Sports Authority supplier slashes forecast

Sport Authority’s decision to file bankruptcy is contributing to one of its suppliers making a major downward revision to a 2016 profit forecast.



Performance Sports Group, a supplier of team sports equipment under the Bauer and Easton brands, slashed its profit forecast for the current fiscal year by 55 cents to a range of 12 cents to 14 cents from a range of 66 cents to 69 cents. Nine cents of the shortfall was attributed to anticipated losses from “a U.S. national sporting goods retailer that has filed under chapter 11.”



The only retailer fitting that description is the Sports Authority, but Performance Sports Group’s challenges extend to broader consumer demand issues that could have ramifications for other purveyors of team sports gear.



For example, Performance Sports Group said it was anticipating a reduction in sales due to weakness in the baseball and softball market and that accounted for 31 cents of the 55 cent profit reduction. Another 19 cents of the 55 cent reduction was due to bad debt reserves for, “certain U.S. hockey customers and the related anticipated loss of sales from such customers.”



Company CEO Kevin Davis cited adverse market conditions and related customer credit issues in elaborating the revision which saw shares of the company tumble more than 60%.



"The baseball (and) softball market is experiencing an unexpected significant downturn in retail sales, including in our important bat category. This weakening of consumer demand, coupled with the chapter 11 filing by one of the largest U.S. national sporting goods retailers, is reducing our sales for baseball and softball products,” Davis said. “Additionally, the consolidation of hockey retail in the U.S. has reduced our customers' demand for products more than we previously anticipated as they continue to reduce their inventory levels. In light of these events and challenges, including the bankruptcy of an internet baseball retailer in our second quarter, we decided to increase our bad debt reserves for certain of our U.S. hockey and baseball (and) softball customers."



Despite tough times in the U.S., Davis noted the company’s global businesses continue to perform well. For example, he said non-U.S. orders for hockey gear which falls in the company’s fourth quarter continue to show resilience with order up in the low- to mid- single digits.