K-Swiss Looks for Revival Next Year

LOS ANGELES — While its losses mounted during the third quarter, there might be a light at the end of the tunnel for K-Swiss Inc.

“Let’s face it: The last few years have been dismal for our reported results,” Steven Nichols said during a conference call with investors and analysts. “[However], we’re starting to see an increased number of green shoots of promise that spring will arrive in 2011.”

During the quarter, worldwide futures orders rose 18 percent to $80 million. Domestic orders surged 51 percent to $34.9 million, while international orders inched up 0.3 percent to $45 million. “To us, that is a clear sign that our three years of investing in innovative product and focused marketing [and] brand positioning might pay off,” Nichols said.

Analysts, too, celebrated the increase in futures. “It’s the first time in more than five years that futures orders have been up. That’s good news,” said Sterne Agee analyst Sam Poser.

B. Riley & Co. analyst Jeff Van Sinderen said the results suggest K-Swiss’ product is connecting with consumers. “Gross margins are up, futures orders are up, and that’s a measure of the success of their new generation of product,” he said.

For the quarter ended Sept. 30, the firm reported a net loss of $28.3 million, or 80 cents a diluted share, versus a loss of $2.9 million, or 8 cents, for the same period in 2009. The loss included a $20.2 million valuation allowance taken against the company’s deferred tax assets that resulted in a tax expense of $14 million, compared with a tax benefit of $1.6 million last year.

Revenues declined 13 percent to $61.6 million, from $70.6 million. Domestic sales fell 13 percent to $27.1 million, while international sales decreased 26 percent to $34.5 million.

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