NEW YORK — Authentic Fitness Corp. should be able to increase revenues at a 25 percent pace in the near future on continued strength of the Speedo brand and rapid expansion of the Cole/Catalina swimwear brands and of retail stores, according to a research report from Morgan Stanley & Co.
Bruce Missett, an analyst at Morgan Stanley, expects overall net earnings in Authentic Fitness’s fiscal year ending June 1995 will grow 47 percent to $19.4 million, or 90 cents a share, from $13.2 million, or 67 cents, excluding a year-ago nonrecurring charge. Sales are expected to move ahead 35 percent to $241.2 million. For fiscal 1996, Missett looks for earnings of $25.2 million, or $1.15, on sales of $307.3 million.
Missett predicts Cole/Catalina’s sales and earnings to more than double this fiscal year. He believes Authentic Fitness “hit a home run” with the October 1993 Cole/Catalina acquisition and predicts Authentic Fitness will recoup all acquisition costs by the end of this fiscal year. He expects Cole/Catalina earnings before interest, taxes, depreciation and amortization (EBITDA) of $13.4 million on sales of $58.6 million in fiscal 1995 against $6.1 million on sales of $28.8 million in the prior year. For 1996, he expects operating profits will reach $17.8 million on sales of $76.2 million.
He said Cole/Catalina is aggressively expanding distribution through department stores with the Ann Cole and Oscar de la Renta brands, and through mass merchandisers, primarily Wal-Mart, with the Catalina brand.
For the retail operation, Missett expects EBITDA of $3.4 million this year on sales of $24.3 million against a $500,000 loss and sales of $4.7 million last year. He looks for EBITDA of $7.1 million on $57 million in sales in fiscal 1996.
At $450 in sales per square foot, the stores are running ahead of management’s goal of $425, said Missett. He added that the company’s first three retail units opening in Bally’s Healthclubs in Manhattan, Los Angeles, and Chicago will show even higher average sales per square foot.
Expansion plans for calender 1995 call for 100 street and mall locations, averaging 1,000 to 1,300 square feet, and 30 Bally’s locations, averaging 200 to 300 square feet. The company had 44 street and mall locations open at the end of calender 1994.
For Speedo, sales this year are projected to grow 12.1 percent to $126.7 million, while operating earnings should rise 13.7 percent to $26.5 million. For fiscal 1996, Speedo’s is expected to earn $28.8 million from operations, on sales of $139.3 million.
Missett thinks Speedo will get a boost from being the exclusive swimwear brand in the upcoming Summer Olympic games in Atlanta. Missett also cited the potential for big gains from this year’s introduction of the Miracle Swimsuit in the upcoming Victoria Secret Catalog and the launch of new swimwear products in Avon’s February catalog.
Meanwhile, sales at White Stag Ski division are expected to slide this year to $31.7 million from $32 million, with operating earnings down to $5.9 million from $6.2 million. For 1996, operating earnings are expected to reach $6.5 million on sales of $34.8 million.
— Fairchild News Service