The drop off in hardgoods spending took a bite out of Globe International Ltd.’s results for the year ended June 30, but excess inventory and heavy promotions have tapered.
“The downturn in the hardgoods market from the second quarter of fiscal year 2022 had a significant impact on fiscal year 2023 financial performance, compared to the prior two years when hardgoods generated massive sales and profit growth,” Globe International CEO Matt Hill said in a statement released Thursday in Australia.
Hill added clearance sales to work through hardgoods inventory, shipping delays, the market downturn, the strength of the U.S. dollar, and higher freight costs all put pressure on the business throughout the year.
Globe International’s net sales for the fiscal year ended June 30 fell 17% in constant currency to AUD$234.3 million ($150.65 million).
Net profit after taxes narrowed to AUD$1.6 million ($1 million) from AUD$18.6 million ($12 million) in the prior year.
Despite the challenges, the company noted signs of improvement in profitability during the second half of the recently ended year compared to the first half, driven by a rightsizing of inventory and the wind-down of excessive clearance activities.
Globe said on a regional basis, Australia was “the most stable and profitable” during the year. Promotions and a glut of hardgoods inventory hit the U.S. the hardest. Meanwhile, Europe was challenged by macroeconomic factors and management issues, with the company saying the latter has been corrected with replacement of the management team.
Apparel Bright Spot for Globe
Throughout the recently ended year, the company’s apparel and footwear brands – FXD, Salty Crew, and It’s Now Cool – remained “stable,” according to Hill.
In fact, all three brands were noted as having grown coming out of the pandemic.
Globe doesn’t break out the financial performance of its brands, but said company-wide sales would have grown in the recently ended fiscal year if hardgoods were excluded from the results.
“If we strip away the impact caused by the hardgoods cycle, there is an underlying apparel business that has grown over the last four years,” Hill said. “Now, as we emerge on the other side of the pandemic-related boom, we have a larger, more stable company than we did pre-pandemic, with global apparel brands of much larger scale, operating in diverse distribution channels around the world.”
Globe Outlook
Globe didn’t provide a sales forecast for the current fiscal year but said revenue is expected to stabilize. Profitability is forecast to improve in the current fiscal year, driven by lower costs and higher gross profit margin.
“We continue our evolution as a branded apparel, footwear, and hardgoods company and now have an excellent platform of key apparel and footwear brands in FXD, Salty Crew, and It’s Now Cool to drive reliable future growth globally, while maintaining our core heritage in hardgoods with the Impala and Globe brands,” Hill said.
The CEO tempered that statement, pointing out that the impact of inflation and interest rates on consumer discretionary income make the outlook on sales “uncertain.”
“Current retail feedback certainly suggests that the market is tough,” Hill said. “However, while it’s very early in the year, the positive trends we saw in the latter part of FY23 seem to have continued into the start of FY24, with sales in July stabilizing and profits higher than at the same time last year.”
Globe International is set to hold its annual meeting in October, where more updates on the business are expected.
Kari Hamanaka can be reached at kari@shop-eat-surf-outdoor.com.
