After several years of negative results, the Lafuma Group finally reported a net profit of €0.7 million for the six months ended March 31, which compares with a loss of €0.8 million in the same period a year ago. Total revenues grew by 0.9 percent to €122.4 million, reversing the negative trends of the last two years, and they rose by 1.0 percent on a comparable and currency-neutral basis.
The gross margin improved to 54.2 percent from 52.6 percent and the operating profit (Ebit) nearly doubled to €1.7 million. The improvement was largely attributed to the end of a long period of inventory reduction, combined with a slightly better product mix and lower fixed charges.
The biggest progress was recorded within the mountain division, comprising Millet and Eider, whose operating profit rose to €3.2 million from €1.5 million in the year-ago period. The greater outdoor division, represented mainly by the more accessible Lafuma brand, reduced its losses to €0.2 million from €1.7 million, and its garden and camping furniture operations turned out to be the most profitable within the group, although the production takes place in France.
While the great outdoor division lifted sales by 1.2 percent to €42.5 million, the mountain division experienced an acceleration of its growth, rising by 6.9 percent to €40.2 million. Instead, the country division, represented by Le Chameau, generated 2.8 percent lower sales of €9.6 million, and Oxbow fell by 5.5 percent to €30.1 million.
The group’s retail sales fell by 4.9 percent to €22.6 million, but they were stable excluding the stores transferred to its Chinese joint venture with LG Fashion, which became operational last September.
Among the product categories, apparel sales declined by 2.7 percent across the group to €80.0 million, and equipment was down by 10.8 percent to €9.7 million, but footwear went up by 8.5 percent to €14.9 million, including a 13 percent increase for Lafuma branded shoes. Furniture recorded a 23.2 percent gain to €17.8 million.
Geographically, the group scored increases of 0.2 percent in France and 5.7 percent in the rest of Europe, with good performance especially in Northern Europe and in Italy. Sales in the U.S. declined by 13 percent as the company decided that it would no longer carry any stock in the country, improving its profitability. Sales in Asia went down by 3.6 percent, but they increased by 6.7 percent excluding the Chinese market.
As it is in a start-up mode, the Chinese joint venture contributed a loss of €0.3 million in the first half. The French company invested €1.2 million in the venture during the period and will add a similar amount in the second half. The number of Lafuma stores in China increased by nine to 16 during the latest six months. Separately, the French group expanded its store network in Hong Kong from seven to nine stores. It plans to add a store in Japan, where the company suffered only slightly from the recent natural and nuclear disasters.
Based in Beijing, the new Chinese joint venture is controlled by LG Fashion at 51 percent. It plans to have a total of 30 directly operated stores and corners, primarily in high-end department stores, before the end of this year, building up to 200 outlets within five years’ time, according to Korean officials.
The Lafuma product range is the same as that LG Fashion is marketing in Korea, but the joint venture has already started to develop more specific products for the Chinese market, trying to develop a luxury outdoor image for the brand.
Lafuma’s French management feels that it will be able to capitalize on this project to push its Millet and Oxbow brands on the Chinese market later on.
It says that its ownership of the former Big Pack factory in China gives it a useful tool to secure production of backpacks and to benchmark other suppliers in the present difficult times for sourcing. It has been rather successful in its efforts to reflect the higher cost of raw materials in its pricing for the next fall/winter season.
Significantly higher orders have been recorded by the group for all its brands, and the management expects to book a profit for the full financial year.