Rarely has an earnings report been so overshadowed by events at the company making it.

Tomorrow, golfing clothier Cutter & Buck (NASDAQ:CBUK) reports its earnings numbers for the third quarter of fiscal 2006, and as is the case with most of its Q3s, the company is expected to report a loss. But the real news about Cutter & Buck came out today: The cadre of company execs is receiving a firm shake, with several names now rising to the top in the wake of CEO Tom Wyatt's departure to take over Gap's (NYSE:GPS) GapBody division. Chief among the new chiefs: Former Cutter CFO and Washington Mutual (NYSE:WM) alum Ernest Johnson will become CEO, and former Cutter marketing chief and Nordstrom (NYSE:JWN) alum Kaia Akre will take over as president.

Ah, but we were talking about the earnings .

Wall Street Wisdom:

  • General consensus. Two analysts follow Cutter: One's a buyer and the other's a holder.
  • Revenues. The prediction is that Cutter will report a 6% sales gain versus the year-ago quarter, for $25.7 million in total.
  • Earnings. Cutter is expected to report a $0.06-per-share loss, 50% worse than last year's $0.04 loss.

Margin watch:
Management shakeups often give investors the willies, but at Cutter, I suspect, investors will just heave a sigh of relief. Cutter has seen gross, operating, and net margins all take a long-term slide over the past 18 months. Sometimes, change is good.

Margins %

7/04

10/04

1/05

4/05

7/05

10/05

Gross

46.7

47.2

47.3

47.9

47.3

46.3

Op.

11.8

11.8

11.1

9.8

8

4.9

Net

7.9

8.5

8.8

6.8

6

4.4
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
With profits likely to go missing tomorrow, we're freer than usual to focus on the company's free cash flow, which, in contrast to its GAAP earnings, is usually positive in Cutter's Q3 reports. Free cash flow has declined 16% against just a 6% drop in sales over the past six months, as growing inventories and uncollected accounts receivable eat into the firm's cash flow. Let's look -- and hope -- for a reversion to the mean tomorrow.

Competitors:
Cutter competes with the likes of Nike (NYSE:NKE) and Phillips-Van Heusen (NYSE:PVH).

Gap is a recommendation of the Fool'sStock AdvisorandInside Valuenewsletters. Check out any of our investing newsletters free for 30 days.

Fool contributorRich Smithdoes not own shares of any company named above.