Heelys' fourth quarter losses widened to $3.2 million, or 12 cents per share, from a loss of $1.1 million, or 4 cents, in the prior-year period. Revenues dropped 41.2% to $6.7 million in Q4.
Domestic sales fell 38.5% to $3.2 million while international decreased 43.5% to $3.5 million due to excess retail inventory in Europe market and the termination of its Japanese distributor.
For the full year, sales decreased 30.4% to $30.4 million. Domestic sales dropped 43.0% to $8.6 million due to reduced overstock inventory sales heading to discounters of $1.4 million, combined with loss of placement of core product in two sporting goods chains, one department store chain, and two footwear chains totaling $6.8 million. Heelys did note that it had received orders from three of those retailers for the first half of this year. The total net loss last year swelled to $4.0 million, or 14 cents per diluted share, from $5.1 million, 19 cents per diluted share, in the prior year.
On a conference call with analysts, Thomas Hansen, company CEO and president, said Heelys management team has been rebuilt with the addition of a chief customer officer (Rick Groesch), CFO and COO (Craig Storey), and national sales director (Rene Trevino) over the last year. It also consolidated from three reps groups in the U.S. to one, MVP Sports.
At the same time, the launch of HX2, its two-wheeled Heelys for younger consumers, and its Nona in-line foot board for older ones is helping “stretch the appeal” of the brand across a wider range of consumers. The goal is to have Heelys available in just over 3,000 doors in the U.S. by Holiday 2011 versus less than 1,500 in Holiday 2010.
“We think that's the optimum level to help Heelys regain greater visibility in the marketplace, yet keep the price and the margins at levels that work well for both us and the retailers,” said Hansen.
