Phoenix Footwear returned to profitability after reporting a heavy loss in the fourth quarter of fiscal 2006. Net sales for the first quarter increased 4.3% to $42.1 million compared to $40.3 million last year.

Positive sales growth was primarily attributable to a strong performance of the Altama and Chambers Belt brands which was partially offset by heavy declines in sales for the Tommy Bahama and H.S. Trask footwear brands and a decline in Royal Robbins apparel. Royal Robbins' first quarter fiscal 2007 net sales decreased 9.6% to $10.1 million, compared to $11.2 million in Q1 last year.

The decrease was primarily attributed to lower sales volume related to the brand’s decision to exit Dick's Sporting Goods and Academy Sports, which they referred to as two “discount retail relationships.”

Excluding these two accounts, Royal is growing in line with its historical level and should show growth in 2007, according to management.

Altama, PXG’s military boot brand, saw Q1 net sales increase 54% to $11.1 million compared to $7.2 million for Q1 of 2006. Phoenix is expecting sales declines in the Altama business for Q2. In order to offset these declines, management is trying to build demand of EXO-Speed and EXO-Light Speed tactical boots in the public safety market.

Consolidated gross margins in the first quarter fell 340 basis points to 35.5% of sales compared to 38.9% in the first quarter of 2006. Operating expenses were up 460 basis points to 30.1% compared to 25.5% in the first quarter of fiscal 2006.

Net income was $414,000 or five cents per diluted share compared to $3 million or 37 cents per share last year.