Cutter & Buck Reports Preliminary 4Q And Fiscal Year 2001 Results

SEATTLE - Golf apparel manufacturer Cutter & Buck Inc. (Nasdaq: CBUK) expects to report net sales for the fourth quarter ended April 30, 2001 decreased 2.9 percent to approximately $53.0 million, compared to $54.6 million for the same quarter a year ago. Net sales for fiscal 2001 increased 11.5 percent to approximately $170.0 million compared to $152.4 million for fiscal 2000. The company also expects to report diluted earnings per share for the fourth quarter 2001 in the range of $0.02 to $0.05, and diluted earnings per share for fiscal year 2001 in the range of $0.34 to $0.37.
"These results are less than we planned," says Harvey Jones, chairman & CEO. "There were a number of factors that impacted the fourth quarter including: a slowdown in corporate sales, which historically account for over 1/3 of revenues and were more susceptible to the economic downturn; a significant reduction in the number of golf rounds played, reflecting the unusually cold Winter and Spring weather and the slower economy; increased off-price and liquidation sales, which disposed of the excess Fall inventory from our third quarter, but reduced gross margins; and a cost structure that assumed a continued strong economy and sales growth, with limited short-term flexibility.
"During the first half of fiscal year 2001, we believed the strong economy would continue, and we invested in infrastructure and new businesses with the expectation that the related costs would be covered by sales growth," adds Jones. "In December, as sales began to slow we implemented cost control initiatives and plan to continue those initiatives in fiscal year 2002, including: reducing operating expenses; restraining capital expenditures, including significantly slowing company-owned retail store expansion; reducing purchases to enhance inventory turns in the back half of fiscal year 2002; and managing our business to be cash flow positive in fiscal year 2002."
"We reduced inventory by approximately $6 million during the fourth quarter to an estimated $55 million," says Marty Marks, president & COO. "Although we have more Spring fashion inventory than anticipated due to the sales shortfall, our total fashion inventories are slightly down from the prior year at just over $12 million. Classics inventory and our new company-owned retail stores generally accounted for the year over year inventory growth of approximately 49 percent.
"To provide some context for the current trading price of our stock," continues Marks, "at $5.66 a share, the stock market values us at: 35 percent of sales, 64 percent of book value, and between 15.0-16.5 times expected fiscal year 2001 earnings. We suspect the continued short position of 1,087,870 shares as of April 12, 2001 may be negatively impacting the price of the stock."
"As of April 30, 2001 we had over $7 million in cash with approximately $15 million available under our credit facility," comments Steve Lowber, vice president and CFO. "We are carefully managing assets and slowing expansion plans for additional company-owned retail stores, in order to achieve positive cash flow during fiscal year 2002. We are well positioned to last out the economic downturn and then take advantage of an upturn in economic conditions."