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Cutter & Buck Sales & Earnings Sink
DECEMBER 08, 2005 --
Cutter & Buck's 2Q sales declined 5.3% year-over-year, driven by decreases in the corporate and golf business units. The decline was partially offset by sales increases in the specialty retail and consumer-direct business units. Net earnings plunged from $2.9 million to $900,000.
"The second quarter was impacted by the same factors that have impacted our previous quarters: that being product design and quality. While our strategic objectives address these issues, as we have said before, we will not see the impact of the changes we have implemented until the second half of this year," said Tom Wyatt, CEO. "We are transitioning to our new Spring line and new Classics line with updated and technical fabrications and more classic styling and colors. However, sales of our Fall line continued to be impacted by a weak product offering."
During 2Q, gross margin fell 360 basis points to 44.6%. "There were two primary reasons for the decrease in our second quarter margin," explained Ernie Johnson, CFO. "First, during the quarter, we were selling off our discontinued Classics inventory through our normal selling channels at discounted prices. We introduced our new Classics line earlier than in past years to coincide with the mailing of our new corporate catalog, so we needed to discount our discontinued styles earlier. In prior years, we began discounting our discontinued styles in October with delivery of the new styles in January. This year we began taking markdowns in August based upon the earlier delivery of the new styles in October and November. We expect to liquidate remaining discontinued Classics in January and early fourth quarter.
"The second cause of the lower margin this quarter is that we increased our inventory reserve by $200,000, primarily due to the weakness of the Fall Fashion merchandise, particularly in the golf channel. With this increase in the reserve, we believe that our discontinued Classics and Fall Fashion inventories are reflected in the balance sheet at their net realizable value."
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Categories
Sporting goods industry
Inventory
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Companies
Cutter & Buck Inc.
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business units
discontinued styles
consumer-direct business units
quarter margin
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Tom Wyatt
Ernie Johnson
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