The Stride Rite Corporation second quarter fiscal 2007 sales were $209.2 million, an increase of 8% compared to the same period in the prior year. Net income for the second quarter totaled $14.2 million or 38 cents per diluted share, compared to the net income of $16.9 million or 45 cents per diluted share in the second quarter of 2006. The second quarter financial results in 2006 included the reversal of certain prior period reserves for income tax exposures that were no longer required and resulted in a lower quarterly tax rate for that period.
The 2007 second quarter tax rate increased to 34.7% from 19.3% in the comparable period of the prior year. The lower tax rate in the prior year was primarily attributable to the favorable outcome of a tax audit which resulted in the reversal of certain prior period reserves. The diluted per share impact of the higher tax rate was $.09 compared to last year.
The second quarter fiscal 2007 financial results include pre-tax expenses of $0.8 million related to Robeez integration costs and the pending merger with Payless ShoeSource, Inc. The prior year second quarter financial results included pre-tax Saucony acquisition related integration expenses of $1.0 million.
Excluding acquisition-related merger and integration costs, net income would have been $14.6 million, while diluted earnings per share would have been $.39 for the second quarter of fiscal 2007. Excluding acquisition-related integration costs, net income would have been $17.5 million for the second quarter of fiscal 2006, while diluted earnings per share would have been $.46. See the section entitled “Non-GAAP Pro Forma Financial Measures” and the “Reconciliation of Non-GAAP Measures” provided in this release for an additional description of these Non-GAAP Measures.
For the first six months of fiscal 2007, net sales were $403.9 million, an increase of 7% from the net sales of $377.4 million for the same period in fiscal 2006. On a diluted basis, earnings per share were $.67 in the first half of fiscal 2007 compared to $.67 in fiscal 2006. Net income for the first half of fiscal 2007 totaled $25.3 million, versus the $25.2 million reported in the comparable period in 2006. The first half financial results in 2006 included the reversal of certain prior period reserves for income tax exposures that were no longer required.
The 2007 six-month financial results include pre-tax expenses of $1.1 million related to Robeez integration and costs related to the pending merger with Payless ShoeSource, Inc. The prior year first half financial results included pre-tax Saucony acquisition related integration expenses of $2.2 million. The 2006 first half financial results also included a pre-tax expense of $2.6 million related to the flow through of the write-up of inventory purchased in the Saucony acquisition to fair value as required by GAAP accounting rules.
Excluding acquisition-related merger and integration costs, net income would have been $25.9 million for the first six months of fiscal 2007, while diluted earnings per share would have been $.69 for the first half of fiscal 2007. Excluding acquisition-related integration costs, the Saucony inventory write-up, net income would have been $28.0 million for the first half of fiscal 2006, while diluted earnings per share would have been $.74. See the section entitled “Non-GAAP Pro Forma Financial Measures” and the “Reconciliation of Non-GAAP Measures” provided in this release for an additional description of these Non-GAAP Measures.
David Chamberlain, Chairman and CEO of Stride Rite commented, “Overall, we continued to make progress in the second quarter.”
“The combined Children's Group second quarter sales decreased 1% compared to last year. The Children's Retail Group sales were up 4% in the quarter and same store comps were down 2.5%. Children's Group wholesale sales were down 16% compared to last year. Second quarter sales comparisons were impacted by the earlier start to our annual pre-Easter promotion which positively affected our first quarter results. We expect second half sales growth in our combined Stride Rite children's business.
“Keds had an improved second quarter, with sales down just 1%. The new, younger product offerings met expectations, which helped to offset the decline in women's core product and lower children's sales. We anticipate a positive sales trend for the remainder of the year.
“Sperry Top-Sider, up 23%, enjoyed another strong quarter of sales. Most of the products are performing well. We expect another year of strong growth.
“Saucony domestic sales were up 2% over a year ago. We are seeing excellent response to our updated technical running lines, particularly in the Triumph, Omni and Hurricane models, which all feature our new ProGrid technology. Saucony should enjoy a solid year.
“International sales were up 18%. Keds continues to enjoy strong sales growth in Europe and Canada. The marketing campaign and younger products are driving the Keds momentum. Saucony delivered solid growth in Europe.
“Our Tommy Hilfiger footwear sales were 4% above last year. We are pleased with the progress of the Tommy Hilfiger brand. The second half sales are anticipated to be weaker due in part to relocating our product line in a key department store.
“Robeez results continued to meet financial expectations for the quarter.”
Mr. Chamberlain continued, “Assuming reasonable retail and economic conditions in 2007, we are reaffirming our projected sales growth of 5% to 8% and earnings per share of $1.10 – $1.15, including a full year of Robeez financial results and excluding any integration and merger related costs.”
NET SALES HIGHLIGHTS:
The Stride Rite Corporation
Net Sales (in thousands)
Second Quarter
———————————————————————-
Percentage
2007 2006 Change
——— ——— ———-
(Unaudited)
Stride Rite Children's Group – Wholesale $15,408 $18,292 (16)%
Stride Rite Children's Group – Retail 57,987 55,789 4%
——— ——— ———-
Stride Rite Children's Group – Combined 73,395 74,081 (1)%
Keds 34,406 34,924 (1)%
Sperry Top-Sider 35,025 28,519 23%
International 22,551 19,171 18%
Saucony 22,691 22,208 2%
Hind 2,525 3,418 (26)%
——— ——— ———-
Other Wholesale – Combined 117,198 108,240 8%
Tommy Hilfiger Adult 15,170 14,583 4%
Robeez 5,941 – n/a
Intercompany Eliminations (2,503) (2,897) n/a
——— ——— ———-
Total $209,201 $194,007 8%
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