NEW YORK — Russell Corp. was hit by higher costs and operational problems in the third quarter, partly because of Hurricanes Katrina and Rita.

The athletic apparel firm reported a decline in earnings of 41.5 percent to $15.8 million, or 47 cents a share, from $26.9 million, or 82 cents, a year earlier.

Sales edged up less than 1 percent to $424.6 million, with much of that increase coming from acquisitions, the company said. Russell has been on a buying spree in recent years and now owns Spalding, Moving Comfort, Huffy and Brooks Running, in addition to its core Russell, Jerzees and Mossy Oak brands.

The earnings results were in line with the company’s revised earnings forecast in September. Russell’s shares closed up 71 cents to $13.13 Thursday on the New York Stock Exchange.

“Not only did Katrina and eventually Rita impact our businesses with additional direct expenses, [but] the biggest impact in the quarter came from disruptions to our supply chain and the resulting expenses associated with expediting customer orders and stockkeeping-unit balancing,” Bob Koney, senior vice president and chief financial officer, said in a call with analysts Thursday.

Chief executive officer Jack Ward said 40 containers of “critical product” were lost or damaged. The port of Gulfport, Miss., Russell’s primary port of entry for finished goods and for shipment of fabric and products assembled in its operations in Central America and the Caribbean, suffered heavy damage.

“We are rapidly returning to normal efficiencies with most of our operational problems behind us,” Ward said. “Our shipping is returning to a more regular situation.”

Nonetheless, he said the company was not able to complete retail orders and is meeting with insurance carriers to cover some of those losses. The company also lost a major boys’ fleece program at Wal-Mart and had costs related to the elimination of its chief operating officer’s position. In addition, Russell said it faced a sharp increase in polyester prices. Polyester staple prices were 82 cents a lb. on Oct. 24, up from 69 cents on Sept. 26.

On a positive note, the Atlanta-based company saw strong sales of performance apparel in its core Russell brand and in its Brooks Running business, which Ward said “continues to meet or exceed every expectation we had when we made the acquisition 10 months ago.”

This story first appeared in the October 31, 2005 issue of WWD. Subscribe Today.

Russell reaffirmed its earnings projections for the full fiscal year. It expects to achieve earnings of between $1.25 and $1.26 a share, and sales of about $1.45 billion.

For the nine months, earnings dropped 40 percent to $22.6 million, or 68 cents, from $37.6 million, or $1.15. Sales edged up 12 percent to $1.08 billion from $964.2 million.

load comments
blog comments powered by Disqus