The downturn in hardgood sales proved a drag on Globe International’s sales in the first half of its fiscal year as the company also wrestled with macroeconomic challenges.
Globe International CEO Matt Hill pointed to several drivers of the company’s 16% decline in net sales to AUD$120.5 million ($82.1 million) for the six months ended Dec. 31.
“Most significantly, the decline in the hardgoods market had a massive impact on both sales and profitability, as we dealt with our own inventory issues and our customers continued to work through theirs,” Hill said in a statement released Thursday in Australia.
The CEO went on to cite inflation, higher freight costs, and a strong U.S. dollar as other headwinds the business faced in the first half.
The company reported earnings before interest and taxes of AUD$900,000 ($612,949). It also swung to a loss in the first half of AUD$200,000 ($136,211), compared to a net profit of AUD$12.5 million ($8.5 million) in the year-ago period.
The CEO said the company conducted a strategic review in the first half and “identified a number of opportunities to refine our operations, brand, and category mix to simplify the business.”
Globe International operates a portfolio of proprietary brands that includes Globe, Salty Crew, FXD, Impala Skate, Dot Boards, Milkbar Bikes, and It’s Now Cool. It also has the Australian and New Zealand license for lines such as Stussy, Obey, XLarge, X-Girl, and Pro-Tec, among others.
Hardgoods Woes
The pullback in the hardgoods business was seen across skateboards, roller skates, and skate accessories, with the greatest overall decline recorded for the company’s European business.
The region, which skews heavily toward hardgoods, will see a reorganization of the business after Its net sales fell 30.7% on a constant currency basis to AUD$14 million ($9.5 million) in the first half.
Meanwhile, the company’s North America and Australasia business units each recorded declines in revenue of roughly 15% in constant currency, reporting revenues of nearly AUD$50 million ($34.1 million) and AUD$56.4 million ($38.4 million) respectively. Globe noted the two regions’ more diverse brand and product assortments helped partially offset the hardgoods decline.
Globe also used discounts to work through inventory, helping improve the company’s working capital balance. The company said it expects to continue to clear through the rest of its excess product throughout the remainder of the year.
Bright Spots
Hill said the company still maintains a positive outlook, citing bright spots in the business.
“In the midst of these negative macro factors, which had an inevitable impact on profitability in the short-term, we continued to invest in our existing core brands, seeing either stability or growth in our non-hardgoods brands, including key brands Salty Crew and FXD,” Hill said.
The company’s purchase of a 50% stake in It’s Now Cool in October is seen as a boon to the business. The DTC-focused swimwear brand, started by photographer Josephine Clough and surf industry veteran Ryan Stanistreet, is also sold in retailers such as Free People, Revolve, and Fred Segal.
Hill said the It’s Now Cool investment offers Globe the “opportunity for growth in a new category for our business.”
Overall, Globe International expects to record a profit for its full fiscal year, which ends in June. The guidance is based on an expected slowing rate of decline in hardgoods coupled with growth of non-hardgoods brands.
