Heelys’ Losses Widen

Profits at Heelys Inc. continued to slip in the fourth quarter as sales nearly halved.

For the period ended Dec. 31, 2010, the Dallas-based firm lost $3.2 million, or 12 cents a share, versus $1.1 million, or 4 cents, in the same period a year ago.

Revenue was $6.7 million, down 41 percent from $11.4 million.

Domestic sales fell due to lower brick-and-mortar retail placements from the prior year, while international sales slid as a result of excess retail inventory in the European market and the termination of a $1.2 million sales order.

Gross profit margin also slipped 3 percentage points in the quarter, as selling, general and administrative expenses rose due to increased advertising costs.

Tom Hansen, CEO of Heelys, said in a statement that the costs were necessary to regain visibility with consumers and retailers and pull excess inventory through the system.

“Retailers have repeatedly mentioned the impact of the advertising on sell-through at holiday, which was excellent. Visibility was high, and now there is very little inventory in the domestic market that isn’t fresh,” he said.

For the full year, Heelys lost $4 million, or 14 cents a share, versus a loss of $5.1 million, or 19 cents, in fiscal 2009.

The company also ended the year with $35.3 million in cash, down slightly from $39.3 million as of Dec. 31, 2009.

“We believe our biggest issue going forward is optimizing distribution,” said Hansen. “Domestically, we’re at about 25 percent of our previous peak, or about 50 percent of the ideal number of retail stores. Internationally, we believe we have tremendous opportunities in Asia as well as Europe.”

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