K-Swiss Inc. saw shares increase 5.4% for the week to close at $37.12 on Friday after the company posted second quarter net income that more than doubled from a year ago and beat the streets consensus earnings estimate of 65 cents a share. KSWS also raised its guidance for the year and doubled its annual dividend rate to 8 cents.
The company is benefiting from an increased presence at Foot Locker, with business there in Q2 representing 27% of sales versus 21% in the year-ago period. FL backlog was 32% of the total at quarter-end compared to 28% at the end of Q1. The worlds-largest-athletic-specialty-retailer is 28% of Q3 backlog and 32% of Q4. A senior executive from Foot Locker told SEW that K-Swiss “keeps inventing new ways to do white shoes”, a capability that clearly has the company capitalizing on the current clean classic trend at retail.
Classics increased 59% for the quarter to represent 65% of total K-Swiss sales. Original classics increased by 134% to 39% of total sales, while Limited Edition product gained just 8% to 26% of total sales.
The Training category jumped 78% and was 10% of total sales outpacing Tennis, which increased 13% to 5% of total sales. Kids increased 26% for Q2 and were 18% of total sales.
The increase in training surely contributed to the increase in average selling price, up 1.0% to $24.93 for the quarter. The company saw unit shipments increase 48% for Q2 to 4.3 million pair. At-once was 13% of the quarter versus 34% in LY Q2. The fill-in business grew 49% versus a 51% planned growth.
Domestic futures were up 88.8% to $140.9 million and International futures rose 46.2% to $18.2 million. Total backlog for Q3 is up 60% and Q4 was up 129%.
In its second quarter 10-Q filing last week, KSWS revealed that they had reached a “compromise agreement” with the trustees that oversaw the liquidation of the assets of Just for Feet. The deal was in response to a suit filed in late 2001 by the JFF trustee in attempt to collect over $4.9 million in payments K-Swiss received in the 90 days prior to the retailers bankruptcy filing. The settlement will require K-Swiss to “pay a small portion of the claimed amounts”. The bankruptcy court will need to approve the deal.
The company also revealed in the filing that Swiss Army Brands had petitioned for cancellation of the companys U.S. registrations for the K-Swiss trademark. KSWS said they have now settled all litigation “in a manner satisfactory to both companies”.
The total sales volume for National Geographic and Royal Elastics was just $604,000 for the quarter in the U.S, essentially double the year-ago volume. Sales for the two brands rose 72% in International to $920,000 for the quarter. Total RE sales increased 97%.
National Geographic has just four employees left and the company feels that “any sales” will cover the costs for people. KSWS said the pain is “all gone” here after taking a $1.3 million charge in the quarter to cover any required royalty payments.
KSWS now sees EPS for the year to range between $2.20 and $2.30, up from the previous guidance of $1.75 to $1.85. Analysts are looking for EPS to come in at $2.21, up from $1.46 a year ago. The company expects 2003 revenue in the $395 million to $405 million range, up from prior guidance of $350 million to $360 million. Analysts expect revenue for the year to increase to $401.7 million from $290.4 million in 2002.
>>> It can often prove troublesome to have one retailer approaching a third of your business
>>> Heavy inventories from other vendors are limiting fill-in OTB for K-Swiss and others…
