Unplanned costs and sourcing issues have hit the bottom line at R.G. Barry Corp.
Second-quarter profits at the Pickerington, Ohio-based firm nearly halved to $4.3 million, or 39 cents a share, from $8.2 million, or 76 cents, in the same quarter a year earlier.
Net revenue for the period, which ended Jan. 1, 2011, totaled $49.7 million, down 11 percent from $55.6 million.
Gross profit margin fell to 34.7 percent, compared with 43.1 percent in the previous corresponding quarter, due primarily to issues in sourcing operations, the firm’s president and CEO, Greg Tunney, said in a statement.
The firm also incurred unplanned delivery costs — mostly related to air shipments of initial fall setups to key retailers — in a bid to maintain on-time delivery of seasonal goods to customers.
That, plus soft performance at key accounts and overseas pricing pressures, added to the first-half gross profit margin erosion, the firm said.
“We are working to improve the profitability of our core business. … We continue to believe that diversification through acquisitions and growth into new or underserved channels will help us address the seasonality issue. Our recent purchase of Foot Petals is an important initial step in changing the face of our company into a year-round fashion and functional accessories provider,” Tunney added.
R.G. Barry last month acquired Foot Petals for $14 million in cash. Tunney said on a call with analysts that the deal is expected to be immediately accretive to earnings and contribute to cash flow as it has tremendous growth potential “for product extensions and sub-branding through other channels of distribution.”
According to Jose Ibarra, R.G. Barry’s CFO and SVP of finance, Foot Petals nearly doubled its net sales over the past five years and earns an EBITDA in the range of $2 million to $2.5 million annually.
The brand and its products will help R.G. Barry penetrate areas where it has limited or no presence, such as high-end department stores and exclusive footwear boutiques, which traditionally provide suppliers with higher margins than other retail channels of distribution, the company said.
“Foot Petals isn’t the end of our search for acquisitions. It is just the beginning. We currently have multiple acquisition targets in various stages of the due diligence process, and when the appropriate business passes through our filter, we will act,” said Tunney, who added that the firm will also “exit two underperforming initiatives during the second half of this year.”
As of Jan. 1, the company had cash and short-term investments of $45.6 million, up 22 percent from $37.4 million one year ago, and no long-term debt.