K-Swiss Posts Q1 Loss on Continued Sales Declines

K-Swiss Inc. posted a net loss was $1.1 million, or 3 cents per diluted share, for the first quarter ended March 31, compared with net earnings of $7.1 million, or 20 cents per diluted share, in the prior-year period. The sale of Royal Elastics on April 30 is being accounted for as a discontinued operation in the company’s financial results.

For the first quarter of 2009, total worldwide revenues decreased 24.8% to $74.0 million compared with $98.4 million in the prior-year period. Domestic revenues decreased 25.4% to $30.48 million in the first quarter, and international revenues decreased 24.3% to $43.7 million.

Futures Orders

Worldwide futures orders with start ship dates from April through September 2009 were $73.71 million at March 31, 2009, compared with $125.6 million at March 31, 2008. Domestic futures orders decreased 39.0% to $28.3 million at March 31, 2009, from $46.4 million the previous year. International futures orders decreased 42.7% to $45.4 million at March 31, 2009, from $79.2 million the previous year.

Palladium

For the quarter ended March 31, 2009, Palladium brand net sales were $7.4 million with a net loss of $58,000. Futures orders with start ship dates from April through September 2009 were $9.6 million at March 31, 2009. Revenues, financial results and futures orders for Palladium are included in the consolidated results above for the first quarter of 2009.

Sale of Royal Elastics

On April 30, 2009, the company completed the sale of Royal Elastics, the company’s laceless fashion footwear brand. The sale is expected to result in a gain of approximately $1.4 million, or 4 cents per diluted share, in the second quarter of 2009.

Earnings Guidance

The company’s guidance from February 2009 has been amended. Currently, the company expects full-year revenues to be approximately $200 million to $230 million and expects to report a full-year loss per diluted share of approximately 60 cents to 90 cents. Full-year SG&A expenses are currently projected to be approximately $125 million, but are expected to fluctuate based on strategic decisions made during the year as well as general trends in the retail marketplace.

Steven Nichols, Chairman of the Board and President, stated, “We expected a tough start to the year in terms of sales and earnings results. We definitely got one. Our focus remains on producing better results, but as indicated by our deteriorating guidance, we’re not expecting that turnaround to occur until after 2009. The global marketing and product initiatives we have underway in Classic, Tennis, and Running, are intended to build a stronger brand for the long term. We have more brand recognition and design developments underway than at any point in recent history. We will work to build on these initiatives during the year.”