Stride Rite Works through Keds Transition; Puts New Management Behind Saucony…

The Stride Rite Corporation saw fiscal third quarter sales increase about 7% for the period ended September 1, 2006 when excluding the domestic contribution from Saucony, which the company had acquired at the beginning of the fiscal fourth quarter last year, and total sales would have probably declined were it not for the gains in the International business that management said had come primarily from the addition of Saucony. SRR saw continued growth at its Sperry Top-Sider unit and the Stride Rite Retail business, but the re-positioning of Keds and the weakness at Tommy Hilfiger Footwear continue to be a drag on the overall business.

The Keds business was down 12.3% for the quarter and the nine-month YTD period, which management said was in line with expectations. David Chamberlain, Stride Rite Corp. chairman and CEO, said that sell-through has improved over the last six weeks due to younger profiles starting to work in all channels. He pointed to a successful test at Finish Line that could see the brand expand to 500 stores from its current 50 store placement. The Journeys business is kicking in and they have opened PacSun and Urban Outfitters as well. They are still servicing the mid-tier and are finding some success with the brand’s dual positioning at Kohl’s.

Fourth quarter sales are expected to be flat for Keds.

At Saucony, the company is focused on the technical running business, but has also developed a Lady Foot Locker business as well. Chamberlain said the Trigon launch was successful and had lessened shipments of lower-priced product.

SRR is apparently looking for more focus and has split the previous structure that had Keds and Saucony under Shawn Neville in a group president role. Instead, Neville will focus on the Keds business and the company has moved Richie Woodworth, who has been running the Tommy Hilfiger and Hind business, over to function as president of Saucony/Hind. Saucony will strengthen its marketing group by moving Sue Dooley over from Sperry to a new role as VP marketing for Saucony. The moves have resulted in the departure of former GM Mike Metcalfe and market director, Kevin Tordoff, among others.

The Tommy Hilfiger business continued to plummet, but Stride Rite did renew the license for another year through March 2008 as they give the new ownership and management of the brand some time to turn things around. The fourth quarter is expected to see a less significant decline than in the first nine months of the year.

The SR Children’s wholesale business was down 6.4%, primarily due to lower sales of TH Footwear in the department store channel. On the retail side, total sales were up more than 17% on a 4.1% comp sales gain and a 12% increase in the number of stores since Q3 last year. SRR ended the quarter with 296 stores.

Sperry had another healthy quarter, reflecting “strong sales” of both men’s and women’s product, “particularly in the premier, family, and outdoor channels.” Chamberlain said they should have a strong Q4.

In the International business, Canada was called out for its “solid growth” of the Keds brand, while Saucony saw “strong growth” in Australia and Korea in both fashion and technical product.

Gross margin got most of its boost from improved contributions from Stride Rite Children’s, Sperry, Tommy Hilfiger, and International.