NEW YORK — Hit by higher costs and operational difficulties, Russell Corp. reported Thursday that profits plunged 54.1 percent in the second quarter and the company lowered its earnings guidance for the year.
Profits in the period ended July 3 fell to $4.7 million, or 14 cents a share, from $10.2 million, or 31 cents, in the year-ago quarter, and were in line with revised expectations. Russell warned earlier this month that earnings would fall below the average consensus target of 21 cents.
Sales gained 18 percent, to $342.1 million from $289.8 million. They were driven by Russell’s Artwear channel and gains in its acquired businesses, including Brooks Sports, the running gear company Russell bought last year, as well as Moving Comfort. Mossy Oak and the core Russell Athletic brand business both posted lower profits and sales.
Jack Ward, chairman and chief executive officer, said on a conference call with analysts that after lowering prices on some products, Russell experienced higher-than-expected demand, which outstripped capacity in the second quarter.
“In hindsight, we had planned our production too tight to deal with such a significant potential increase in business,” he said.
To address these issues, Ward said the company has added contractors and revised its planning schedule for certain items. Russell also has a new production facility in Honduras.
Russell, based in Atlanta, said earnings for the year will likely be $1.40 to $1.48 a share, below earlier forecasts of $1.55 to $1.65. The information caused the stock to drop 1.2 percent to $18.63 Thursday on the New York Stock Exchange. The activewear giant said it is maintaining its forecast for second-half sales growth of 4 to 6 percent and estimated sales of $1.5 billion to $1.52 billion this fiscal year.
For the six-month period, profits dropped 40 percent to $6.9 million, or 21 cents, from $19.7 million, or 33 cents, a year ago, while sales grew 21 percent to $655.3 million from $541.6 million.