The North Face Reports Record Sales of $103.8 Million For the Third Quarter of 1998
PR Newswire - October 29, 1998 16:45
SAN LEANDRO, Calif., Oct. 29 /PRNewswire/ -- The North Face, Inc. (Nasdaq: TNFI) today reported financial results for the third quarter and nine months ended September 30, 1998.
For the third quarter ended September 30, 1998, sales increased 19% to $103.8 million compared to $87.0 million for the third quarter of 1997. Net income for the quarter, excluding relocation and reorganization related charges for the period of $1.3 million, after-tax, or $0.11 per share, was $12.1 million, or $0.95 per share, compared to $10.8 million, or $0.92 per share, for the third quarter of 1997(1). The North Face has finalized a licensing and royalty agreement to sell The North Face products in China and Nepal which will result in fourth quarter revenue of $2.5 million. It was planned that this agreement would be consummated in the third quarter to offset the $2.1 million revenue decline in our international Asian business. The total international licensing and royalty revenue for the year is expected to be approximately $4.0 million, which is comparable to last year.
For the nine months ended September 30, 1998, sales increased 23% to $194.2 million compared to $157.4 million for the nine months ended September 30, 1997. Net income for the nine months, excluding one-time charges for facility closure and relocation and reorganization costs of $2.3 million, after-tax, or $0.19 per share, increased 21% to $10.9 million, or $0.89 per share, from $9.0 million, or $0.77 per share, in the comparable period of 1997. On a year-to-date basis, royalty revenue and related income from international markets declined $2.5 million and $1.3 million, respectively.
Jim Fifield, President and Chief Executive Officer, commented, "We are extremely pleased with our continued level of strong revenue and income growth in our core markets. In addition to reporting record profits, this is the first time The North Face has exceeded $100 million in sales in one quarter. Despite the lower revenue and earnings from the Asian market licenses, revenue and earnings from our core business performed very well with U.S. wholesale gross margins consistent with last year's third quarter figure of 46.6%. Operating expenses, excluding facility closure and relocation and reorganization related charges, as a percentage of sales decreased by 20 basis points in the quarter to 23.7% as compared to 1997. On a year-to-date basis, the comparable statistics are even more favorable with overall gross margins of 44.5% which is 10 basis points better than last year and operating expenses as a percentage of sales, improving by 40 basis points, excluding the one-time charges."
"During the quarter, we initiated an extremely successful sell-in to launch of The North Face's new rugged footwear line. Order taking for Spring 1999 deliveries commenced during the quarter and was significantly greater than our original plan and we believe represents one of the best launches of a footwear program in the industry. The technical features and innovation of these products are outstanding and directly compliment The North Face's existing line of technical apparel and equipment."
Highlights of the quarter:
* The Company's top performing product categories for the quarter included
Outerwear, Skiwear and the Ascentials line of accessories. Sales for
performance layering systems such as the Denali jacket and vest were
particularly strong. Skiwear sales were up sharply over last year as
the Company's redesigned line of waterproof, breathable products proved
extremely popular.
* Early Spring 1999 pre-season orders are coming in very positively with
order pace indicating a year-over-year growth rate of at least 20%,
excluding footwear sales.
* Three new retail outlet stores were opened during the quarter. The new
stores are located in Bend, Oregon; Carlsbad, California; and Birch Run,
Michigan.
* The North Face Summit Shop program, its shop-within-a-shop program,
exceeded expectations with 129 new shops being opened in the quarter.
This brings the total number of Summit Shops to 361 through September.
* The Company successfully completed the physical relocation of its
corporate offices to Colorado and is now fully staffed and functioning
very effectively in the Roaring Fork Valley.
* The acquisition of La Sportiva s.r.l. and La Sportiva USA was completed
at the beginning of the quarter.
* The Company entered into a new five-year $130 million Senior Secured
Revolving Credit Facility led by the Industrial Bank of Japan (IBJ)
Group, with BankAmerica and Banque National de Paris (BNP) as co-agents.
The new global, multi-currency facility replaces the Company's two
existing bank facilities and will be used to fund future expansion and
support working capital requirements.
* In a separate licensing agreement, The North Face entered into a 5-year
worldwide license and royalty agreement with Great American Knitting
Mills, Inc., ("Gold Toe"), which will produce authentic outdoor and
fitness socks which will be shipped to current North Face customers in
fall 1999 under The North Face brand.
The North Face, Inc. designs and distributes technically sophisticated outerwear, skiwear, functional sportswear, tents, sleeping bags, backpacks, daypacks, accessories and rugged footwear under The North Face name. Through its subsidiaries, La Sportiva s.r.l. and La Sportiva USA, the Company designs, manufactures and distributes rock climbing shoes, mountaineering boots and other rugged footwear under the La Sportiva name. The Company sells its products primarily to select specialty retailers throughout the United States, Canada and Europe.
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