Heelys, Inc. narrowed its net loss for the fourth quarter as sales improved and the companys operating loss improved to $5.7 million from $9.1 million in the year-ago period. Sales for the fourth quarter ended December 31 jumped 37% to $15.6 million from $9.8 million in the 2007 fourth quarter. The net loss for the period improved slightly to $5.2 million, or 19 cents per diluted share, compared to $5.9 million, or 22 cents per diluted share, in the year-ago period.
Gross margins, pressured by higher-than-expected markdowns and an out-of-period adjustment, were 18.9%of net sales compared to negative 16.9% in the year-ago period.
Management noted that a dramatic slowdown in consumer spending, coupled with a highly promotional retail environment, placed substantial pressure on margins, but the wheeled footwear manufacturer still managed a 50% decline in inventory versus year-end 2007.
Management added that the progress with efforts to tighten inventory levels and boost margins, but those efforts were partially sidetracked by a precarious retail environment. Improved inventory levels in the U.S. were partially offset by a $4.4 million increase in the companys international inventory.
During the fourth quarter, the company returned more than $27 million in cash to its shareholders through a one dollar dividend. Despite the payout and the full year net loss, management said the company ended 2008 with more than $68 million in cash and equivalents.
The company did not provide guidance for 2009, but reported that first quarter sales are likely to be below last years level, while margins are expected to stay under pressure as inventory markdowns continue. CEO Interim President and CEO Michael Hessong said in a conference call that while markdowns continue with mall retailers, family footwear partners are doing well with the product.
Also of note, management said the company has completed mediation and agreed to a preliminary settlement regarding the pending class action suit related to its IPO.
