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K2 Shares Plunge on Earnings Warning

California: News and Insight on Business in the Golden
State | THE STATE / SPORTING GOODS

October 14, 1998|Bloomberg News

K2 Inc. shares fell 30% after the sporting goods company warned of lower-than-expected third-quarter earnings because of poor sales of its expensive bicycles. Shares of the maker of skis, snowboards, in-line skates and other sporting goods fell $4.31 to close at $9.88 on the New York Stock Exchange. Earlier, shares touched $7.75, a 52-week low. K2 said poor sales of its high-end, full-suspension bicycles led it to cut prices, eroding margins. Excluding charges, the company expects to report earnings from continuing operations of $1.5 million, or 9 cents a share, on sales of $130 million. The Los Angeles-based company had been expected to earn 33 cents a share. In the year-earlier period, K2 had earnings from continuing operations of $2.9 million, or 18 cents, on sales of $121 million. K2 said it will take a $14.5-million pretax charge to restructure its bike business, implement a cost-cutting program in its winter clothing and equipment business, and write down inventory. The company expects the poor performance of its bicycle business to affect earnings through the fourth quarter.

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