AUTHENTIC FITNESS NET GAINS 71.6% IN FOURTH QUARTER

Byline: Valerie Seckler

NEW YORK--Powered by its Speedo swimwear and activewear, Cole and Catalina lines, as well as its own burgeoning retail chain, Authentic Fitness Corp. reported earnings grew 71.6 percent in the fourth quarter on a 38 percent increase in sales.
Net income for the quarter ended July 2 totaled $4.4 million, up from $2.5 million a year ago. Earnings per share grew 43 percent to 20 cents on an average of 21.6 million shares, compared with 14 cents on 17.5 million.
Fourth-quarter sales for the company, which is based in Van Nuys, Calif., rose to $59.8 million from $43.4 million.
Speedo products generated about $37.7 million or 63 percent of the fourth-quarter revenue; other swimwear, $11.9 million or 20 percent; skiwear, $7.8 million or 13 percent, and Speedo Authentic Fitness retail stores, $2.4 million or 4 percent, Linda J. Wachner, Authentic's chairman and ceo, said in an interview.
Wachner is bullish on the firm's retail chain of Speedo Authentic Fitness stores, whose typical 1,300-square-foot unit is generating sales of $425 per square foot.
"July was the stores' first million-dollar month," she said.
Seven Speedo units were opened in the fourth quarter, bringing the total to 19, and Wachner said the company is on track to have 50 stores in operation by Dec. 31.
The stores' sales in the fourth quarter, as well as the $300,000 profit they generated, were "well ahead of plan," Wachner noted.
She said the chain's growth strategy has been accelerated due to its strong performance; there now are plans for 200 Speedo stores by the end of 1996, rather than the 100 originally set. The stores will continue to be rolled out in both mall and freestanding locations.
For the fiscal year ended July 2, Authentic's earnings fell 18.3 percent to $7.9 million, or 41 cents a share, from $9.7 million or 56 cents, reflecting a nonrecurring charge in the latest year and an increased provision for income taxes. In the second quarter of fiscal 1994, Authentic recorded a one-time charge of $5.7 million, related to the acquisition of Catalina/Cole and a noncash extraordinary writeoff of 1.6 million, net of an income tax benefit of $900,000.
Yearend operating income moved ahead 35.9 percent to $26.5 million or 14.8 percent of sales, from $19.5 million or 14.6 percent.
Sales for the year gained 34.3 percent to $178.6 million from $132.9 million.
"I think Linda Wachner is building a great company, and the outstanding news of the day is that the company is planning 200 Speedo stores instead of 100," declared Buckingham Research analyst Laurence C. Leeds. "They have more than enough money to expand at that rate."
Leeds is projecting the firm's fiscal 1995 earnings will grow about 30 percent, lifting the bottom line to about $10.4 million. He estimates sales will move ahead 40 percent to about $250 million next year, almost double the company's fiscal 1993 sales of $133 million.
In response to a question, Wachner said Catalina, Authentic's mass-market swimwear brand, "was a strong performer in the quarter," but she declined to break out results.
While Leeds said Catalina represents a relatively small part of Authentic's overall business, he noted a test of swimwear last spring at Wal-Mart went well and said the retailer will probably buy the line in a bigger way.
Another mass market brand, White Stag, is showing a 25 percent increase in advance bookings for fall, according to the analyst.
"Linda Wachner's made White Stag an important resource for the Wal-Marts of the world," he observed.
Authentic's operating income also climbed steeply in the quarter, 53.8 percent to $8 million from $5.2 million.
A "better mix of regular versus off-price sales, along with the retail stores," accounted for the strong increase, explained Wachner.
The company's operating profit margin ballooned from 12 percent to 13.4 percent in the fourth quarter--at the high end of the range enjoyed by similar companies, said Leeds.
Wachner noted the company has strengthened its financial position by paying down its long-term debt, which reached a high of $85 million in 1990.
"As a result of the secondary stock offering in December, the company paid down approximately $50 million in debt to only $23 million at year's end," she said in the company statement. "Also, the refinancing of our $100 million bank facility in January lowered interest by approximately $1 million annually."
Leeds noted the firm's debt-to-equity ratio now stands at just 19 percent.
He also enthused: "Authentic now has one of the largest women's swimwear businesses, Speedo profits are growing at an enormous rate...and [Wachner's] building a strong retail chain from scratch."
Despite the strong report, Authentic's stock, traded on the New York Stock Exchange, slipped 1/8 Wednesday to close at 15 1/2.
--Fairchild News Service

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