Short news...10/29/04

Ness Abruptly Leaves Road Runner Sports

Bill Ness abruptly resigned this week as president of Road Runner Sports, the California-based running specialty catalog and web retailer. Road Runner has recently started to expand into brick-and-mortar retailing with a planned store in Seattle and other locations are under negotiation. Ness had reportedly been under pressure from Road Runner CEO Mike Gottfredson and apparently resigned without another post lined up. In other running market news, long time Hind sales exec Donna Williams resigned to join Swix Sports.


Nike Launching National Women's Catalog

Nike announces the launch of its first national catalog for women. Featuring a full selection of Nike Women's products, this catalog will focus on helping the active woman not only learn more about Nike's product innovation, but the best way to achieve her fitness goals.
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The 56-page catalog will feature a full line of apparel, footwear and equipment products essential for today's active women and will be mailed 11 times per year in the US. Elite and everyday female athletes will showcase the best of Nike's women's Holiday 2004 line from innovative performance running, footwear, and apparel to gym basics for all types of workout classes. The new catalog complements Nike's marketing efforts on both the Internet and its nikewomen stores.


Puma Continues To Surge Ahead

Puma AG's 3Q showed another outstanding performance with growth in consolidated sales of 16.5% on a currency-neutral basis or by 14.6% to EUR461 million in Euro currency. Like for like, footwear sales grew by 13.9% (in euros 12.4%) to EUR301 million, apparel increased 19.3% (17.6%) to EUR130 million and accessories were up 27.1% (25.1%) to EUR31.0 million. Currency neutral sales for the first nine months jumped by 22.5%. In euros, sales were up 20.1% to EUR1,257 million, nearly reaching full year sales of FY2003. Footwear sales grew by 18.1% (in euros 16.2%) to EUR836 million, apparel by 28.5% (26.6%) to EUR339 million and accessories recognized the strongest growth of 39.8% (38.6%) reaching EUR82 million. Net earnings rose by 23.2% to EUR85 million in Q3 and by 42.2% to EUR220 million in the first nine months. Net return on sales reached 18.4% and 17.5% respectively.


CPSC Fines Two Fitness Companies $500,000

A fitness equipment manufacturer and a treadmill importer have agreed to pay a civil penalty to settle allegations that both companies failed to report a serious safety hazard with their treadmills to the federal government. Johnson Health Tech Co. Ltd., Taiwan, and Horizon Fitness Inc., DeForest, WI, have agreed to pay a total of $500,000 for allegedly violating federal reporting requirements by not informing the CPSC in a timely manner about problems with the control panel on the treadmills.

Between August 2000 and June 2001, Johnson Health Tech subcontracted to have motor control boards made for their treadmills, which were to be imported and distributed by Horizon Fitness. Between September 2000 and December 2001, Horizon imported over 10,000 treadmills that contained defective electronic control panels that caused the motor and walking belt to rapidly and unexpectedly accelerate. In some cases, the exercise machines also failed to stop when the safety key was activated.

Johnson and Horizon received 180 reports of "runaway" treadmills and safety stop-key failures between January 2001 and January 2002. Fifteen of these reports alleged injuries, including sprain, strains, a torn rotator cuff, bruises and serious friction burns. The companies never reported these incidents to CPSC. Instead, the companies attempted to correct these defects by redesigning the product on three occasions.

On January 14, 2002, three days after CPSC contacted Horizon to schedule an inspection of the company's documents, a full report was made to CPSC. In April 2002, CPSC and Horizon announced a voluntary recall of 5,900 defective "Paragon," "Quantum" and "Omega" brand treadmills.

According to federal law, manufacturers, distributors, and retailers are required to report to CPSC immediately (within 24 hours) after obtaining information which reasonably supports the conclusion that a product contains a defect which could create a substantial risk of injury to the public, presents an unreasonable risk of serious injury or death, or violates a federal safety standard.

In agreeing to settle the matter, Johnson Health Tech Co. and Horizon Fitness Inc. deny that the treadmills were defective and that they violated the reporting requirements of the Consumer Product Safety Act.


Johnson Ups Buyout Price 11.7%

Johnson Outdoor's board of directors has approved a definitive merger agreement with JO Acquisition Corp., a newly formed entity established by members of the family of the late Samuel C. Johnson, including Helen Johnson-Leipold, COB/CEO of Johnson Outdoors. Under the terms of the proposed merger, public shareholders of Johnson Outdoors would receive $20.10 per share in cash, and the members of the Johnson family would acquire 100% ownership of Johnson Outdoors. The family had originally offered shareholders $18, but that didn't sit well with them. The board of Johnson Outdoors acted upon the unanimous recommendation of a special committee of the company's independent directors and has recommended that shareholders vote for approval of the merger agreement. After careful consideration of many factors, including a thorough review with its independent advisors, the special committee determined that the merger was in the best interests of the company and its shareholders other than the Johnson family and JO Acquisition Corp. The special committee's independent financial advisor has delivered a written opinion to the effect that as of October 28, 2004, the merger consideration was fair from a financial point of view to the shareholders of Johnson Outdoors other than members of the Johnson family and JO Acquisition Corp. This determination by the special committee's independent financial advisor was based on and subject to assumptions and limitations set forth in its written opinion.

The $20.10 per share price represents a 21.2% premium to the average closing price of Johnson Outdoors Class A common stock for the 30 days prior to the February 20, 2004 announcement of the Johnson family's initial proposal to acquire 100% ownership of Johnson Outdoors, and a 53.7% premium to the average closing price for the 52 weeks prior to the February 20, 2004 announcement.


Columbia Posts Record 3Q Sales & Earnings

Columbia Sportswear announced record 3Q net sales of $415.8 million for the quarter ended September 30, 2004, an increase of 11.4%. The company reported record 3Q net income of $68.6 million, a 7.9%. 3Q EPS were $1.68 (diluted), compared to $1.56 (diluted). Compared to 3Q03, US sales increased 5.8% to $264.4 million, Other International sales increased 51.2% to $43.1 million, European sales increased 28.7% to $58.8 million, and Canadian sales increased 0.2% to $49.5 million for 3Q04.


Cabela's 3Q Revenues Rose 16%

Cabela's total 3Q revenue increased 15.9% to $383.8 million. Net income increased 61.2% to $16.5 million, or 25¢ per diluted share, compared to $10.2 million, or 19¢. During 3Q, direct revenue increased 3.8% to $221.0 million; retail revenue increased 36.8% to $140.5 million, despite a same-store sales decline of 3.0%; and financial services revenue increased 39.9% to $22.3 million. The comp-store decline was blamed on a delay in the printing and mailing of a card promotion. It was launched in September 2003, but it was still being mailed in 4Q04.


Soffe Had $22 Million In 3Q Revenues

Delta Apparel's MJ Soffe acquisition contributed $22.0 million in sales and $3.1 million in operating income during 1Q05. The Soffe segment exceeded its sales expectations in its military distribution channel and expects the strong sales in this channel to continue through the fiscal year. Demand for the Soffe brand continues to be strong and Delta continues to expand the Soffe product offering through the addition of new styles and colors. The new Soffe product line, coupled with proper inventory levels, should allow this segment to achieve increased sales through the spring selling season.


Genesco reached an agreement with Levi Strauss & Co. to renew its Dockers brand men's footwear license through December 31, 2006, with an option for an additional two-year term expiring December 31, 2008, subject to certain conditions.