Golf apparel manufacturer Ashworth (NASDAQ:ASHW) will report Q4 2006 financial results on Wednesday, Jan. 10, and it looks to be a rather threadbare quarter.

What analysts say:

  • Buy, sell, or waffle? Two analysts cover Ashworth, and they're unanimous: Hold.
  • Revenues. With everything golf-related apparently on the wane these days, revenues are expected to fall 18% for the quarter, down to $45.3 million.
  • Earnings. Profits are expected to drop from a $0.16-per-share loss last year to a $0.25-per-share loss this round.

What management says:
Ashworth is a company in turmoil and transition. The executive suite was very recently a revolving door. Following a nasty proxy fight at the company's shareholder meeting, two of the directors nominated by the dissident shareholders were appointed to the board, the CEO subsequently resigned, and one of the new directors was installed as his replacement. The wear marks are beginning to show on the company's carpet.

Things aren't much better for the clothing lines the company sells, either. With sales being lower, Ashworth had to resort to bigger and more extended markdowns of its clothes, which caused it to lower guidance on sales and earnings for the year. For 2006, Ashworth expects earnings per share to be between $0.12 and $0.17, while revenues are forecast to be 2% to 3% lower than its previous guidance, at the lower end of the $210 million to $220 million range. Underutilization of its capacity potential and charges of approximately $1.1 million related to the revolving door in senior management also contributed to the shortfall.

What management does:
Needless to say, trying to gather all the threads together at a time when the company leadership is in doubt makes it difficult to stay focused. It remains to be seen whether the new management can turn things around and improve performance, but it's also casting its eyes about hoping a suitor will step forward to bail it out. Management can't keep discounting the merchandise to make things look better.

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

One Fool says:
It may be a favorite at the country clubs, but Ashworth's clothing lines simply are not moving off the racks. While the management changes occurred at a time that suggested the old regime was unable to improve the situation, the new leadership's decision to seek "alternatives" (that's "sell the company" in corporate-speak) means that the dissident shareholders may simply be more interested in recouping their investments than in turning the company around. With golf sales slowing -- from clothes to shafts -- it may be the easier way out, too.


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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.