MOSS ADAMS CAPITAL: Apparel and foowear market monitor highlights notable deals, stock prices and results.
Details on Industry Insight.
I thought it would be useful to examine results for publicly traded companies in the industry, and compare those to other apparel companies. I also looked at results for action sports retailers and for a wide range of other retailers.
Many companies that make or sell consumer goods are seeing slower sales as the economy cools and their stocks are getting hammered on Wall Street.
After I looked at the data, it would be hard to describe the surf sector as struggling - at least not more than any other consumer sector in this tough economy.
Volcom, Hurley and Billabong all reported strong top-line growth in their latest results.
Industry leader Quiksilver is still working through the impacts of its Rossignol acquisition, now categorized as a discontinued operation as the company moves to sell the division. Excluding Rossignol, Quiksilver recorded double-digit revenue growth.
One trend is very apparent. Diversified, global sales are crucial and are boosting sales for many companies - no matter the sector - as U.S. sales soften.
That trend is pretty consistent no matter if the company is a fashion retailer like Guess? or a sports powerhouse like Nike.
Surf/action sports brands
Volcom revenue grew 59 percent overall for the quarter ended March 31. In its U.S. segment, product revenue grew 2 percent. The company recorded $25.2 million in sales from Europe and $6.2 million in sales from Electric, which it acquired in January this year. Volcom increased its guidance for the full year.
The latest available results for Billabong were for the six months ended Dec. 31, 2007. U.S sales rose 13.2 percent in constant currency terms during that period. European sales increased 19.6 percent in constant currency terms. Australia/Asia sales increased 16.8 percent in constant currency terms.
Hurley recorded its best results ever in the quarter ended Feb. 29, according to parent company Nike. Hurley revenues increased 33 percent.
Quiksilver net revenues for the quarter ended April 30 grew 15 percent (excluding Rossignol). Sales in the Americas grew 5 percent, driven by DC Shoes. Asia/Pacific and European sales rose 23 percent, which includes a favorable impact from currency exchange rates. Same-store sales at company-owned stores were down in the U.S.
I looked at a few other apparel and footwear companies to see how they are doing. The results are mixed. Again, international sales are boosting many players.
Nike's revenues mirror the international trend. U.S. sales grew 5 percent while sales in Europe grew 23 percent and in Asia, 27 percent. Total sales grew 16 percent.
Net sales for Columbia Sportwear grew 3 percent in the quarter ended March 31. Sales were flat in the U.S. In the Latin America and Asia Pacific region, sales grew 20 percent. Sales grew 4 percent in Canada, and declined 3 percent in Columbia's Europe, Middle-East & Africa region.
Guess? is doing very well in a tough economy. Total revenue for the quarter ended May 3 grew 29 percent. The company said two-thirds of the revenue growth came from the company's European and Asian businesses. Comp store sales at North American Guess stores rose 7 percent. Wholesale revenue was also strong, increasing 26.9 percent.
Warnaco saw revenues increase 18 percent in the quarter ended April 5. Sportswear revenue grew 28 percent, led by demand in Europe and Asia for the Calvin Klein brand. Warnaco raised its guidance for the year.
Jones Apparel is struggling. Revenue fell 9.6 percent in the quarter ended April 5. Same-store sales at company stores fell 8.6 percent. The company lowered its guidance for the full year.
Kenneth Cole is also having a tough time. Revenue fell 5.2 percent for the quarter ended March 31. While same-store sales at company stores increased 3.4 percent, wholesale revenue fell 10.7 percent.
Retailer customers and competitors
The retailers that carry surf brands are posting results similar to other retailers.
ActionWatch provided me with sales data for the independent board retailers it tracks that were in the panel last year during the first quarter.
For the first quarter of 2008, sales grew 4.4 percent compared to the same period last year.
Almost all categories produced positive results, including apparel (up 7.4 percent), footwear (up 3.6 percent), accessories (up 14.6 percent) and wetsuits (up 13.4 percent). Hardgoods took the biggest tumble (down 8.3 percent).
PacSun reported a 0.4 percent sales decline in the first quarter versus the same quarter last year. Same-store sales fell 1 percent, below expectations. The company's same-store sales are taking a hit as the company exits footwear to focus on apparel. Also, PacSun has been hurt as more competitors carry action sports brands at the malls and the company's stores grew dated because it did not refresh the store look - a project now underway under CEO Sally Frame Kasaks.
Zumiez sales rose 14.4 percent in the first quarter ended May 3, while same-store sales declined 0.8 percent.
The results of many action sports retailers mirror the larger retail trends.
Target retail sales in the first quarter grew 5 percent while same-store sales declined 0.7 percent.
Abercrombie & Fitch total company net sales increased 8 percent while same-store sales decreased 3 percent.
American Eagle total sales for the first quarter rose 5 percent while comparable store sales decreased 6 percent.
Tiffany & Co. worldwide sales grew 12 percent. Sales in the Americas region increased 6 percent. Same-store sales in the U.S. were flat. Sales in the Asia-Pacific region increased 21 percent. On a constant-exchange-rate basis, sales rose 10 percent. Sales in Europe increased 38 percent. On a constant-exchange-rate basis, European sales rose 30 percent.
REI reported 13.5 percent sales growth for 2007, the latest results available. Comp store sales grew 8.2 percent.