Oshkosh B'Gosh, Inc. Reports Third Quarter 2004 Results - Gross
Margin Increases 380 Basis Points - OSHKOSH, Wis., Oct. 20
/PRNewswire-FirstCall/ -- Oshkosh B'Gosh, Inc. (NASDAQ:GOSHA),
today reported financial results for its third quarter ended
October 2, 2004. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040614/NYM031LOGO-a ) For the
third quarter, net sales were $115.2 million compared to $124.1
million last year. A 2.7% decline in comparable store sales was
partially offset by seven additional stores compared to the
year-ago period and resulted in retail sales of $72.9 million
versus $73.3 million last year. Wholesale sales contributed $41.5
million compared to $50.0 million last year. The previously
announced Kids "R" Us store closings as well as tighter targeted
inventory levels at certain of the Company's wholesale customers
resulted in reduced Fall 2004 bookings. During the quarter, the
Company opened one Family Lifestyle store, ending the quarter with
169 total retail locations, including nine Family Lifestyle stores.
Gross margin increased 380 basis points to 39.8% from 36.0%. The
improvement is a result of a sales mix shift towards higher margin
retail sales, more efficient supply chain execution, and a lower
level of "closeout" promotional sales. Selling, general and
administrative expenses decreased by approximately $0.5 million to
$36.9 million compared to $37.4 million despite the increased
number of retail stores. This is primarily attributed to cost
containment efforts in various corporate support functions. Net
income increased 18.0% to $8.0 million, or $0.68 per diluted share,
compared to net income of $6.8 million, or $0.57 per diluted share,
last year. For the first nine months, net sales were $277.8 million
compared to $307.9 million last year. Net income for the first nine
months totaled $5.2 million, or $0.44 per diluted share, reflecting
the aggressive promotional strategy the Company implemented in the
first quarter. Excluding the $1.2 million gain on the sale of the
vacant OshKosh, Wisconsin distribution facility, net income for the
nine-month period was $4.5 million, or $0.38 per diluted share,
versus net income of $6.2 million, or $0.52 per diluted share, in
the prior nine-month period. Douglas W. Hyde, Chairman and Chief
Executive Officer, said, "By staying focused on the things that we
can control, we believe that we have now stabilized our core
wholesale and outlet businesses and have begun to see signs of a
turnaround in recent months. Through improvements in the design and
marketing of our merchandise, we continue to strengthen our brand
equity with our customers, which we believe in turn will help spur
longer-term growth in our sales." "We are encouraged by the
improved results of the third quarter and believe that this year of
transition will prove to be a successful one. We are also pleased
with the consumer reaction to our nine family lifestyle stores, our
newest growth vehicle, and remain on target to open six more by
year-end. To support both existing and future lifestyle stores, we
have developed a comprehensive marketing program that includes
family-focused, interactive activities designed to drive traffic in
the fourth quarter. On a broader scale, we believe these marketing
initiatives will ultimately strengthen the long-term emotional
connection between the OshKosh B'Gosh brand and our core consumer
base, thus enhancing brand loyalty and fueling future growth of the
OshKosh B'Gosh brand in all of our sales channels." Given sales
growth has taken somewhat longer than anticipated to return, the
Company now expects annual net sales to be in the range of $383
million to $390 million, with retail sales accounting for
approximately 65% of the total. Nevertheless, improvements in gross
margin percentage over prior year levels are anticipated to
continue to positively impact the bottom line. Taking both of these
factors into account, diluted earnings per share for the full year
are now expected to be $0.75 to $0.85, at the lower end of the
Company's original estimate of $0.75 to $0.95 per diluted share.
OshKosh B'Gosh will host a webcast of its third quarter results
conference call today at 10:00 a.m., Eastern Time. Investors and
the media are invited to listen to the call at the Company's web
site, http://www.oshkoshbgosh.com/. An archive of the webcast will
be available on the same site. OshKosh B'Gosh, Inc. is best known
as a premier marketer of quality children's apparel and
accessories, available in over 50 countries around the world. The
Company is headquartered in Oshkosh, Wisconsin. Statements
contained herein that relate to the Company's future performance
including, without limitation, statements with respect to the
Company's anticipated financial position, results of operations or
level of businesses for 2004 or any other future period, are
"forward-looking statements" within the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Such
statements, which are generally indicated by words or phrases such
as "plan," "estimate," "guidance," "project," "anticipate,"
"reaffirm," "outlook," "the Company believes," "management
expects," "currently anticipates," and similar phrases are based on
current expectations only and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those
anticipated, projected, or estimated. Among the factors that could
cause actual results to materially differ include the level of
consumer spending for apparel, particularly in the children's wear
segment; risks associated with competition in the market place,
including the financial condition of and consolidations,
restructurings and other ownership changes in, the apparel and
related products industry and the retail industry, the introduction
of new products or pricing changes by the Company's competitors,
price deflation in the apparel industry, and the Company's ability
to remain competitive with respect to product, service and value;
risks associated with the Company's dependence on sales to a
limited number of large department and specialty store customers,
including risks related to customer requirements for vendor margin
support, as well as risks related to extending credit to large
customers; risks associated with possible deterioration in the
strength of the retail industry, including, but not limited to,
business conditions and the economy, natural disasters, and the
unanticipated loss of a major customer; risks related to the
failure of Company suppliers to timely deliver needed raw
materials, risks associated with importing its products into the
United States under current and future customs and quota rules and
regulations which are becoming more stressed, risks associated with
importing its products using a global transportation matrix
including a number of ports that are experiencing capacity
constraints and the Company's ability to correctly balance the
level of its commitments with actual orders; risks associated with
terrorist activities as well as risks associated with foreign
operations including global disease management; risks related to
the Company's ability to defend and protect its trademarks and
other proprietary rights and other risks related to managing
intellectual property issues. In addition, the inability to ship
Company products within agreed time frames due to unanticipated
manufacturing, distribution system or freight carrier delays or the
failure of Company contractors to deliver products within scheduled
time frames are risk factors in ongoing business. As a part of the
Company's product sourcing strategy, it routinely contracts for
apparel products produced by contractors in Asia, Africa, Mexico
and Central America. If financial, political or other related
difficulties were to adversely impact the Company's contractors in
these regions, it could disrupt the supply of product contracted
for by the Company. The forward-looking statements included herein
are only made as of the date of this press release. The Company
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (In thousands) October 2,
January 3, 2004 2004* (unaudited) ASSETS Current assets Cash and
cash equivalents $ 12,811 $ 23,931 Accounts receivable, net 18,142
16,669 Inventories 72,604 61,358 Prepaid expenses and other current
assets 9,929 8,316 Deferred income taxes 7,800 10,100 Total current
assets 121,286 120,374 Property, plant and equipment 75,448 72,416
Less accumulated depreciation and amortization 52,079 48,720 Net
property, plant and equipment 23,369 23,696 Non-current deferred
income taxes 2,350 2,000 Other assets 5,333 5,855 Total assets $
152,338 $ 151,925 LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities Accounts payable $ 16,741 $ 16,961 Accrued liabilities
32,641 33,552 Total current liabilities 49,382 50,513 Employee
benefit plan liabilities 12,789 13,647 Shareholders' equity
Preferred stock -- -- Common stock: Class A 96 94 Class B 22 22
Additional paid-in capital 3,616 -- Retained earnings 89,062 87,649
Unearned compensation under restricted stock plan (2,629) -- Total
shareholders' equity 90,167 87,765 Total liabilities and
shareholders' equity $ 152,338 $ 151,925 *Condensed from audited
financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (In thousands,
except per share amounts) (Unaudited) Three-Month Period Nine-Month
Period Ended Ended October 2, October 4, October 2, October 4, 2004
2003 2004 2003 Net Sales $ 115,187 $ 124,097 $ 277,775 $307,930
Cost of products sold 69,368 79,441 169,386 191,870 Gross profit
45,819 44,656 108,389 116,060 Selling, general and administrative
expenses 36,875 37,400 110,435 113,745 Royalty income, net (3,556)
(3,679) (9,013) (7,845) (Gain) loss on sale of assets (60) 14
(1,161) 25 Operating income 12,560 10,921 8,128 10,135 Other income
(expense): Interest expense (59) (216) (159) (473) Interest income
24 60 137 156 Miscellaneous 1 2 10 8 Other income (expense) - net
(34) (154) (12) (309) Income before income taxes 12,526 10,767
8,116 9,826 Income taxes 4,523 3,984 2,922 3,636 Net income $ 8,003
$ 6,783 $ 5,194 $ 6,190 Net income per common share Basic -- Class
A $ 0.70 $ 0.59 $ 0.45 $ 0.53 Basic -- Class B $ 0.61 $ 0.51 $ 0.39
$ 0.46 Diluted $ 0.68 $ 0.57 $ 0.44 $ 0.52 Weighted average common
shares outstanding Basic -- Class A 9,579 9,663 9,552 9,688 Basic
-- Class B 2,183 2,193 2,184 2,193 Diluted 11,815 11,968 11,798
12,001 Cash dividends per common share Class A $ 0.110 $ 0.110 $
0.330 $ 0.250 Class B $ 0.095 $ 0.095 $ 0.285 $ 0.215 OSHKOSH
B'GOSH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of
Cash Flows (In thousands) (Unaudited) Nine-Month Period Ended
October 2, October 4, 2004 2003 Cash flows from operating
activities Net income $ 5,194 $ 6,190 Depreciation and amortization
4,803 5,266 Deferred income taxes 1,950 (100) Income tax benefit
from stock options exercised 42 302 Items in net income not
affecting cash and cash equivalents (1,484) 326 Changes in current
assets (14,332) (34,553) Changes in current liabilities (1,131)
2,594 Net cash used in operating activities (4,958) (19,975) Cash
flows from investing activities Additions to property, plant and
equipment (4,521) (2,780) Proceeds from disposal of assets 2,133
129 Changes in other assets (405) (445) Net cash used in investing
activities (2,793) (3,096) Cash flows from financing activities
Dividends paid (3,781) (2,893) Net proceeds from issuance of common
shares 412 678 Repurchase of common shares -- (3,845) Net cash used
in financing activities (3,369) (6,060) Net decrease in cash and
cash equivalents (11,120) (29,131) Cash and cash equivalents at
beginning of period 23,931 36,198 Cash and cash equivalents at end
of period $12,811 $7,067 See notes to condensed consolidated
financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Summary
of Net Sales Net Sales (dollars in millions) Domestic Wholesale
Retail Other Total Three months ended: October 2, 2004 $ 41.5 $
72.9 $ 0.8 $ 115.2 October 4, 2003 50.0 73.3 0.8 124.1 Decrease $
(8.5) $ (0.4) $ -- $ (8.9) Percent decrease (17.0%) (0.5%) --
(7.2%) Nine months ended: October 2, 2004 $ 102.6 $ 172.9 $ 2.3 $
277.8 October 4, 2003 133.2 172.4 2.3 307.9 Increase (decrease) $
(30.6) $ 0.5 $ -- $ (30.1) Percent increase (decrease) (23.0%) 0.3%
-- (9.8%)
http://www.newscom.com/cgi-bin/prnh/20040614/NYM031LOGO-aDATASOURCE:
Oshkosh B'Gosh, Inc. CONTACT: David L. Omachinski, President and
Chief Operating Officer, +1-920-232-4140, or Michael L. Heider,
Vice President Finance, Treasurer and Chief Financial Officer,
+1-920-232-4418, both of OshKosh B'Gosh, Inc.; or Investor
Relations: Melissa Myron, or Rachel Albert, both of Financial
Dynamics, +1-212-850-5600, for OshKosh B'Gosh, Inc. Web site:
http://www.oshkoshbgosh.com/
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