Black Diamond Inc. has hired a leading consulting firm to conduct a global profitability study across all its product categories and geographies in order to refine its future development strategies. It has also mandated an executive search firm to look for a senior executive with experience in the management of lifestyle brands who would help the company develop its new apparel division and to move forcefully into direct-consumer sales now that it can offer a full line of products under the Black Diamond brand name.

In commenting on the company's lackluster results for the third quarter, Peter Metcalf, president and chief executive, indicated that the company sees major opportunities for growth from the diversification of its product lines and the development of retailing and e-commerce. He said that Black Diamond should be able to fund the related investments from its existing resources, without accessing capital markets, but the company will continue to explore strategic alternatives to facilitate the acceleration of these investments.

Poc, the creative Swedish producer of helmetsfor snow sports, will launch its first line of bike clothing and bike helmets next spring, and Metcalf said it has the potential to add other categories of apparel and lifestyle products. The brand diversified recently into body armor and into snow goggles and other types of sports glasses (see related article in the News Briefs).

In the third quarter ended Sept. 30, the Black Diamond group's sales grew by only 8.3 percent to $52.8 million, partly due to “general early-season softness” in hardgoods, but Metcalf expressed confidence that it will reach a previously announced target to raise its sales by between 17 and 22 percent for the full year.

The company will have to score a sales increase of at least 28 percent in the current quarter to reach that goal. Metcalf indicated that the big push will come from delayed shipments of winter hardgoods. Reflecting a situation observed also at The North Face (see VF article in this issue), retailers in the U.S. and Europe have been very cautious in their orders for the current autumn/winter season, pushing some deliveries to the fourth quarter.

The shift in the ordering pattern, combined with the recent temporary closure of national parks in the U.S. and sales lost from the recall of Pieps' new Vector avalanche transceivers, contributed to depress the group's sales results in the third quarter. They offset to positive impact of Gregory Mountain Products' acquisition of the distribution of its products in Japan and the introduction of Black Diamond's first line of apparel, which includes 440 SKUs for 22 different styles, to 240 selected retailers in the U.S., Europe and the rest of the world.

Overall, the group's sales increased in the third quarter by only 3.6 percent in the U.S. to $19.8 million, but they went up by 11.3 percent to $33.0 million in the rest of the world.

Pieps' product recall depressed the group's gross profit by $1.5 million in the quarter. Adding the effect of discontinued merchandise offerings, production variances and inventory adjustments, which depressed it by $1.1 million, the gross margin fell by 0.6 percentage points to 37.3 percent of sales for the group. Excluding these extraordinary items, the adjusted gross margin would have risen by 0.1 percentage points to 40.2 percent, thanks to higher-margin apparel sales and improved channels of distribution.

With operating costs rising by 6.3 percentage points to 39.8 percent of sales, the group recorded an operating loss of $1,490,000 against a profit of $1,535,000 in the same period a year ago.

The final result was a net loss of $1,306,000 for the quarter against net income of $726,000. After adjustments for $4.6 million in non-cash items and $0.2 million in merger and integration costs, Black Diamond reached an adjusted net profit of $3.5 million, down from $5.5 million a year ago. In the year-ago period, the company booked $4.2 million worth of non-cash items and $0.4 million for merger and integration costs.