Shares of Ashworth Inc. fell 6 percent Wednesday, a day after the golf apparel specialist reported a $9.6 million third-quarter loss and said it was exploring strategic alternatives, including a possible sale or merger.
This story first appeared in the September 11, 2008 issue of WWD. Subscribe Today.
Ashworth’s stock declined almost 30 percent, to $2.83, in morning trading before a rebound to $3.75, down 24 cents, or 6 percent.
The company said that, in order to enhance shareholder value and “capitalize on the global strength of the Ashworth brand,” it was exploring the possibility of a sale, merger or other transaction and retained Kurt Salmon Associates Capital Advisors.
The firm’s $9.6 million loss equaled 65 cents a diluted share, compared with a loss of $5.6 million, or 39 cents, during the third quarter of last year. The red ink far exceeded the 14 cent-a-share loss expected by analysts.
Sales retreated 8.7 percent, to $45.2 million from $49.5 million, despite a 5.5 percent increase in Ashworth’s core golf business, to $18.5 million from $17.2 million. However, the company said on a conference call with analysts that, because of difficult retail conditions, it anticipated golf sales to move lower in the fourth quarter despite significant investments in product and personnel.
Collegiate apparel revenues dropped 7.2 percent to $11.7 million, corporate revenues fell 31.5 percent to $4.3 million and retail revenues sank 30.9 percent to $1.1 million during the quarter. International business contracted 14.4 percent to $7.3 million, mainly because of weakness in Europe, while revenues from the company’s outlet stores were off 19.8 percent to $2.6 million.
Gross margin contracted 330 basis points to 34.9 percent of sales because of “increased discounting, higher product costs as a result of fixed overhead allocated to lower sales volumes, higher material and transportation costs, a higher volume of off-price sales and increased inventory reserves,” the company said.