NEW YORK — Better gross profit allowed Fila Holding SpA to substantially reduce its losses in the first quarter even as sales fell sharply.
For the three months ended March 31, the Biella, Italy-based sportswear and footwear marketer reported a net loss of $7.4 million, or 7 cents an American depository share. By comparison, last year, the company lost a heftier $36.3 million, or 91 cents. Figures have been converted from euros at current exchange rates. Calculating at average exchange, Fila said the first-quarter net loss was $6.9 million versus $27.7 million a year ago.
Net revenues for the period plunged 20.5 percent to $227.6 million from $286.5 million, while at average exchange, they dipped a more modest 2.3 percent to $221.3 million from $226.6 million. Fila said the discontinuation of some subsidiaries and the depreciation of the dollar against the euro negatively subtracted about 20 million euros from the top line.
A 410 basis point improvement in gross profit to 40.4 percent of revenues from 36.3 percent a year ago was critical to the boosted bottom line. Fila said the higher profit margin was primarily due to the combined effects of previously implemented efficiency actions, the closure or discontinuation of some less profitable subsidiaries, reductions in inventory and more selective distribution.
In a statement, chief executive officer Marco Isaia said, “The positive results Fila continues to report despite the critical economic scenario confirm the validity of the long-term strategy adopted by management, improving the sales mix despite the volume reduction, with a strong focus on more highly profitable brands and products and on constant supervision of all activities with a view to healthy corporate management. This confirms our conviction that the company has all the right fundamentals to react swiftly and effectively to unfavorable economic conditions and to pursue its mission to reinforce and reposition the brand internationally.”
While both apparel and footwear sales regressed in the U.S and Europe, the declines were far greater in the footwear segment. Apparel revenues slipped 3 percent in the U.S and Europe but footwear shriveled 20 and 31 percent in those markets, respectively. Overall, total apparel revenues amassed to $85.7 million in the quarter.
Holding di Partecipazioni Industriali SpA agreed to sell the operating businesses of Fila to an affiliate of U.S. investment fund Cerebrus for $351 million in cash plus the assumption of some debt. The sale is scheduled to close in June.