The Stride Rite Corporation had to rely on a double-digit gain in their Children’s Retail stores and a 3.0% increase in the Sperry Top-Sider business for good news in the fiscal first quarter ended February 28. Total sales for the company were down 10.5% in the quarter as weak sell-through last year on key Keds product and the inability to anniversary a key Tommy Hilfiger Footwear program cut futures bookings and has the company looking for a sharp increase in fill-in orders to delivery their full year estimates.

The sales decline more than offset a respectable gain in gross margin, leading to a sharp decline in net income.
Stride Rite Children's Group revenues were flat to last year’s Q1 numbers due to a 13% decrease in Wholesale numbers that negated a nice 14% jump in Retail revenues. Children’s comp store sales were up 11.8% more than reversing last year’s 6.2% decline in Q1 comps.

In a classic chain reaction event, Stride Rite saw wholesale numbers fall primarily due to the Footstar bankruptcy as SRR decided to quit shipping goods to Footstar’s Meldisco division that runs the leased Children’s footwear department at Federated. They are shipping goods again in Q2 since they are “getting the cash upfront”.

Keds sales fell 24% in the quarter, due primarily to a pull-back in futures orders after retailers turned more conservative on the brand after product shipped in the year-ago period failed to sell through at anticipated rates. The company is pointing to improved retail performance of the canvas product this spring as they look for stronger re-order activity for second quarter.

The Hilfiger Footwear line continues to perform well in women’s and the company is encouraged by nice Tommy Girl orders that hit 520 Journeys and Underground Station stores this spring.

But the overall TH Footwear business was said to be “disappointing” as it declined 18% versus the year-ago period. The main culprit appears to be lower average selling prices as sale volume moved from canvas product to beach and sandals, offsetting an increase in unit sales.

The division also lost $1.0 million in close-out sales, which probably helped margins. The other key issue that hit THFW was the loss of a “major athletic program” with a major family footwear chain.

THFW reportedly still expects the full year business to be flat to slightly positive for the year, indicating that some programs that were front-loaded last year are now spread across multiple quarters in 2004.

International sales for the first quarter increased 8% compared to the same period in 2003.

The gross gain in the quarter was due to “better in-line gross profit margins and fewer inventory markdowns”.
Stride Rite said that they continue to affirm guidance that reflects a 3% to 5% sales increase and an 8% to 12% growth in earnings for the full fiscal year.


>>> The department store business has hurt these guys of late. Perhaps the renewed energy will help fill that order book…