business is also helping to increase sales, up 24 percent year-to-date over last year and representing 34 percent of apparel sales, and more than doubling the brand’s overall run business. Stephen Curry’s growing global awareness is also boosting sales, and a second Curry tour will take place in China later this summer.

The continued success of the basketball category, led by the Curry signature basketball line, led to a 58 percent gain in overall footwear sales in the quarter, to $242.7 million. Also contributing to the catego-ry’s success was growth in running and cleated categories in both team sports and golf.

Apparel sales advanced 18.9 percent to $612.8 million, led by growth in men’s training, women’s training and golf. Accessories revenues increased 21.3 percent to $101 million, driven primarily by its new lines of bags and headwear.

Wholesale revenues in the quarter grew 26.7 percent year-over-year to $635 million, while DTC revenues grew 27.9 percent to $321 million, representing 32 percent in total sales. North America revenues were ahead 22 percent while International revenues, which represented 15 percent of total net revenues for the quarter, grew 68 percent year-over-year, or 72 percent on a currency-neutral basis.

Licensing revenues expanded 16.0 percent to $21 million, while Connected Fitness segment sales surged 73.3 percent to $23.5 million.

Gross margins eroded to 47.7 percent compared with 48.4 percent, reflecting negative impacts of approximately 130 basis points from a sales mix driven by strong growth in footwear and international, partial-ly offset by approximately 50 basis points from improved product cost margins.

SG&A expenses grew 32 percent to $458 million, including the impact of the one-time impairment related to the Sports Authority liquidation and continued investments in DTC and overall headcount to support the company’s strategic initiatives. As a percent of sales, SG&A grew to 45.8 percent from 44.3 percent a year ago.

Net income fell 57 percent to $6.3 million, or 15 cents a share, in line with estimates.

Under Armour kept its guidance for the full year. The company expects revenues to reach about $4.93 billion, representing growth of 24 percent over 2015, and 2016 operating income in the range of $440 million to $445 million, representing growth of 8 to 9 percent over 2015.

Prior to the May 31 update, the company had expected revenues to increase at a 26 percent rate. Due to the bankruptcy, the company had said it was only able to recognize $43 million of the originally planned $163 million in revenues with Sports Authority for 2016. Operating earnings had previously been expected to expand in the range of 23 to 24 percent over 2015.

Other growth avenues highlighted by Plank on the call included digital.In June, Under Armour introduced the UA shop app that’s more in-

tegrated with its Connected Fitness platform. Under Armour is also making strides in personalizing offers to its Connected Fitness members based on their activities and location.

Marketing also remains a primary investment for growth. Under Armour will have four times as many athletes at the Rio Olympics com-pared to London, including Michael Phelps, Andy Murray and Natasha Hastings.

In the U.K., Tottenham Hotspur qualified for champion play this sea-son, and Southampton will be playing Europa league football in their first season in Under Armour kits next month. Revenues in the U.K. more than doubled in the second quarter. Plank added, “The U.K. is far and away our largest market in Europe, so we’re driving awareness to places that moved the needle for business.”

In the U.S., Under Armour recently signed UCLA and Cal Berkeley. Plank noted that California represents roughly 12 percent of the U.S. population. Sports Authority also closed many doors in California and Plank noted that Kohl’s has 100 stores across the state. Plank added, “This is a great example of how we’re thinking all the way through all the assets that we could bring to bear to get after the opportunity in that very, very key market.”

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Shimano Corp. expects sales to fall twice as fast this year than it did three months ago due to a global oversupply of bicycles.

The Japanese company reported high bicycle inventories in the United States, unfavorable weather in Europe and weak consumer spend-ing in China contributed to significantly weaker results in the first half ended June 30 compared with a year earlier.

The results prompted the Japanese maker of bicycle components and fishing gear to signifi-cantly lower its sales and earnings forecast for the full year.

Shimano’s total sales for the six months end-ed June 30 reached ¥166.4 billion ($1.54 bil-lion), down 15.3 percent from a year earlier. Gross margin was flat at 41.1 percent. Operating income declined 24.7 percent to ¥34.2 million ($317 million), while ordinary income was off 36.3 percent to ¥31.6 million ($293 million). Shimano reported net income of ¥22.9 billion ($21 million) a decline of 37.3 percent.

Bike Inventories High EverywhereNet sales at the Bicycle Components segment decreased 18.6 percent from the same period of the previous year to ¥132.6 billion yen, while operating income decreased 28.5 percent to ¥30.6 billion yen.

In North America, retail sales of bicycles were somewhat weaker than the year earlier quarter and distributor inventories of bicycles remain high, Shimano reported. U.S. bike wholesalers held 18.9 percent more bikes in their inventory at the end of May compared with a year earlier, which marked a big improvement from the end of 2015, when inventory levels were estimated to be 44 percent higher than a year earlier, accord-ing to the Bicycle Product Suppliers Association (BPSA). The trade association has estimated U.S. bike sales declined 8.4 percent in May and were down 5.7 percent through the first five months of 2016.

In Europe, bad weather in March and April greatly undermined retail sales of bicycles, resulting in a higher level of distrib-utor inventories. In China, distributor inven-tories began heading to an appropriate level despite continued weakness in retail sales of sports bicycles, which fell last year as the coun-try economy slowed.

Shimano said retail sales of sports bicycles in Southeast Asia remained robust, while those in South America continued to be soft because of the economic slowdown and weak currencies.

In Japan, retail sales of sports bicycles, which had been robust until the previous year, lost momentum and distributor inventories have

become somewhat high. Retail sales of commu-nity bicycles remained weak, continuing from the previous year.

Fishing Tackle Sales FlatNet sales at Shimano’s fishing segment increased 0.6 percent from the same period of the previous year to ¥33.6 million, while operating income increased 37.2 percent to ¥3.66 billion yen.

Despite the negative impact of an earthquake in Kumamoto in April, sales in Japan exceeded the level of the same period of the previous year. Sales in the rest of Asia remained robust, led by South Korea and Taiwan in the East Asian market. Sales in North America, Europe, and Australia did not fully recover from the dip in the first quarter.

Slashing ExpectationsShimano ended the first half of the year with in-ventory valued at $53.6 billion, down 11.3 percent from a year earlier, with most of the decline com-ing from merchandise and finished goods.

The company’s adjusted forecast for 2016 calls for net sales to decline 14.2 percent, com-pared with a decline of 7.6 percent forecast April 26. Operating income and net income are fore-cast to fall 20.1 and 37.7 percent, compared to a previous forecast of -5.9 and -30 percent.

SHIMANO CORP. SLASHES 2015 GUIDANCE

Photo courtesy Shimano

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BANKRUPTCIES, MAP HURT OAKLEY, RAY-BAN IN U.S.Luxottica Group lowered its full-year guidance July 25 to reflect lower sales of Oakley products in the U.S. sporting goods channel and a drop in Ray Ban sales at Amazon and other online retailers following implementation of a new Minimum Advertised Price (MAP) policy by the brand.

The Italian optical giant reported its North American wholesale revenues fell to €268 million in the quarter that ended June 30, down 8.4 percent from €293 million a year ear-lier, or down 5.8 percent in currency-neutral (c-n) terms. While the results include sales of prescription eyewear under dozens of licensed fashion brands to department stores, opticians and other retail outlets, Luxottica attributed most of the decline to Oakley and Ray-Ban. For the first half ended June 30, North American wholesale revenue declined 2.5 percent (-1.6 percent c-n.)

“That’s a positive optical business and a some-what more challenging sports business,” said Paolo Alberti, Luxottica’s EVP Wholesale.

Ray-Ban Moves to MAPAlberti explained that Luxottica’s decision to in-troduce MAP across its other four proprietary brands had a major impact on Ray-Ban. MAP polices control when and by how much retailers can advertise a product below a certain price. While legal in the United States, they are pro-hibited in the European Union.

“Some of our online clients in particular have decreased their sales by 50 percent, 60 percent, 70 percent,” Alberti said of Ray-Ban’s wholesale business. “And one very large one, that begins with an ‘A’, actually has decreased their sales by 90 percent over the last two weeks. Months from

now the average unit price for our Ray-Ban sales will go up and that’s going to help all our busi-ness, both retail and wholesale.”

To help enforce MAP, Luxottica is now embedding RFIC tags into Ray-Ban products so it can determine where violators bought their product.

“If they are not buying from us and they’re buying from diverters, we will be able to also close the diverter,” said Alberti.

That could prove useful in combating unauthorized sales by Costco Wholesale Corp., which is known for sourcing high-end brands from the so-called overseas distributors and other parts of the so-called “gray market,” and offering them at deep discounts.

Oakley’s Sporting Goods Sales CraterThe decline at Oakley, which has long run one of the best enforced MAP policies in the U.S. sporting goods channel, was attributed to problems in the sporting goods channel. Alberti noted that the brand’s sales into the optical channel have grown in the high- single-digit range since January and were up double-digits in Australia.

Luxottica’s CEO of Product and Operations, Massimo Vian, acknowledged that Oakley is “struggling more than planned in the sports channel this year,” but added that Luxottica responded in June by accelerating integration of the brand’s wholesale sports and 250-store retail business into the rest of its U.S. and global operations. Under that plan, Oakley’s product design, research and development will remain based at its Foothill Ranch, CA headquarters, where Luxottica doubled capital spending this year to create the most advanced and

automated factory in the globe for injected high- performance frames and lenses.

Oakley’s wholesale sports division will report to Luxottica’s U.S. wholesale headquarters in New York, while its retail division will report to an office in Mason, OH. Oakley is also nar-rowing the assortment of apparel, footwear and accessories.

“We’ll be more focused,” pledged Vian. “We will have less verticals, and you’ll be able to see immediate effect on Spring 2017 new collections.”

Luxottica reported its North America Retail revenues reached €1.12 billion in the quarter, down 1.2 percent (+1.1 percent c-n) from a year earlier thanks to modest same-store sales growth at LensCrafters and a rebound in same-store sales at Sunglass Hut, which has accelerated since the end of the quarter.

Stores in tourism destinations performed worse but improved in California, Florida and New York in June and July. Sales remain weak in Las Vegas and Orlando but grew by more than 30 percent at SunglassHut.com in the first half in North America after accelerating in the second quarter.

For the first half, Luxottica’s consolidated North American sales reached €2.74 billion, which was flat in currency-neutral terms. Glob-ally, consolidated net sales reached €2.45 billion ($2.8 billion), up 2 percent from the first half of 2015.

Citing the second-quarter results and increasing uncertainty in many markets, Luxottica lowered its guidance for the full year. The company now expects sales, adjusted op-erating income and adjusted net income to grow 2 to 3 percent in currency-neutral terms compared with 5 to 6 percent.

Photo courtesy Luxottica

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