Russ profits in Q1

By Staff -- Playthings, 5/13/2008 9:20:00 AM

OAKLAND, N.J.—Russ Berrie and Company reported modest sales gain in the first three months of 2008 as it achieved a profitable quarter despite rising costs.

For the quarter ended March 31, 2008, consolidated net sales increased 1 percent to $75.9 million, while consolidated net income fell 25 percent from the corresponding period of 2007 to $2.0 million, or $0.09 per diluted share.

Sales were lead by the company’s Infant & Juvenile segment, which rose 7.5 percent to $41.6 million, driven by new product introductions and growth in international sales. Net sales for the Company's Gift segment decreased 5.7 percent to $34.3 million, primarily as a result of year- over-year new product launch timings and some industry weakness as retailers have implemented more conservative purchasing programs.

Consolidated gross profit in 2008’s first quarter of 2008 was $30.6 million, or 40.2 percent of net sales, compared to $31.3 million, or 41.7 percent of net sales, for the first quarter of 2007. The Infant & Juvenile segment gross profit margins were impacted by market pricing constraints, a shift in product mix and higher product costs, while Gift segment margins increased slightly compared to the same period last year.

Consolidated selling, general and administrative expenses (SG&A) for the first quarter of 2008 were $27.0 million, or 35.5 percent of net sales, compared to $26.5 million, or 35.2 percent of net sales, in the first quarter of 2007. SG&A for the Infant & Juvenile segment increased to 17.6 percent of sales from 17.3 percent of sales in the prior year quarter, primarily due to increased product development and additional promotional costs to support the growth in this segment. SG&A for the Gift segment increased as a percentage of sales to 57.3 percent in the first quarter of 2008 from 54.3 percent in the prior year quarter, primarily as a result of softer sales in the first quarter of 2008.

"During the quarter we were able to achieve modest top-line growth, despite the weakening macro environment,” noted Bruce G. Crain, Russ Berrie’s CEO and president, of the results. “Importantly, our growth efforts during early 2008 allowed us to enhance our global leadership position in the infant and juvenile market.”

On April 2, Russ completed its acquisitions of furniture maker LaJobi and bedding and accessories firm CoCaLo, and secured an expanded credit facility. The moves “reflect both our ability to execute and the tremendous long-term potential for our business,” said Crain. “Further, we remain encouraged by our ongoing accomplishments in our global gift segment, as we continue to strengthen our product design initiatives and operational efficiencies in a soft retail market,” he added.

The LaJobi and CoCaLog acquisitions will be recorded as second quarter events.

Looking forward, Crain said, “We will continue to focus on design-led and branded product development in both our Infant & Juvenile and Gift segments. We expect that this approach, as well as our efforts to optimize our pricing strategies, control inventory levels and manage rising costs, will help offset some of the macroeconomic pressures.”