CARLSBAD, Calif. -- Ashworth, Inc. (NASDAQ: ASHW) reported that consolidated net revenue for the first quarter ended Jan. 31 decreased 9.8% to $34.5 million as compared to $38.3 million for the first quarter of 2007. The company reported a consolidated first quarter net loss of $7.4 million, or $0.50 per diluted share, compared to a net loss of $2.4 million, or $0.17 per diluted share, for the same quarter of the prior year.

Net revenue for the domestic segment (including Gekko Brands, LLC) decreased 5.8% to $30.1 million from $32.0 million for the same period of the prior year, officials said. Net revenue from the international segment (including Ashworth, U.K., Ltd.) decreased 30.1% to $4.4 million from $6.3 million for the same period of the prior year.

In the company's golf channel, however, total revenues in the first quarter of 2008 increased 5.6% to $9.5 million as compared to the same period last year. Revenues from on-course golf retailers increased 8.9% or $578,000 over the prior year, but this increase was partially offset by a decrease of $76,000 in revenues from off-course golf retailers.

Ashworth continues to experience significant competitive pressure and market consolidation within the off-course channel of distribution, officials said. As part of their effort to restore sales growth, management is implementing new sales management processes in both the on-course and off-course channels of distribution and company is also establishing a number of new programs with key off-course accounts.

In the first quarter of fiscal 2008, the company's consolidated gross margin decreased 460 basis points to 36.2% as compared to 40.8% in the first quarter of fiscal 2007. The decrease in consolidated gross margin was driven by the deleveraging effects of the decrease in revenue and an increase in product costs not offset by price increases.

In addition, as a result of a labor stoppage at a key headwear vendor, the company incurred additional costs to divert the production of its NASCAR products to alternate manufacturing facilities and expedite manufacturing and transportation.

Consolidated selling, general and administrative ("SG&A") expenses increased 1.3% to $19.4 million for the first quarter of fiscal 2008 as compared to $19.1 million for the first quarter of fiscal 2007. As a percent of net revenues, SG&A expenses were 56.1% for the first quarter of fiscal 2008 as compared to 50.0% for the same period of the prior fiscal year.

The expense increase is largely due to increased consulting fees, primarily associated with product design and supplementing the company's accounting function during the executive transition period, combined with the expense related to the employment and non-compete agreements entered into with the principals of Gekko on June 4, 2007. These increases were partially offset by a decrease in commission expense primarily as a result of the reduction in revenues.

"We are continuing to implement plans to improve our operations and cut operating costs," said Ashworth CEO Allan H. Fletcher. "We are establishing channel specific product strategies and sales programs to better serve our customers and improve our profitability.

"We are encouraged with the improvement in our domestic core golf distribution channel, but a complete turnaround will take more time," he added. "I believe the plans we've started to implement will, in time, return the company to sustainable profitability."

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