The Company incurred a net loss of $2.0 million or $.05 per diluted share in the fourth quarter of fiscal 2002, as compared to a net loss of $6.0 million or $.14 per diluted share in last year’s fourth quarter. The fiscal 2001 fourth quarter results included non-recurring costs related to the corporate restructuring, as well as inventory write-down charges related to the Company’s exit from its leased department store business, which negatively impacted earnings by $.07 per share. Excluding these charges, the Company would have reported a $.07 loss per share in the fourth quarter of 2001.
For the full 2002 fiscal year, net sales totaled $532.4 million, a 1% increase from the sales level of $529.1 million achieved in fiscal 2001. Net income totaled $24.1 million in fiscal 2002, a 27% increase from the net income of $19.0 million in fiscal 2001. On a diluted basis, earnings were $.58 per share in fiscal 2002, as compared to $.45 per share in fiscal 2001. During the 2001 fiscal year the Company recorded non-recurring and other one-time, after-tax costs of $5.1 million or $.12 per share related to restructuring charges, the leased department store exit and executive termination costs. Excluding these 2001 charges, net income for fiscal 2002 would have been flat compared to last year and earnings would have been $.57 per diluted share for fiscal 2001.
Sales of the Keds brand in the fourth quarter of fiscal 2002 increased 6% from the comparable period of fiscal 2001, although annual sales declined 6% compared to the prior fiscal year. Sales of the Stride Rite Children’s Group increased 4% for the fourth quarter and 1% for the full year as compared to the same period of fiscal 2001. This increase was driven by the company-owned retail stores, which had increases of 11% and 9% for the fourth quarter and fiscal year, respectively, compared to the same periods of fiscal 2001. Sales at comparable company-owned retail stores increased 1.0% in the fourth quarter and decreased 0.8% for the fiscal year. Stride Rite Children’s Group sales to independent retailers declined 10% and 8% compared to the prior year’s fourth quarter and fiscal year. Sales of the Sperry Top-Sider brand increased 35% in the fourth quarter and 10% for the fiscal year from the comparable periods in fiscal 2001. Fiscal 2002 Tommy Hilfiger Footwear sales for the fourth quarter and the full year increased 22% and 6% compared to the same periods in the prior year, respectively. International sales for the fourth quarter were flat compared to the same period in 2001 and increased 6% for the full year compared to fiscal 2001.
David M. Chamberlain, Stride Rite’s Chairman and Chief Executive Officer, commented, “During 2002, we continued to work on our strategies and improve our product lines. These efforts positively impacted the results for Tommy Hilfiger Footwear, Sperry Top-Sider and the International business. We believe this momentum will carry into the new fiscal year. Keds, as we previously reported, had a transition year in 2002. Our new management team revamped Keds design and developed a fresh updated Keds look, which is being delivered to retailers with new advertising beginning in 2003. During fiscal 2002, we opened 58 Stride Rite Children’s Group company-owned retail stores, closed three under-performing retail stores and successfully exited the 46 children’s leased department stores. The Stride Rite retail stores, when combined with our licensed partner’s doors, allows Stride Rite to maintain a strong national specialty store presence. We will focus Stride Rite in 2003 on building the base of sales in our stores and key accounts, while selectively adding new stores. We also continue our work on Munchkin and KidSmart brands aimed at different customers and price points. In 2002, Stride Rite stores and customers felt the effects of the soft retail economy, particularly the poor Easter and back-to-school business, the key selling periods.”
Mr. Chamberlain continued, “During this past year, we strengthened our balance sheet and improved cash flow. We managed our inventories down and improved DSO throughout 2002. The 2002 fiscal year ended with an $18 million increase in cash, net of short term borrowing, despite repurchasing over $20 million in Company stock during 2002. As we enter this new fiscal year, we hope to continue the momentum we experienced last quarter, while working through a difficult retail environment. For fiscal 2003, we believe our sales will continue to grow in the range of 3% to 5% and we are comfortable with the current First Call earnings projection of $.62 per share.”
A summary of sales and net income for the fourth quarter (unaudited) and fiscal year is provided below. A more detailed balance sheet and income statement follows this release.
(in thousands) For the Quarter For the Fiscal Year Ended Ended Nov. 29, Nov. 30, Nov. 29, Nov. 30, 2002 2001 2002 2001 Net sales $98,197 $89,026 $532,400 $529,147 Net income (loss) (2,036)(a) (6,023)(b)(c) 24,117(a) 18,997(b)(c) Net income (loss) per share of common stock: Diluted (.05)(a) (.14)(b)(c) .58(a) .45(b)(c) Basic (.05)(a) (.14)(b)(c) .58(a) .45(b)(c) Shares used in per share computations: Diluted 40,444 42,077 41,713 42,114 Basic 40,024 41,876 41,315 41,757 (a) Income for the 2002 fourth quarter and fiscal year includes a credit of $0.1 million pre-tax, or less the $.01 per share after tax, related to a reversal of prior year restructuring accruals. (b) Income for the 2001 fourth quarter and fiscal year includes nonrecurring, pre-tax charges of $3.1 million, or $.04 per share after tax, related to a restructuring of the Company's administrative staff, the exit of the leased department store segment and retail system asset impairment costs. (c) Income for the twelve months of 2001 includes $2.3 million, pretax, in first half executive termination costs and $1.8 million, pretax, of fourth quarter inventory writedown costs related to the exit of the leased department store leaseholds included in cost of sales.
The Stride Rite Corporation markets the leading brand of high quality children’s shoes in the United States. Other footwear products for children and adults are marketed by the Company under well-known brand names, including Keds, Sperry Top-Sider, Tommy Hilfiger, Grasshoppers and Munchkin. Information about the Company is available on our website – www.strideritecorp.com. The Company will provide a live webcast of its fourth quarter conference call. The live broadcast of Stride Rite’s quarterly conference call will be available on the Company’s website and at www.streetevents.com, beginning at 10:00AM EST on January 9, 2003. An on-line replay will follow shortly after the call and will continue through January 16, 2003. Information about the Company’s brands and product lines is available at www.striderite.com, www.keds.com and www.sperrytopsider.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This announcement includes forward-looking statements which reflect our current views with respect to the future events or financial performance discussed in the release, based on management’s beliefs and assumptions and information currently available. When used, the words “believe”, “anticipate”, “estimate”, “project”, “should”, “expect”, appear and similar expressions which do not relate solely to historical matters identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future events or performance, which may be affected by known and unknown risks, trends and uncertainties. Should one or more of these risks or uncertainties materialize, or should our assumptions prove incorrect, actual results may vary materially from those anticipated, projected or implied. Factors that may cause such a variance include, among others: the opening of new stores may be delayed; the volume of anticipated sales may decline; revenues from new product lines may fall below expectations; the launch of new product lines may be delayed; new retail concepts may not achieve expected results; general retail sales trends may be below expectations; current license agreements may be terminated; consumer fashion trends may shift to footwear styling not currently included in our product lines; our retail customers, including large department stores, may consolidate or restructure operations resulting in unexpected store closings; and additional factors discussed from time to time in our filings with the Securities and Exchange Commission. We expressly disclaim any responsibility to update forward-looking statements.
The Stride Rite Corporation Summarized Financial Information for the periods ended November 29, 2002 and November 30, 2001 Statements of Income (in thousands) Fourth Quarter Twelve Months (Unaudited) 2002 2001 2002 2001 Net sales $98,197 $89,026 $532,400 $529,147 Cost of sales 64,739 60,560 337,951 338,753 Gross profit 33,458 28,466 194,449 190,394 Selling and administrative expenses 36,672 35,729 159,429 161,046 Nonrecurring charges (income)(a) (b) (75) 3,059 (75) 3,059 Operating income (loss) (3,139) (10,322) 35,095 26,289 Other income, net 232 120 330 515 Income (loss) before income taxes (2,907) (10,202) 35,425 26,804 Provision for (benefit from) income taxes (871) (4,179) 11,308 7,807 Net income (loss) (b) (c) $(2,036) $(6,023) $24,117 $18,997