K-Swiss CEO hopes premium product focus will reverse declines
K-Swiss Inc. (Nasdaq:KSWS) CEO Steven Nichols said the shoe maker has been through a downturn twice before and management actions worked before. Nichols said he hopes the Westlake Village, Calif.-based firm’s plans - which include a focus on premium sports shoes, tennis products and athlete endorsements – will work again. Nichols made the comments during a midday Tuesday conference call.
During hard times, Nichols said most companies come out with promotional shoes, lower-priced shoes and find business at the lower end of the market.
“We’re running in the opposite direction and this is the third time we’ve had a significant downturn in my 20-plus years here. That’s essentially what we did the other two times – it’s counterintuitive,” Nichols said. “In the short run, it hurts your business but in the long run, in the first two times, it greatly resuscitates your brand and we ended up hitting totally new heights. Anytime you get an indication from a stock broker of a stock, they always say, ‘Past performance is no indication of what will happen in the future.’ That’s the same story here.”
Nichols said a danger point would be for K-Swiss to resemble L.A. Gear, which made shoes that light up when the wearer’s foot hits the floor, or Heelys, which makes shoes that have wheels embedded in the soles. L.A. Gear and Heelys are “gimmick companies,” he said.
“We want to stress that we have long-term athletic qualities about us and that our heritage shoes were once athletic shoes,” Nichols said.
In an early Tuesday press release, K-Swiss said it expects second-quarter revenue to range from $70 million to $80 million and earnings ranging from a loss of $0.05 per share to a profit of $0.05 per share. Wall Street analysts expect revenue of $80 million on earnings of $0.04 per share.
The firm expects 2008 revenue of between $305 million and $330 million and fiscal year earnings to range from $0.05 to $0.25 per share. Analysts anticipate revenue of $328.6 million on earnings of $0.26 per share.
K-Swiss Inc. (Nasdaq:KSWS) shares are slipping slightly despite the footwear maker’s early Tuesday announcement that its first-quarter sales totaled $102.9 million, which came in above Wall Street’s expectation of $101 million. During the year-ago period, K-Swiss posted $122.6 million in sales.
“The slowdown in our international business materialized in the first quarter,” Nichols said. “Backlog was down 3% at March 31.”
Quarterly net earnings slipped 61% to $7.1 million, or $0.20 per share, from $18 million, or $0.51 per share, a year earlier. The income results met Wall Street analysts’ expectation of earning $0.20 per share.
In Tuesday’s trading, KSWS shares were down 0.96%, or $0.15, at $15.45.
