While reporting a few days ago a net loss of €3.56 million for the French company in the financial year ended last Sept. 30, against a net profit of €1.66 million in the prior year, officials of the Lafuma Group emphasized several improvements in its underlying results and expressed confidence for further progress, especially in the first half of the current year.
They indicated that the group is now ready to take new measures to enter a new phase of growth, starting probably with Eider, after solving its liquidity problems. The operating margin before amortization (Ebitda) grew last year to 4.9 percent from 1.4 percent, fulfilling one of the conditions set by the banks for its latest loans.
As previously reported, the group’s total sales decreased by 3.7 percent last year to €245.5 million, but with a drop of only 1.0 percent in the second half. More significantly, excluding exceptional items such as a gain of €17 million for the sale of its rights to the Millet and Eider brands in Korea in the previous year, the group turned around to an operating profit of €3.0 million from a loss of €6.7 million. Personnel charges were reduced by 6.8 percent, and purchasing and other external charges by 13.7 percent.
Improvements were recorded in all four business units of the group. The Grand Outdoor division, which groups the Lafuma brand of outdoor and camping products as well as the Ober brand of jeans, saw its operating losses decline to €4.6 million from €6.7 million, although Ober contributed a bigger loss of €1.5 million. The division’s sales declined by 10 percent to €83.4 million.
Represented by Millet and Eider, the Mountain division had a profit of €2.9 million against a loss of €0.5 million, as sales inched up by 3.1 percent to €71.0 million. This was largely due to major progress for Eider, which moved from a heavy loss position to break-even results.
Le Chameau and other activities of the so-called Country division posted a marginally improved profit of €0.3 million in the past year, although sales went down by 10.4 percent to €23.3 million.
The surf division, consisting essentially of Oxbow, made a big jump in profits to €4.4 million from €0.5 million on 0.6 percent higher sales of €67.7 million, and the management is expecting further progress on the back of higher orders for spring/summer 2011.
Total sales through the group’s own stores rose last year by 2.5 percent to €44.3 million. In terms of the various product categories, the group’s revenues from clothing declined by 4.2 percent to €159.2 million, but its sales of Lafuma camping furniture increased by 15.2 percent to €30.3 million. Sales of equipment fell by 14.3 percent to €25.6 million, and those of footwear by 6.4 percent to €30.4 million, but this segment is expected to recover this year.
Geographically, sales in France declined last year by 1.8 percent to €147.5 million, representing 60 percent of the total turnover. In the rest of Europe, they fell by 6.6 percent to €57.9 million, with major declines in the U.K. and Central Europe, but while the Italian and Spanish markets are still down, the German market appears to be recovering strongly.
Sales in Asia went down last year by 9.0 percent to €29.2 million, largely because of the loss of the Korean market and the transfer of the group’s business in China to a joint venture with LG Fashion. In the U.S. and the rest of the world, sales rose by 5.4 percent to €10.8 million.
The group managed to cut its inventories by an additional €18.3 million, reducing its working capital strongly, although this action has prevented it from responding to some requests for reorders due to the cold weather of the last few weeks in Europe.
The gross margin remained stable at 51.6 percent, but on an adjusted basis, eliminating the impact of these and other measures, it improved to 54.0 percent from 53.3 percent.
The management sees the gross margin rising further in the first half of the current financial year, but it will probably deteriorate in the second half because of rising raw material and labor costs, although some price increases will be inevitable.
Excluding Ober, whose losses are bound to decrease, the management is now targeting break-even results in the Grand Outdoor division for this year. Profits will improve in the other divisions and the surf division should return to growth. Restructuring charges will be cut down considerably, allowing the management to predict better operating results and a net profit for the year.