Stride Rite Needed Saucony to Stay Positive in Q4…

The Stride Rite Corporation saw their acquisition of Saucony provide the company with positive revenue growth in the fiscal fourth quarter ended December 2, a quarter that was also impacted at the owned-retail level by an additional week in the year-ago period. Total Q4 sales were up 12.8% to $131.7 million, compared to $116.8 million in the fourth quarter last year. The quarter, which had 13 weeks, versus 14 weeks last year, got a $23.2 million boost from the inclusion of 11 weeks of Saucony revenues. Total year sales would have been up just 1.2% without Saucony in the mix.

SRR posted a net loss of $3.1 million, or 8 cents per diluted share, in the fourth quarter, compared to net income of $51 thousand, or zero cents per diluted share, in the year-ago quarter. The fourth quarter includes a pre-tax expense of $5.4 million related to the write-up of inventory purchased in the Saucony acquisition and approximately $800,000 in pre-tax acquisition related integration expenses. Excluding charges, Stride Rite would have posted a half-million dollar, or a penny a share, profit for Q4.

Stride Rite Children’s Group sales were down 3.6% to $62.4 million in Q4, compared to $64.7 million in Q4 last year. Despite the shorter quarter impact on retail, it was the Wholesale business that saw the big decline for the period, falling 16.6% to $16.7 million from $20.0 million in the year-ago period. Children’s Retail revenues were up 2.2% to $45.7 million for the period, compared to $44.7 million last year. Same-store sales were up 4.4% for the quarter and up 5.2% for the year.

Stride Rite finished the year with 271 stores, a net gain of 20 stores from the prior year. They see adding 33 new stores in the current fiscal year.

Keds brand sales were down 22.5% to $13.7 million in the fourth quarter, compared to $17.6 million in Q4 last year, but the company pointed to its efforts in repositioning the brand in the premium channels, citing an 11% decline in first quality sales for the quarter, while halving the off-price business for the year.

Company Chairman and CEO David Chamberlain said that the brand has been successfully rebuilt in the premium channel and is well positioned for the coming year. He said the mid-tier business, which was down 8% for the year as they were weaned off a heavy promotional cadence on the brand, is set for 2006 and will get more silhouettes in Microstretch, Microstretch Sports, and the Rave Distressed product. He also said they have expanded their penetration of athletic and trendsetter accounts. SRR expects to see flat sales for the Spring season, driven by sell-through and re-orders.

Tommy Hilfiger Footwear continues its downward spiral, falling 22.3% to $14.3 million in Q4 from $18.4 million in the year-ago period, with most of the decline coming from the men’s business and department stores. Chamberlain said they expect to renew the THFW license when it expires in March 2007 and was encouraged by Apax’s acquisition of the brand.

Sperry Top-Sider was the lone positive wholesale contributor for the domestic business in Q4, increasing 4.8% to $13.2 million from $12.6 million in the prior-year period.

The International business, which will add the non-Domestic Saucony business, jumped 23.8% to $7.0 million. Chamberlain said growth here was driven by gains in the TH Footwear business in Latin America, Keds growth in Europe and Asia, and Sperry Top-Sider gains in Europe and South Africa.