The Stride Rite Corporation reported that net sales for the fiscal third quarter ended September 2 were $146.2 million, an increase of 4% from the net sales of $140.4 million in the comparable period of fiscal 2004. Operating income in the third quarter of 2005 was $11.1 million, an 18% increase from the prior year's quarter. Net income for the third quarter totaled $7.7 million, or 21 cents per diluted share, an increase of 24% compared to the net income of $6.2 million, or 16 cents per diluted share, in the third quarter of 2004.
For the first nine months of fiscal 2005, net sales were $456.5 million, an increase of 3% from the net sales of $441.5 million for the same period in fiscal 2004. Fully diluted earnings per share were $.74 for the first nine months of fiscal 2005 versus $.65 in fiscal 2004. Net income for the first nine months of fiscal 2005 totaled $27.6 million, an increase of 8% from the $25.6 million reported in the comparable period in 2004.
Third quarter sales of the Stride Rite Children's Group increased 9% compared to the third quarter of fiscal 2004. The Children's Group company-owned retail stores recorded a sales increase of 20% for the third quarter over the same period of fiscal 2004. Sales at comparable Children's Group retail stores increased 7.4% in the third quarter versus last year. Year-to-date comparable retail store sales are now up 5.5% through the first nine months of 2005.
Sales by the Children's Group to independent retailers decreased 6% during the third quarter of fiscal 2005 as compared to the same period last year. At the end of the third quarter of fiscal 2005, the Stride Rite Children's Group operated 264 stores, an increase of 9% from the prior year.
Sales of Sperry Top-Sider footwear increased 53% in the third quarter of fiscal 2005 versus the same period of fiscal 2004. Sales of Keds and Tommy Hilfiger products decreased 9% and 27%, respectively, in the third quarter of fiscal 2005 from the prior year's comparable period. International sales for the third quarter increased 33% versus the same period in 2004.
The Company's gross profit percentage of 39.8% in the third quarter of fiscal 2005 increased 3.3 percentage points as compared to the same period last year. Keds, Stride Rite Children's Group and Sperry Top-Sider all had strong gross profit percentage improvements versus last year. Operating expenses in the third quarter of 2005 increased 13%, as compared to the same period last year. As planned, the major operating cost increases for the period related to higher advertising costs and the Stride Rite Children's Group retail store expansion. Excluding those costs, operating expenses increased 3% versus last year.
The quarter end balance sheet was strong. Accounts receivable was increased 1% compared to last year on a 4% quarterly sales increase. DSO was 40 days, a decrease of 3 days versus the same period last year. Inventories of $86 million were up 7% compared to the same period of 2004. Net cash and marketable securities were $92 million and the Company had no outstanding debt at the end of the third quarter.
David M. Chamberlain, Chairman and Chief Executive Officer, commented, “The third quarter was a nice reflection of the strength of our brands and product offerings, even as we work through the Keds repositioning. Children's Group store comps increased 7.4%, reflecting the strength of our retail strategy and our key product lines. The Children's Group wholesale business was impacted by declines in Tommy Hilfiger and Munchkin. We continue our strategy of opening additional doors and expect to have a net increase of 21 stores this year, up 8% from a year ago. Keds continues its transition to an active, upscale lifestyle brand. Their sales were down 9% for the quarter reflecting significantly fewer sales to the value channel and closeout retailers, reduced sales in the mid-tier channel and increased sales in premium department and specialty stores. We also continued the advertising campaign featuring Mischa Barton of “The O.C.” into the fall season as part of our effort to attract younger customers.”
“Sperry Top-Sider sales increased 53% for the quarter and are up 31% for the nine months. The quarter increase reflected growth in men's, women's and the outdoor and marine channels. Tommy sales, excluding PRO-Keds, which is now licensed, and the discontinued Tommy H line, were down 20% for the quarter. The decline was primarily in men's. International sales are up 33% for the quarter and 25% for the nine month period.”
Mr. Chamberlain continued, “As previously announced, we completed the Saucony acquisition on September 16, 2005 and are moving ahead quickly to implement our integration plans. Saucony expands Stride Rite's portfolio of nationally recognized footwear brands, and has excellent long-term growth potential. We expect the Saucony acquisition to be accretive to earnings starting in 2006 before any non-cash purchase accounting inventory impact. In the fourth quarter of 2005, the acquisition is expected to be dilutive to earnings by approximately $.04 per share before the non-cash purchase accounting inventory impact.”
