NEW YORK — Surging apparel sales contributed to substantial bottom-line gains for Reebok International Ltd. in the third quarter.

This story first appeared in the October 24, 2002 issue of WWD.  Subscribe Today.

For the three months ended Sept. 30, the Canton, Mass.-based footwear and apparel titan reported a 26.5 percent improvement in earnings to $53.4 million, or 81 cents per diluted share. That compares with last year’s quarter when Reebok recorded net income of $42.2 million, or 66 cents. Earnings per share eclipsed Wall Street estimates by 3 cents.

Sales for the period grew 7.6 percent to $911.6 million from $847.3 million a year ago. Total apparel sales led the pack, gaining 15.2 percent to $345.6 million from $300 million last year, while footwear sales increased a more modest 3.4 percent to $566 million from $547.2 million in the prior-year period.

“Our U.S. apparel business had a sales increase in the quarter of 30 percent,” said chief executive officer Paul Fireman in a statement. “Both Reebok branded apparel and our sports licensing product are performing well at retail. Retailer and consumer demand for our sports licensed product continues to exceed our expectations. During the third quarter, all 32 NFL teams took the field in Reebok apparel. And when the basketball season officially begins this month, 19 NBA teams will be dressed in Reebok apparel.”

Also adding to the bottom line was a gross margin improvement of 80 basis points to 37.5 percent of sales from the year-ago level of 36.7 percent. Fireman said the gross margin increase emerged across all of the company’s brands in the key markets of North America and Europe, and was attributable to reduced returns and lower rates of cancellations.

Looking ahead, Reebok reported that its total worldwide backlog of open orders scheduled for delivery from October 2002 through March 2003 for the Reebok brand increased 14 percent over the prior year’s levels. However, the company cautioned that the comparison is not indicative of future overall sales trends since it includes the company’s new sports licensing business, which did not begin operations until March 2001. As a result, Reebok estimates sales for the fourth quarter will grow in the range of 8 to 11 percent over last year’s levels.

Overall, for the first nine months of the year, Reebok’s reported net income climbed 12.7 percent to $110 million, or $1.71 per diluted share. That compares with the prior-year period when the company took in profits of $97.6 million, or $1.56. A change in accounting principle regarding the amortization of goodwill cut aftertax profits $5.1 million in this year’s period.

Sales for the first three quarters increased 15.8 percent to $2.37 billion from $2.33 billion a year ago. Apparel sales, which rose 12.9 percent to $772.1 million from $684 million, offset a 3.1 percent decline in footwear revenue, which dropped to $1.59 billion from $1.64 billion last year.

In guidance, Reebok said it is on target to meet its previous fourth-quarter EPS estimate of 23 to 25 cents, which would result in full-year EPS growth of 20 to 22 percent.