Phoenix Footwear Sees Acquisitions Help Offset Loss of Sales to Key Retailer…

Phoenix Footwear Group, Inc. saw acquisitions give a major boost to its top line results, but the end of sales to Dillard’s put a major crimp on several of the company’s brands and was the main culprit in a 3.9% organic sales decrease for the quarter and 2.4% for the year.

Net sales for the fourth quarter increased 60.2% to $33.2 million, compared to $20.7 million for the fourth quarter of 2004 largely driven by the addition of the acquired Chambers and Tommy Bahama brands. Royal Robbins’ 24.5% sales jump and H.S. Trask’s 4.1% increase added to the gain and were the loan bright spots on the organic side of things, as the company posted an organic sales decrease of 3.9%.

Fourth quarter net sales for Royal Robbins increased 24.5% to $3.7 million compared to $3.0 million a year ago, driven by continued strong domestic sales. Additionally, during 2005, the company finalized an agreement with its Canadian distributor and, as of January 1, 2006, Royal Robbins began selling directly in Canada. Initial performance has been very positive and in line with the Company's expectations.

Gross margin improved 200 basis points to 37.4% in the quarter, thanks to fewer close-out sales and markdowns. Net income for the fourth quarter was $71,000, or a penny per diluted share compared to a net loss of $624,000, or 8 cents per diluted share during the fourth quarter last year.

For the first quarter of 2006, the company expects sales to range from $37 million to $39 million with earnings per diluted share of 18 cents to 20 cents. In addition to that range, the company received a purchase price adjustment from the seller of its Altama brand in early January 2006. The net effect of this transaction is expected to result in a one-time after tax gain of approximately $1.6 million or 19 cents per diluted share, which will be reported in the first quarter of 2006.