Phoenix Footwear Group, Inc., the parent of Trotters and SoftWalk, reported, net sales from continuing operations for the second quarter increased 9.2 percent in the second quarter ended June 29, to $3.44 million compared to $3.15 million for the second quarter of fiscal 2012.

Consolidated net loss from continuing operations for the second quarter declined to $359,000 or $0.05 per share compared to a net loss of $470,000 or $0.06 per share during the second quarter of fiscal 2012.
Net sales from continuing operations for the first six months increased 4.3 percent to $9.2 million compared to $8.9 million for the first six months of fiscal 2012.

Consolidated net loss from continuing operations for the first six months of fiscal 2013 narrowed to $91,000 or $0.02 per share compared to a net loss of $209,000 or $0.03 per share for the first six months of fiscal 2012.

On July 1, 2013, the company completed the sale and leaseback of its Distribution Center located in Old Town, Maine for $620,000.

GREY’S ANATOMY LICENSING AGREEMENT

As announced on June 20, 2013, the company has entered into a licensing agreement with Disney/ABC Studios to sell footwear to the medical community under the Grey’s Anatomy brand. Phoenix has developed performance footwear utilizing the unique comfort features found in SoftWalk® which is specifically designed for the medical professional. In addition, Phoenix will be jointly marketing this product through Barco Uniforms, an industry leading uniform company which for the past seven years has developed and manufactured medical scrubs bearing the Grey’s Anatomy label. This new performance product known as Meredith, will bear the label Grey’s Anatomy by SoftWalk and be available in stores in early 2014.

BRUCE R. KAPLAN HIRED AS EXECUTIVE VICE PRESIDENT

Also as announced on June 20, 2013, industry veteran Bruce R. Kaplan joined the company on July 8, 2013 as its new Executive Vice President. Mr. Kaplan is replacing outgoing Executive Vice President, Robby L. Carter, who left the company on June 30, 2013 to pursue other opportunities.

For the past 13 years, Mr. Kaplan has held various executive leadership roles with Ariat International, a privately held active outdoor footwear and apparel company, including that of National Sales and General Manager of its new Lifestyle division. Prior to obtaining that role, Mr. Kaplan was the Eastern and Core Regional Sales Manager and was instrumental in the rapid expansion of the company’s brand as well as responsible for building and training the sales organization in these same regions contributing to Ariat’s present leadership position in the global equestrian market. From 1998 to 2000, Mr. Kaplan was the Eastern Region and New York Metro Majors Territory Sales Manager for Ecco North America and was primarily responsible for selling to Nordstrom, Macy’s and other national and high visibility retail accounts.

Prior to Ecco North America, Mr. Kaplan was the Vice President of Sales and Customer Service for H.H. Brown, in charge of Soft Spots, Supremes and the launching of Born Footwear. In 1981, Mr. Kaplan began his career in retail with Milgram Kagan Corporation, a 208-store retail chain, where he held the position of General Manager until 1987.

Commented James Riedman, CEO: “Bruce is highly regarded within the industry and brings with him an unparalleled record of success. Bruce distinguishes himself by combining a solid history of building brands with operational excellence. I look forward to working with Bruce to grow the company’s Trotters® and SoftWalk® brands.”

SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 2013

For the quarter ended June 29, 2013, net sales rose to $3.44 million or 9.2 percent from $3.15 million when compared to the second quarter of fiscal 2012. Net sales for the first six months of fiscal 2013 increased $382,000 or 4.3 percent to $9.2 million compared to $8.9 million for the first six months of fiscal 2012. The increase in net sales for the quarter and first six months of fiscal 2013 was primarily driven by a new style offering designed to appeal to the broader customer demographic of the company’s internet-based accounts together with a 3.8 percent improvement in the average net unit selling price of the company’s product offering.

Gross margins for the second quarter of fiscal 2013 improved to 37.1 percent compared to 36.2 percent for the second quarter of fiscal 2012, while the gross margin for the first six months of fiscal 2013 compared to the first six months of fiscal 2012 was 37.0 percent. The improved gross margin for the second quarter benefited from an increase in the average net unit price of 5.9 percent coupled with a 2.4 percent increase in the volume of full priced goods sold during the period and decrease in the volume of off-priced sales that was partially reduced by an increase in the average net unit cost of goods sold of 4.5 percent.

SG&A for the second quarter of fiscal 2013 increased to $1.45 million or 1.8 percent compared to $1.43 million for the second quarter of fiscal 2012. SG&A as a percentage of net sales decreased to 42.1 percent for the second quarter of fiscal 2013 from 45.2 percent when compared to the same period of fiscal 2012. SG&A for the first six months of fiscal 2013 decreased slightly to $3.13 million compared to $3.12 million for the first six months of fiscal 2012. SG&A as a percentage of net sales decreased to 33.8 percent from 35.2 percent when compared to the same period of fiscal 2012.

The company reported a net operating loss from continuing operations of $359,000 or $0.05 per share for the second quarter compared to a net operating loss from continuing operations of $470,000 or $0.06 per share for the same period of the prior year.

For the first six months of fiscal 2013, the company reported a net operating loss from continuing operations of $91,000 or $0.02 per share compared to a net operating loss from continuing operations of $209,000 or $0.03 per share for the first six months of fiscal 2012.

Earnings before interest, taxes, depreciation and amortization (or “EBITDA”) from continuing operations for the first six months of fiscal 2013 was $397,100 compared $252,300 for the first six months of fiscal 2012.

SALE AND LEASEBACK OF THE OLD TOWN, MAINE DISTRIBUTION CENTER

As announced on July 8, 2013, Penobscot Shoe company (“Penobscot”), a Maine corporation and wholly owned subsidiary of Phoenix Footwear Group, Inc., a Delaware corporation (“Phoenix Footwear”), entered into a purchase and sale agreement (the “Agreement”) with Old Town Partners, LLC (“Buyer”) relating to transactions which include, among other things, the sale and leaseback of Phoenix Footwear's warehouse facility located in Old Town, Maine on July 1, 2013.

Under the terms set forth in the Agreement, Penobscot sold to Buyer an approximately 75,000-square-foot commercial building located on approximately 3.379 acres (collectively, the “Property”). Currently, Phoenix Footwear utilizes the Property as its warehouse for inventory. Under the Agreement, Penobscot is required to lease the Property back from the Buyer pursuant to the terms of a Commercial Lease (Net Lease) between the Buyer, as landlord, and Penobscot, as tenant, and guaranteed by Phoenix Footwear. The lease term is ten years. The purchase price under the Agreement is $620,000. The proceeds from the closing of the transaction were used by Phoenix Footwear to pay off its $250,000 term loan with AloStar Bank of Commerce, an Alabama bank (“AloStar”), and pay down its $700,000 subordinated term note with Gibraltar Business Capital, LLC, and its $7.0 million revolving credit facility with AloStar.