R.G. Barry: increased business investments will bring sales growth
During a midday conference call, executives of R.G. Barry Corp. (AMEX: DFZ), which makes Dearfoams slippers, said the company plans to achieve sales growth through increased investments in product development, marketing, advertising and merchandising.
In an early Tuesday release, R.G. Barry said it expects sales growth in the range of 4% to 8% during fiscal 2008, which began June 30. The guidance represents sales of between $109.5 million and $113.8 million, compared with $105.3 million in fiscal 2007.
To achieve this growth, CEO Greg Tunney said during the call that R.G. Barry has a major initiative with a large retail partner that could “meaningfully increase sales relationship this retailer.” The project involves transitioning existing inventory from the retailer system and taking returns while “simultaneously flowing new products into this customer’s distribution centers and stores,” he said.
“This project is an important undertaking,” Tunney said. “We expect to see some impact from it each quarter of 2008 and its overall result has been factored into 2008 guidance.”
R.G. Barry’s Terrasoles outdoor footwear is beginning to get retail space, he said, and is being sold through independent retailers, sporting good stores and catalogs such as Mason’s and L.L. Bean. The company should have better information on customer acceptance of Terrasoles in three months, he said.
Additionally, Tunney said R.G. Barry recently became the exclusive North American licensee for the European luxury canvas footwear brand Superga. The firm plans to leverage Superga’s design capabilities and supplier base to enter a category and a retail arena where it has no presence, the chief executive said. Superga shoes will begin appearing in department stores, shoe chains and boutiques in spring 2008.
The company also said it expects NCAA-licensed clogs to give a modest revenue boost in fiscal 2008, but to provide a better impact in fiscal 2009. The clogs, which will bear the names and mascots of university sports teams, will be sold in college bookstores and retailers.
To finance these initiatives, Tunney said R.G. Barry is increasing its selling and general administrative expense budget by 10%, or $3 million, to about $33.4 million, from $30.4 million in fiscal 2007. The company’s guidance takes into account recent economic uncertainty expressed in mixed industry forecasts for the second half of calendar 2007, he said.
Responding to an analyst’s question, CFO Dan Viren said the guidance numbers anticipate some organic growth from the business initiatives.
R.G. Barry sold its French subsidiaries, Escapade and Fargeot, during the fourth quarter. Still, the footwear maker has not ruled out an acquisition in the future, Viren said.
“An acquisition would need to make strategic sense through growth opportunities, ROI benchmarks and be accretive to earnings,” Viren said.
The Pickerington, Ohio-based company does not plan to repurchase stock or pay dividends in the near future.
“While options such as paying dividends or buying back stock seem attractive, we believe our cash can be better put to use in support of growth in the future,” Viren said. “The cash reserves are not idle. They are in investment, earning interest.”
Before the opening bell, R.G. Barry announced that its fourth-quarter loss was $1.7 million, or $0.16 a share, a 41% decrease from the $4.1 million loss, or $0.41 a share, in the year-ago period. The 2006 results include $2.5 million in restructuring and impairment charges related to a lease settlement. The firm’s revenue during the three-month period ended June 30 was $14.1 million, up 1% from $14 million in the same period of the prior-year period.
In today’s trading, shares are sagging 7.42%, or $0.76, at $9.44. Over the last 52 weeks, shares have fluctuated between $6 and $13.14.
For a related story, see RG Barry Corp: Comfort, and the promise of joy, April 26, 2007.
