Taking Stock: Achilles Heelys… Consumers Relaxing…

ACHILLES HEELYS: Even with getaway wheels on the bottoms of its shoes, Heelys Inc. could not escape the economic downturn of 2008, and the company expects more trouble in the coming year. The Dallas-based footwear manufacturer last week reported a fourth-quarter net loss of $5.2 million, or 19 cents a diluted share, narrowed from a loss of $5.9 million, or 22 cents, in the fourth quarter of 2007. Net sales were $15.6 million, up from $9.8 million a year ago. For the full year, the loss totaled $5.9 million, or 22 cents a share, compared with a net income of $21.9 million, or 78 cents, in the year-ago period. Michael Hessong, Heelys’ interim CEO, blamed the company’s woes on “a dramatic slowdown of consumer spending,” as well as declining reorders and weak gross margins. But, he pointed out, the company is still sitting on $68 million in cash and no debt, which should give Heelys some long-term breathing room, even as it expects first-quarter sales to be below last year’s levels, and gross margins to remain pressured. “2008 was a down year, obviously,” Hessong said. “But we’ve shown the ability that, despite going through a rough time and a rather up-and-down time, we can manage the cost and manage the cash.” Hessong was mum on any other long-term plans, including his tenure as the company’s interim CEO, a position he has held since Don Carroll resigned from the post in February.


CONSUMERS LESS CONCERNED: After a sharp decline in February, consumer confidence leveled off in March, as shoppers continued to digest what’s next for the economy despite persistent concerns over the job market. The Conference Board’s Consumer Confidence Index inched up to 26 in March from 25.3 the prior month, but according to the survey, consumers’ concern about the economy and labor markets hasn’t abated. Those who claimed business conditions are “bad” rose to 51.1 percent from 50.5 percent in February, and those who said jobs are “hard to get” rose to 48.7 percent from 46.9 percent. However, looking ahead, there were a few signs of mild optimism. Consumers expecting business conditions to worsen over the next six months fell to 39.1 percent from 40.7 percent, while those expecting fewer jobs in the months ahead declined to 42.6 percent from 47 percent. Retail stocks bounced back last Tuesday as word of stabilizing consumer confidence helped the S&P Retail Index end the month and quarter with beefy increases. On the final day of March and the first quarter, the index rose 2.54 points, or 0.9 percent, to 293.66, up a robust 16.6 percent for the month and 5.2 percent for the quarter. The S&P Retail Index hasn’t generated such a strong result since before the recession officially began in late 2007.


REAL ESTATE REDUX: The uncertain commercial real-estate environment was a hot topic at last week’s “Next Generation” program hosted by The International Council of Shopping Centers, as brokers, landlords, architects and attorneys came together in New York to share their strategies and vent their frustrations. “Very few deals are happening,” said Richard Wagman, director of Madison Capital. “Very few people have conviction in what they are doing in this environment.” The interactive roundtables focused on issues such as store design, lease negotiation and tenant relationships. “People who are already incorporating sustainable design are going to have a leg up,” said David Rush, principal of New York-based design firm Cubellis. Rush also addressed the shifting trend toward “smaller and more intimate” store layouts. “Bigger is not better anymore,” he said. An increase in short-term leasing was another issue among panelists, as many retailers are bargaining for modified 10-year leases, with the ability to opt out after two or three years. Pop-up shops, too, present an opportunity for landlords with vacancies and for brands looking to create excitement. Meanwhile, Joshua Weinkrantz, Northeast VP of Kimco Realty, said he is looking favorably upon discount retailers as anchor tenants right now. TJX Cos., noted Jon Colombratro of Ripco Real Estate, “is very active in looking for space,” while “Nine West is also doing well with expansion in New York’s boroughs.”


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