K-Swiss Loss Narrows in Fourth Quarter

BOSTON — K-Swiss Inc. reiterated a commitment to repositioning its namesake brand last week amidst reporting slightly improved fourth-quarter results.
Chairman and President Steven Nichols said the firm’s advertising and marketing spending plan for 2010 “is expected to reach an all-time high as a percentage of revenues,” as K-Swiss looks “to reposition the K-Swiss brand as the California sports company.”
“The K-Swiss class of tennis shoe designed in California was a performance breakthrough in 1966, when the world only knew canvas. In 2010 and beyond, new products and marketing initiatives will have to reclaim the spirit of innovation,” Nichols said.
He added, “The new brand voice will connect with consumers with a progressive, creative and playful California attitude.”
Nichols said new television advertising beginning in mid-March will “depict an awesome day in the life of the California sports company,” with tennis players and triathletes “warming up, competing, winning [and] enjoying themselves from sunrise to sunset.”
Meanwhile, the firm is also revamping its Website, Kswiss.com, “to create a global marketing hub to contemporize the brand’s look and feel,” said Nichols. The site will go live in April.
K-Swiss also reiterated its plans to become a meaningful player in the running and triathlon performance categories, as well as to expand its recently acquired Palladium brand.
In all, selling, general and administrative expenses are expected to rise to $135 million to $140 million in 2010, versus $118.3 million the prior year, due largely to the marketing efforts.
Looking ahead, the company forecast 2010 revenues “to be comparable to 2009.” In the first quarter, K-Swiss anticipates a decline in sales. Gross margins, however, are expected to rise to 40 percent of sales, versus 35.8 percent in 2009, the company said, citing an expectation for fewer closeout sales.
The company said future orders through June 2010 decreased nearly 13 percent, with domestic backlogs down 7 percent and international down 16 percent.
Last Thursday, the Westlake Village, Calif.- based company reported a net loss of $12.5 million, or 36 cents a diluted share, compared with a loss of $13.7 million, or 39 cents, the prior year. Analysts on average had expected a loss of 31 cents in the most recent quarter.
Revenues declined 21 percent to $42 million — ahead of Wall Street expectations for $36.3 million — from $53.5 million a year ago. Domestic revenues were down 32 percent at $18.1 million, while international sales declined 11 percent to $23.9 million.
In full-year 2009, K-Swiss reported a net loss of $28 million, or 80 cents, compared with net income of $20.9 million, or 59 cents, the prior year. Revenues fell to $240.7 million, from $327.4 million in 2008.

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