CEO: K-Swiss expects continued weakness
K-Swiss Inc. (Nasdaq: KSWS) CEO Steven Nichols said the shoemaker expects weak business for quite a while. Nichols made the comments during a midday conference call.
“We’ve been saying for several quarters now that domestic business will be weak until at least late in 2008,” Nichols said. “From what we have seen in the retail environment as of late and order indications, that expectation needs to be extended until 2009.”
Before the opening, K-Swiss reported fourth-quarter net income of $0.6 million, or $0.02 per share, compared with $10.7 million, or $0.30 per share, a year earlier. The results missed Wall Street expectations of earning $0.04 per share.
Quarterly revenue fell to $78.2 million, down 17% from $93.8 million during the year-ago period. Wall Street analysts, on average, projected revenue of $79.7 million.
Classic footwear accounted for 62% of revenue, children’s 20%, Royal Elastics 5%, tennis 7%, training 4% and other products accounted for 2%.
“The breakdown of sales by product category for the fourth quarter of 2007 continues to reflect the decline in the class of business, but demonstrated improvement in other areas,” Nichols said. “Worldwide revenue and backlog are down overall on continued weakness in the domestic market, while international revenue is up albeit at a slower pace in the fourth quarter than we experienced earlier in the year.”
The chief executive noted that international business continued its positive momentum during the quarter.
During the quarter, K-Swiss opened the first U.S. retail location of its Royal Elastics brand. Royal, a wholly owned subsidiary, makes slip-on, laceless shoes. The firm already has three Royal stores in Taiwan.
“The Royal on Main Street in Santa Monica gives us the opportunity to showcase new shoes such as King and Queen high-tops and licensed shoes such as Lamb sneakers and Andy Warhol,” Nichols said.
Going forward, K-Swiss projects first-quarter revenue between $95 million and $105 million. The firm expects earnings in the range of $0.18 to $0.28 per share. K-Swiss expects full-year revenue of between $310 million and $340 million and full-year earnings in the range of $0.10 to $0.35 per share.
CFO George Powlick said the revenue estimates reflect the continued decline in American revenue, “substantial” investment in product development and further investment in the Royal Elastics brand.
In midday trading, KSWS shares are down 9.39%, or $1.57, at $15.15. Over the last 52 weeks, shares have ranged from $14.15 to $32.29.
