R.G. Barry Shares Spike on Strong Earnings

R.G. Barry Shares Spike on Strong
Greg Tunney

R.G. Barry Corp. saw its shares rise almost 10 percent in morning trading after the company’s results beat analysts’ expectations.

The Pickerington, Ohio-based firm reported income of $6.1 million for the second quarter of fiscal 2014, or 53 cents a diluted share, up from $5.3 million, or 46 cents, in the year-ago period. The result was 12.8 percent higher than analysts’ consensus forecasts for the quarter of 47 cents.

Total revenues for the period were $48 million, compared to $48.5 million year-on-year.

Market watchers attributed the positive share price reaction to the company’s ability to deliver a quarter-on-quarter increase in earnings despite a drop in sales for the period, due in part to a decline in selling, general and administrative expenses.

For the first half of fiscal 2014, R.G. Barry posted a 7.5 percent decline in footwear sales to $71.9 million, reflecting soft activity in its retail business from July through December — primarily in department stores and off-price channels — partially offset by a recovery in its warehouse club and international shipments.

“We continue to lead our peer group in many key performance metrics, despite the challenging retail environment during the holiday selling season,” said Greg Tunney, president and CEO of the firm.

“Our proven model and operational excellence permitted us to generate healthy profitability, while investing significant resources in our brands and building a business that will continue to meet the challenges of both today and tomorrow,” he added.

Meanwhile, R.G. Barry is mulling a $20-a-share takeover bid made in early September by Mill Road Capital Management and its affiliated funds, in a deal that valued the company at $226 million. Shares of R.G. Barry are trading at around $18.44 a share.

Tunney said that he expects recent investment in the company’s international and e-commerce businesses to impact earnings for the full year, but the impact will benefit the firm over the long term.

Jose Ibarra, CFO, added, “We ended the half with a good retail sell-through. Our strategy of continuing to eliminate underperforming or lower-margin components of the business impacted the top line, but gross margin as a percent of net sales improved by 110 basis points, despite the highly promotional retail environment.”

Ibarra reiterated the company’s guidance of revenue for the year to be down compared with fiscal 2013, due to continued economic headwinds and the challenging retail environment. 

Selling, general and administrative expenses of $22.7 million were relatively flat versus $22.9 million in the comparable period one year ago.

On Monday, the company declared an 11.1 percent increase in its quarterly dividend to 10 cents a share, or 40 cents on an annual basis, payable on March 4.