The Lafuma Group reported last week a net loss of €15.2 million for the financial year ended last Sept. 30, compared with a net profit of €3.9 million in the prior year, but blamed the poor results mainly on non-cash charges of about €15 million and on the poor performance of its surf division, represented by Oxbow. Its outdoor brands performed relatively well.

Lafuma has decided to write off €10.7 million from its investment in Oxbow and to launch a serious reorganization program intended to make the French surf brand profitable again three years from now (details in SGI Europe). Besides the Oxbow writeoff, the company's results were affected by a loss of €0.7 million at Le Chameau, the brand of hunting boots and clothing that it sold a few weeks ago to Marwyn Management Partners, and by a loss of €2.3 million from its joint venture with LG Fashion of Korea for the development of the Lafuma brand in China.

The gross margin declined to 48.1 percent across the group in the past year from 51.1 percent the year before. Operating earnings before amortization and depreciation (Ebitda) declined to €10.3 million ? or 7.6 percent of sales ? from €17.0 million, largely due to a decline of €6.5 million at Oxbow.

After amortization and depreciation, the group's operating results (Ebit) were down to €3.6 million from €10.4 million. Oxbow turned around from a profit to a loss of €3.7 million. The Lafuma division, which corresponds to the group's so-called Great Outdoor segment, improved Ebit to €1.6 million from €1.2 million. The mountain division, represented by Millet, Eider and Killy, generated a slightly lower operating profit of €5.8 million, down from €6.9 million in the prior year, because of closeout sales for Millet.

The group had already reported a decline of 0.3 percent in its total turnover for the year to €248.7 million, due entirely to a drop of 16.4 percent to €53.3 million at Oxbow. Even Le Chameau saw its sales go up by 4.6 percent to €24.8 million.

The Lafuma division's sales rose by 0.4 percent to €83.2 million (they did not decline, as previously reported), driven by higher sales of camping furniture and the opening of two Lafuma stores in Hong Kong.

The mountaineering division grew by 11.5 percent to €87.1 million, driven by a 15.8 percent increase for Millet. The division's sales rose by 8.5 percent in France and by 14.4 percent elsewhere, with particularly strong growth in Asia.

Across the group, the footwear offerings of the various brands showed the biggest growth at 7.2 percent, although they represented only 6 percent of the total turnover. Revenues from clothing fell by 2.6 percent to €149.4 million because of the poor performance of Oxbow. Sales of camping furniture, backpacks and other types of equipment went up by 6.3 percent to €25.8 million.

As previously reported, while the group's sales in France dipped by 5.1 percent, its international sales grew by 6.8 percent and came to represent 43.5 percent of the group's total sales. Declines in Spain and distributor markets such as Austria and Switzerland were offset by major increases in Germany, the U.S., Japan, Hong Kong and other parts of Asia.

The group's wholesale business fell by 2.7 percent because of a deteriorating economic environment in Europe, but its retail sales rose by 13.3 percent to €45.7 million, or 20 percent of the total turnover. Revenues from e-commerce, which is limited for the moment to the Oxbow and Lafuma brands in France, grew by 14.4 percent to €5.1 million and generated a profit.

On a positive note, the sale of Le Chameau, which was valued at 10 times its Ebitda, reduced the group's working capital requirements and helped it to cut net debt by €30 million to €17.2 million. Cash flow nearly doubled to €18.9 million. Combined with other elements including the leaseback of a building in Annecy, this allowed the group to reduce its negative cash position to €5.7 million from €17.6 million a year earlier.

Under a new agreement with its lenders, Lafuma will have to reimburse its long-term debt in annual installments of €4 million, less than half the previous levels.

The group has enjoyed reasonably good reorders so far into the autumn/winter season, but orders in hand for spring/summer 2013 are generally down for all the brands except for Millet. One reason is the fact that the group is refusing to lower its prices in order to obtain larger orders.

Looking at the future, the group's management was particularly bullish about the general development of the outdoor market, especially in China, where its joint venture with LG Fashion is expected to start generating profits during the company's 2013-14 financial year.

The joint venture currently manages a network of 66 Lafuma shops of between 50 and 90 square meters, with a stronger concentration in the northern part of China than in the west and the south. Their annual sales are expected to grow from nearly €10 million to €40 million by 2014, as the number of stores will be raised to 200.

Meanwhile, Lafuma has signed up a new distributor for Millet in China, Go Rising, which should be able to develop the presence of the brand faster than the previous one.

The management had little to say about its recent failed discussions with E-Land about its interest in acquiring the French group. The large South Korean brand owner, licensee and retailer was apparently interested mainly in its overall market potential in China. According to local press reports, E-Land is targeting total annual sales of US$9.3 billion in China by 2016.