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K-Swiss Posts Loss, Outlook Still Gloomy

Analysts pointed to tougher times ahead for K-Swiss after the company reported a fourth-quarter loss and offered up a bleak 2009 outlook.

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LOS ANGELES — Analysts pointed to tougher times ahead for K-Swiss after the company reported a fourth-quarter loss and offered up a bleak 2009 outlook.

“It’s going to be a tough year,” said Jeff Van Sinderen, an analyst at B. Riley & Co. “This is a tough market to reinvent yourself in. Their turnaround is harder with the headwind of what’s going on in the overall retail space right now.”

Sam Poser, an analyst at Sterne, Agee & Leach, said that as time goes on, it’s likely to get harder for the brand to stay top-of-mind with consumers and ignite sales. “The clock is ticking,” he said. “They’ve got to make sure they’re set up for spring 2010. If they don’t, they’re going to be in even more trouble than they are now.”

For its fourth quarter ended Dec. 31, 2008, the firm reported a net loss of $13.7 million, or 39 cents per diluted share, compared to a profit of $596,000, or 2 cents, for the year-ago quarter.

Sales during the quarter dropped 28 percent to $56.3 million, versus $78.2 million for the fourth quarter of 2007.

Looking ahead, the company said it now expects a 2009 loss of 30 to 60 cents a share on sales of $210 million to $250 million. “Our estimates for 2009 continue to reflect the significant decline in domestic and international revenues, substantial investments in product development and marketing for the K-Swiss and Palladium brands, and a slowdown of international operations,” said VP of finance and CFO George Powlick during a conference call with investors and analysts.

For his part, Chairman, President and CEO Steven Nichols said macroeconomic conditions are likely to continue to challenge the company. “As weak as these periods have been, I don’t see the rest of 2009 getting better,” he said during the call. “Footwear buyers are holding off on purchases in order to turn inventory into cash, and there are few willing to allocate space for the products.”

For the full year, the company reported earnings of $20.9 million, or 59 cents, compared to $39 million, or $1.10, in 2007. Sales for the year declined 17 percent to $340.2 million, from $410.4 million the prior year.

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