The Stride Rite Corporation looked to their fiscal fourth quarter to reverse of number of negative trends for the year, but still see some issue in their base childrens business and dont expect to see Keds post growth until the back half of the current year. Saucony continues to see strength in the running specialty market and management is now looking to grab some of the lifestyle fashion athletic dollars again with new launches in 2007.
Total net sales for the fiscal 2006 fourth quarter ended December 1 increased 15.3% to $151.8 million from $131.7 million in the year-ago period. The addition of the acquired Robeez business this year, which added about $9.7 million to the 2006 period, accounted for about 7.4 points of the growth for the quarter.
SRR posted net income of roughly $632,000 for the fourth quarter, or two cents per diluted share, compared to a net loss of $3.1 million, or eight cents per diluted share, in Q4 last year. The fourth quarter of 2006 includes a pre-tax expense of $0.9 million related to the write-up of inventory purchased in the Robeez acquisition and another hakf million dollars in pre-tax acquisition related integration expenses related to Saucony and Robeez. Excluding these items, non-GAAP net income would have been $1.5 million, or four cents per diluted share, for Q4.
The Stride Rite Children's Group saw fourth quarter revenues increase 9.5% to $70.4 million from $64.3 million in the year-ago quarter. Wholesale revenues were up 8.4% to $18.1 million from $16.7 million in Q4 last year, while owned-retail numbers for the Group increased 10% to $52.3 million for the period, compared to $47.6 million in the 2005 fourth quarter. Management said that the decline in the full year wholesale numbers was due primarily to issues with department stores and licensed partners, a trend they see continuing into 2007.
Stride Rite added 29 stores in fiscal 2006, which is about a 10% increase in the store base, for a total of 318 stores at year-end. Retail comps were up 3.4% for the year. The company said it plans to add another 5% to 10% to their store base this year, which would result in mid-single-digit growth for the Childrens Group for 2007.
Management said the made “solid progress” with Keds in 2006, but the company had quite a hill to climb as they moved to reposition the brand away from basic white discounted footwear in the mid-tier and value channels to a younger fashion brand with higher price-points and better margins.
Keds sales were up less than one percent for the fourth quarter, posting sales of about $13.9 million versus $13.8 million in Q4 2005. but was still down in low double-digits for the year.
David Chamberlain, chairman and CEO of Stride Rite Corp., said that the Keds brand suffered from a weakening of mature product for a mature customer, represented by the classic white product that represented over 50% of the business.
Today, he said they feel the have a cache brand, with average price-points up to $24 from $16. He said they are reducing value channel sales and are replacing that in part with increased business at Nordstrom, which will have the brand in the May catalog. They also took a 15 door test at Lord & Taylor and are now in all doors. They are going into Bloomies with product in the $60 to $80 range. On the younger side, they are now in “almost all doors” at Journeys and have moved from a 50 door test at Finish Line to “probably close to 400 to 500 stores” for spring. Mr. Chamberlain also said that DSW, Kohls, and Famous Footwear have “jumped on the new strategy quickly” in the mid-tier business and are “enjoying very solid business.”
Sperry Top-Sider was up 15.6% to $15.3 million for the quarter, compared to 413.2 million in Q4 last year.
Management said that Saucony continues to “enjoy success and market share growth in the specialty run business” and the initial reactions to new technical product for 2007 have been “very positive.” SRR said it anticipates growth in this market, but they are also updating and broadening product offerings of the less technical and athletic lifestyle products.
Saucony sales, including Hind, were up 7.8% to $17.9 million in Q4 from $16.7 million in the year-ago quarter.
Tommy Hilfiger Footwear sales were down 9.0% to $12.9 million from $14.1 million.
International sales were down 3.7% for the fourth quarter, posting revenues of $15.2 million in Q4, compared to $15.8 million. International posted strong growth for the year, but much of the gain was attributed to the addition of Saucony last September, which was anniversaried in the fourth quarter.
