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K-Swiss Refocuses, Sells Royal Elastics

The firm is turning its attention back to its core business.

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K-Swiss CEO Steven Nichols

K-Swiss CEO Steven Nichols

Photo By Courtesy Photo

LOS ANGELES — K-Swiss is turning its attention to its core business after announcing the sale of its Royal Elastics brand to a private investment firm and posting a first-quarter loss.

B. Riley & Co. analyst Jeff Van Sinderen told Footwear News the results were not surprising given K-Swiss’ earlier statements, but added that the company has the time and finances to stage a turnaround. “It’s just going to be a process, but they’ve got a tremendous amount of cash,” he said. “They’ve got the time to rebuild their business comfortably in a calculated, conservative way while being innovative.”

New product launches could help, noted Van Sinderen. “They are planting the seeds to build a performance running and performance tennis business, to launch the Remastered Classic,” he said. “It really has to do with repositioning the brand as more of a performance brand.”

For the quarter ended March 31, K-Swiss reported a net loss of $1.1 million, or 3 cents a diluted share, compared with earnings of $7.1 million, or 20 cents, in the year-ago period.

Revenues during the quarter declined nearly 25 percent to $74 million, versus $98.4 million in the first quarter of 2008. Domestic and international revenues fell by 25 percent and 24 percent, respectively.

Futures orders were also down. Orders with ship dates from April through September decreased 41 percent to $73.7 million, compared with $125.6 million for the same time last year.

For the full year, the company said it expects to report a loss of 60 cents to 90 cents a share on sales of $200 million to $230 million.

“Our goal for 2009 remains unchanged,” Steven Nichols, chairman, president and CEO, said during a conference call with investors and analysts. “We will focus on minimizing our net loss, reducing inventory levels and making the right investments in our brand for the long term.”

The company announced on May 4 it had sold the Royal Elastics brand to REH, an investment group headed by the label’s former product design director, John Bondoc.

Bondoc was not available for comment at press time.

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