Golf apparel maker Ashworth, Inc. (NASDAQ: ASHW) reported that its consolidated net revenue for the second quarter ended April 30 decreased 3.4 percent to $57.8 million as compared to $59.9 million for the second quarter of 2007. Consolidated second quarter net income was $0.9 million, or $0.06 per diluted share, compared to a net loss of $2.5 million, or $0.17 per diluted share, for the same quarter of the prior year.

In the quarter, the company's consolidated gross margin increased 340 basis points to 42.2 percent as compared to 38.8 percent in the second quarter of fiscal 2007. The increase in consolidated gross margins was due to an improved gross margin in the company's domestic segment driven by a higher average selling price as compared to the same period of the prior year as well as a reduction in overhead expenses, officials said.

Consolidated selling, general and administrative ("SG&A") expenses increased 4.3 percent to $22.8 million for the second quarter of fiscal 2008 as compared to $21.8 million for the second quarter of fiscal 2007, officials explained. As a percent of net revenues, SG&A expenses were 39.4 percent for the second quarter of fiscal 2008 as compared to 36.5 percent for the same period of the prior fiscal year.

The increase is largely due to increased consulting fees, primarily associated with athlete endorsements, design consultants and the consulting agreement for the services of its CEO. Also contributing was an increase in royalties due to a higher concentration of revenues from licensed products, an increase in commissions due to a higher concentration of revenues from independent sales representatives and the expense related to the employment and non-compete agreements entered into with the principals of Gekko on June 4, 2007. The increases were partially offset by a decrease in salaries and wages, primarily performance based bonuses.

Total revenues in the domestic golf channel in the second quarter increased 2.3 percent to $22.3 million from $21.8 million for same period last year. This is the third consecutive quarter in which revenues in the golf channel have increased. The increase in the second quarter was primarily driven by higher revenues from on-course golf retailers, partially off-set by lower revenues from off-course and off-price golf retailers over the comparable prior year quarter.

Ashworth continues to experience competitive pressure and the effects of market consolidation in off-course specialty golf retail. As part of its effort to restore sales growth, management is implementing new sales management processes in both the on-course and off-course channels of distribution.

Copyright 2008 PGA.com. All rights reserved.