Challenges Continue for K-Swiss in Q2

LOS ANGELES — K-Swiss Inc. continued to face a tough retail environment that led to the continued downward spiral of its earnings during the second quarter.

For the three months ended June 30, the company reported a net loss of $11.5 million, or 33 cents per diluted share, compared with a profit of $26.4 million, or 75 cents, for the same quarter in 2008. Sales during the period fell nearly 35 percent to $54 million, versus $82.9 million a year ago.

The company’s results include a $1.9 million, or 5 cents a share, pre-tax gain from the sale of the Royal Elastics brand, and an after-tax loss of $2.6 million, or 8 cents, relating to the purchase of the remaining interest in Palladium.

“[Our] second-quarter results were close to what we anticipated,” Chairman, President and CEO Steven Nichols said last week during a conference call with investors and analysts. “We outlined last quarter that sales, earnings and backlog [orders] showed significant declines year-after-year in domestic and international operations. This projection hasn’t changed.”

International sales during the quarter fell 47 percent. Sales in Europe decreased 55 percent, while sales in Asia declined 23 percent.

Looking ahead, the company revised its guidance and now expects a loss of 70 cents to 90 cents per share in 2009 on sales of $215 million to $230 million.

“Our top goals for the remainder of 2009 [are to] continue to minimize our net loss, reduce inventory levels, and make the right investment for [our] brands for the long term,” said Nichols.

Among the new investments, Nichols said the company had made significant inroads in promoting its tennis, running and classics business.

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