04 Feb RG Barry Brands Earnings up; Reaffirms Outlook for 2014 Revenue
R.G. Barry Corporation (NASDAQ: DFZ), today said that its second-quarter/first-half consolidated performance for fiscal year 2014 remained consistent with its previously discussed expectations for the period.
For the quarter ended December 28, 2013, the Company reported, on a consolidated basis:
- Net earnings of $6.1 million, or $0.53 per diluted share, up versus $5.3 million, or $0.46 per diluted share, in the second quarter of fiscal 2013;
- Net sales of $48.0 million compared to $48.5 million in the equivalent period last year;
- Gross profit as a percent of net sales at 42.7%, up 30 bps from 42.4% one year ago; and
- Selling, general and administrative expenses declined 9.5% to $10.8 million versus $11.9 million in the second quarter last year.
Consolidated six-month results included:
- Net earnings of $10.9 million, or $0.94 per diluted share, compared with $11.4 million, or $0.99 per diluted share, in the first half of fiscal 2013;
- Net sales of $89.9 million versus net sales of $95.7 million one year ago;
- Gross profit as a percent of net sales at 44.4% increased 110 bps from 43.3% in the first half of fiscal 2013; and
- Selling, general and administrative expenses of $22.7 million were relatively flat versus $22.9 million in the comparable period one year ago.
Footwear Segment
First half footwear net sales declined 7.5% to $71.9 million reflecting soft July-to-December 2013 retail business primarily in department store and off-price channels, partially offset by increased warehouse club and international shipments. Footwear net sales for the second quarter were $39.1 million versus $39.5 million in the equivalent period last year.
Footwear segment gross profit as a percentage of first half net sales rose 90 basis points to 41.4% from 40.5% in the comparable period of fiscal 2013; and quarterly gross profit as a percentage of net sales expanded 30 bps to 40.0% versus one year ago. The increases were primarily reflective of favorable changes in product and customer mix.
The segment generated first half operating profit of $19.6 million, down $0.4 million versus the first half last year as a result of lower sales volume partially offset by lower expenses in a variety of areas. Second quarter operating profit of $10.7 million increased 12.4% from $9.5 million in the second quarter of fiscal 2013. The increased quarterly operating profit principally reflected lower expenses in a number of categories, including reduced incentive bonus accruals.
Accessories Segment
Six-month net sales in the Accessories segment were flat at $18.0 million. For the quarter, accessories net sales decreased 1.3% to $8.9 million versus one year ago. The decline primarily resulted from the previously discussed strategic decision to reduce lower margin business in the off-price channel.
Accessories gross profit rose 2.5% to $10.2 million, and gross profit as a percentage of net sales expanded 140 basis points to 56.8% compared to the equivalent period a year ago. Quarterly gross profit and margins were relatively flat at $4.8 million or 54.4% of net sales.
Segment operating profits of $1.0 million for the quarter and $1.8 million for the half were off versus last year by 33% and 44% respectively, and showed the impact of the Company’s continuing investment in its long-term growth strategy for its Accessories segment.
Management Comments
“We continue to lead our peer group in many key performance metrics despite the challenging retail environment during the holiday selling season,” said Greg Tunney, President and Chief Executive Officer. “Our proven model and operational excellence permitted us to generate healthy profitability, while investing significant resources in our brands and building a business that will continue to meet the challenges of both today and tomorrow.”
Jose Ibarra, Senior Vice President Finance and Chief Financial Officer added, “We ended the half with a good retail sell-through. Our strategy of continuing to eliminate underperforming or lower margin components of the business impacted the top line, but gross margin as a percent of net sales improved by 110 basis points, despite the highly-promotional retail environment.
“We continue to experience economic headwinds and a challenging retail environment. While the Company is financially strong and well positioned to meet its long-term goals, these factors have led us to reaffirm our view that consolidated revenue this year will be down slightly compared with fiscal 2013,” Mr. Ibarra said.
Mr. Tunney concluded, “We remain committed to investing in long-term growth strategies for areas such as international and ecommerce, both of which grew during the first half, and to actively pursuing growth through category appropriate acquisitions. While the support of these strategies is expected to negatively impact profitability in the short-term, including the current fiscal year, we are confident that, over time, they will generate levels of growth and profitability that will keep RG Barry Brands a leader in the accessories marketplace.”