The Lafuma Group has reported a net profit of €3.9 million for the financial year ended last Sept. 30 compared with a loss of €3.6 million the year before.
The gross margin improved by 2.3 percentage points to 53.9 percent of sales, thanks in particular to a better sales mix and to higher prices, especially for the Eider brand. The operating margin rose to 3.0 percent from 0.2 percent.
Net debt fell last year to the equivalent of 2.89 times earnings before amortization (Ebitda), down sharply from 19.63
times two years ago, when the group was forced to bring in new investors to boost its equity of €10.5 million.
Noting that the group had respected all the covenants signed at the time with the banks, Philippe Joffard, president and chief executive, announced a new round of discussions with them to obtain additional funds for its working capital needs and to facilitate further sales growth in spite of the uncertain economic situation.
At a recent meeting with financial analysts and the press last week, Joffard introduced a new chief financial officer, André Rousset. A former executive of Gerland, Reynolds and Entremont, he has taken the place of Gilles Venet. Joffard also presented a 34-year-old manager, Arnaud de Mesnil, who has been promoted to the role of director of strategic operations. A former auditor of Ernst & Young, he joined the group three years ago and he has lately been in charge of financial controlling and of Lafuma's 10 foreign subsidiaries. He is also replacing Matthieu Bazil, former general manager of Oxbow, on an interim basis.
As previously reported, the group's total sales grew by 1.6 percent to €249.5 million in the last financial year, with a 2.4 percent increase on a comparable basis. Sales advanced more strongly in the second half of the financial year than in the first half, and the momentum should continue in the half-year ending next March.
Higher revenues and profits were r corded for all the brands with the exception of Ober jeans and Oxbow, the French brand of surfwear. Oxbow's sales declined by 5.5 percent to €64.0 million in the past year and its operating profit fell to €2.4 million from €4.4 million in the previous year. According
to officials of the group, Oxbow suffered from the poor economic situation in France, from poor weather conditions and from an ongoing dilemma between function and fashion within the sector.
The Great Outdoor segment of the group continued to lose money last year, but its operating loss declined sharply to less than €500,000 and it was exclusively due to Ober.
The Lafuma brand was profitable, however, and its sales went up, driven by increases of 11 percent in camping furniture and 6 percent in footwear. The division's revenues rose by 0.1 percent to €83.5 million, but they would have risen by 5 percent excluding Lafuma's Chinese business, which was transferred to a joint venture with LG Fashion of Korea one year ago.
As it was in a start-up mode, the Chinese joint venture made a loss of €2.2 million in the past year, but its losses are expected to decline gradually and to be completely eliminated by the end of the 2012-13 fiscal year. The Chinese company will have 40 Lafuma stores in place by the end of 2011, up from 26 at the end of September.
Geographically, the group enjoyed the highest growth rates in Asia as well as in Northern Europe. There was also good growth of about 13 percent in Germany, where sales reached €12.2 million, and in Italy.
The group reported growth of 15 percent in Hong Kong, where Eider has joined Lafuma and Millet, and of 8 percent in Japan, where the group has its largest subsidiary, ahead of Germany. The Japanese business consisted only of Millet and Lafuma, which generated sales of €20 million and €5 million last year, respectively.
The biggest profit contribution last year came from the group's Mountain division, represented by Millet, Eider and Killy. Together, the three brands generated an operating profit of €6.8 million, up sharply from €2.9 million the year before, as sales grew by 10.1 percent to €78.1 million. The Country division, consisting mainly of Le Chameau, increased its profit to €0.7 million on 1.8 percent higher revenues of €23.7 million.
Company officials noted that there is still some potential to expand the presence of Millet, especially in markets such as Germany, and of Eider and its sister brand, Killy.
Together, Eider and Killy generated sales of €23 million in the past year, compared with €18 million when Lafuma bought the operation.
Meanwhile, Lafuma's subsidiary in Spain has taken over the distribution of the Eider and Killy lines from next January. They were previously distributed there by Snow Factory.
Significantly, the report about Oxbow's relatively poor performance has been followed in the last days by reports of mixed results for two surf industry leaders, Billabong and Quiksilver, and the rentrenchment of two minor brands, Rusty and Insight, from the European market (more in SGI Europe).
Lafuma wants to understand the market situation before making any decisions on Oxbow's future positioning, but the idea for the moment is to focus on men's and on performance, and to make better use of testimonials such as Laird Hamilton, who has signed a special Oxbow collection for the REI chain in the U.S. Oxbow's recent sales decline has only affected the women's segment of its collection.
Oxbow's sales of thongs and other types of footwear rose by 25 percent last year, but remained marginal at 3 percent of the turnover. The brand's total sales outside France went down by 9 percent. France still absorbs the bulk of Oxbow's sales.
Elsewhere, the group has decided to focus the development of the brand on Belgium, Germany and Spain, reserving later action for Eastern Europe and Japan.