Stride Rite (NYSE:SRR)
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The Stride Rite Corporation (NYSE: SRR) today reported
financial results for its 2005 second fiscal quarter and six months
ended June 3, 2005.
Net sales for the second quarter of fiscal 2005 decreased 3% to
$159.6 million from $165.0 million in the comparable quarter in fiscal
2004. Operating income in the second quarter of 2005 was $18.2
million, a 4% decrease from the prior year's quarter. Net income for
the second quarter was $11.8 million, or $0.32 per diluted share, as
compared to net income of $11.9 million, or $0.30 per diluted share,
in last year's second quarter.
For the first six months of fiscal 2005, net sales were $310.2
million, an increase of 3% from net sales of $301.1 million for the
same period in fiscal 2004. Net income for the first half of fiscal
2005 was $19.9 million, an increase of 3% from $19.4 million in the
comparable period in 2004. Diluted earnings per share were $0.54 in
the first half of fiscal 2005 compared to $0.49 in the first half of
fiscal 2004.
Second quarter sales of the Stride Rite Children's Group were up
3% compared to the second quarter of fiscal 2004. The Children's Group
company-owned retail stores had a sales increase of 7% for the second
quarter over the same period of fiscal 2004. Sales at comparable
Children's Group retail stores increased 1.9% in the second quarter
reflecting, in part, the timing of the earlier Easter holiday. For the
first six months, our net store count was 259, up 8 stores. Children's
Group wholesale sales decreased 5% during the same period. Sales of
the Sperry Top-Sider and International increased 17% and 12%,
respectively, in the second quarter of fiscal 2005 from the comparable
period of fiscal 2004. Sales of the Keds and Tommy Hilfiger Footwear
brands decreased 15% and 14%, respectively, in the second quarter from
the comparable period in fiscal 2004.
Gross profit was 40.8% of sales in the second quarter of fiscal
2005, an improvement of 2.3 percentage points over the same period
last year, due principally to fewer Keds closeout sales and lower
markdown allowances. Operating expenses in the second quarter of 2005
increased 5% compared to the prior year. As planned, the major
operating cost increases for the quarter related to the Stride Rite
Children's Group retail store expansion and higher advertising costs.
The quarter-end balance sheet was solid. Accounts receivable was
down 8% from last year and days sales outstanding (DSO) was 42 days.
Inventories increased 22% compared to last year, with the growth
related predominantly to higher levels of in-line styles. Quarter-end
net cash and marketable securities were $70 million and the Company
has no outstanding debt.
David M. Chamberlain, Chairman and Chief Executive Officer,
commented, "The quarterly sales were heavily impacted by the Keds
transition to an upscale active lifestyle brand. Keds sales were down
15% for the quarter and 4% for the six-month spring season, resulting
primarily from our strategic decision to significantly reduce value
channel and closeout business as we reposition the brand as
higher-priced and aspirational, with improved styling. We enjoyed
solid success in the premium department and specialty stores, while
the mid-tier channels had slower sales than anticipated as a result of
higher pricing. We will continue the advertising campaign featuring
Mischa Barton of 'The O.C.' into the fall season as part of our brand
building strategy to attract younger customers.
The Stride Rite's Children's Group had a strong six month spring
season with sales up 7%, retail sales up 13% and comparable store
sales up 4.4%. Sperry Top-Sider sales were up 23% for the six-month
period with an increase in men's and women's product sales. Tommy
sales, excluding PRO-Keds which is now licensed, were down 8% for the
six months primarily due to a decline in men's product sales.
International was up 21% for the six month spring season."
Mr. Chamberlain concluded, "We believe our strategies are sound
and our products are right. We remain particularly enthusiastic about
our pending acquisition of Saucony, which will provide a new platform
for growth in the performance athletic segment. As we move into the
second half, we are reaffirming our 2005 full-year guidance of 3-5%
growth in sales and 5-10% growth in earnings."
A summary of sales and net income for the second quarter
(unaudited) is provided below. A more detailed balance sheet and
income statement follows this release.
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(in thousands, except per share amounts)
For the Quarter For the Six Months
Ended Ended
----------------------------------------
June 3, May 28, June 3, May 28,
2005 2004 2005 2004
----------------------------------------
Net sales $159,641 $165,009 $310,232 $301,143
Net income 11,752 11,900 19,913 19,384
Net income per common share:
Diluted .32 .30 .54 .49
Basic .32 .31 .55 .50
Average common shares used in
per share computations:
Diluted 37,185 39,450 37,075 39,887
Basic 36,175 38,637 36,091 39,029
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The Stride Rite Corporation markets the leading brand of high
quality children's shoes in the United States. Other footwear products
for children and adults are marketed by the Company under well-known
brand names, including Keds, Sperry Top-Sider, Tommy Hilfiger,
Grasshoppers and Munchkin. Information about the Company is available
on our website - www.strideritecorp.com. The Company will provide a
live webcast of its second quarter conference call. The live broadcast
of Stride Rite's quarterly conference call will be available on the
Company's website and at www.streetevents.com, beginning at 10:00AM ET
on June 28, 2005. An on-line replay will follow shortly after the call
and will continue through July 5, 2005. Information about the
Company's brands and product lines is available at www.striderite.com,
www.keds.com and www.sperrytopsider.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: This announcement includes forward-looking
statements which reflect our current views with respect to the future
events or financial performance discussed in the release, based on
management's beliefs and assumptions and information currently
available. When used, the words "believe", "anticipate", "estimate",
"project", "should", "expect", "appear" and similar expressions, which
do not relate solely to historical matters identify forward-looking
statements. Such statements are subject to risks, uncertainties and
assumptions and are not guarantees of future events or performance,
which may be affected by known and unknown risks, trends and
uncertainties. Should one or more of these risks or uncertainties
materialize, or should our assumptions prove incorrect, actual results
may vary materially from those anticipated, projected or implied.
Factors that may cause such a variance include, among others: the
pending acquisition of Saucony may not be consummated; the opening of
new stores may be delayed; the volume of anticipated sales may
decline; revenues from new product lines may fall below expectations;
the launch of new product lines may be delayed; new retail concepts
may not achieve expected results; general retail sales trends may be
below expectations; current license agreements may be terminated;
consumer fashion trends may shift to footwear styling not currently
included in our product lines; our retail customers, including large
department stores, may consolidate or restructure operations resulting
in unexpected store closings; and additional factors discussed from
time to time in our filings with the Securities and Exchange
Commission. We expressly disclaim any responsibility to update
forward-looking statements.
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The Stride Rite Corporation
Summarized Financial Information
for the periods ended June 3, 2005 and May 28, 2004
Statements of Income
(in thousands) Second Quarter Six Months
-------------------- --------------------
2005 2004 2005 2004
---------- --------- ---------- ---------
(Unaudited) (Unaudited)
Net sales $159,641 $165,009 $310,232 $301,143
Cost of sales 94,430 101,507 184,489 184,628
---------- --------- ---------- ---------
Gross profit 65,211 63,502 125,743 116,515
Selling and administrative
expenses 47,028 44,589 94,479 85,929
---------- --------- ---------- ---------
Operating income 18,183 18,913 31,264 30,586
Other income, net 208 321 370 740
---------- --------- ---------- ---------
Income before income taxes 18,391 19,234 31,634 31,326
Provision for income taxes 6,639 7,334 11,721 11,942
---------- --------- ---------- ---------
Net income $11,752 $11,900 $19,913 $19,384
========== ========= ========== =========
Balance Sheets
2005 2004
------------- -----------
Assets: (Unaudited)
Cash and cash equivalents $30,376 $17,324
Marketable securities 40,000 62,250
Accounts receivable 73,079 79,278
Inventories 98,476 80,749
Deferred income taxes 15,134 15,178
Other current assets 11,179 10,734
------------- -----------
Total current assets 268,244 265,513
Property and equipment, net 51,758 57,793
Other assets 13,104 13,193
------------- -----------
Total assets $333,106 $336,499
============= ===========
Liabilities and Stockholders' Equity:
Current liabilities 52,908 58,456
Deferred income taxes and other liabilities 16,767 13,989
Stockholders' equity 263,431 264,054
------------- -----------
Total liabilities and stockholders'
equity $333,106 $336,499
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