Stride Rite's Third Quarter Earnings Climb 59% as Keds Sales Increase 49%
LEXINGTON, Mass.--(BUSINESS WIRE)--Sept. 24, 1998--The Stride Rite Corporation (NYSE: SRR) today reported higher sales and earnings for the third quarter of its 1998 fiscal year.
Net sales for the third quarter of fiscal 1998 increased 17% to $168.5 million from $144.5 million in the comparable 1997 period. Net income totaled $12.8 million in the third quarter of 1998, a 56% increase above the $8.2 million earned in the same period last year. Earnings per share on a diluted basis increased 59% to $.27 per share in the third quarter of fiscal 1998 compared to $.17 per share in the same period of fiscal 1997. During the third quarter, the Company launched three new licensed product lines, Tommy Hilfiger for women, Levi's for men and boys and Nine West Kids footwear for girls.
For the first nine months of fiscal 1998, net sales totaled $440.7 million, a 5% increase above the net sales of $417.9 million for the comparable period of fiscal 1997. Net income increased 38% in the first nine months of 1998 to $26.8 million compared to $19.4 million in the similar period of 1997. On a diluted basis, earnings were $.56 per share in the 1998 nine-month period, an increase of 44% above the $.39 per share earned in the first nine months of 1997. The results for the 1998 nine-month period included a pre-tax gain on the sale of real estate of $3.8 million or $.05 per share, which was recorded in the second quarter of fiscal 1998. This gain partially offset $4.7 million in start-up costs which were incurred in the first half of 1998 with respect to the new licensed product lines.
During the third quarter of fiscal 1998, the Company's Keds division posted its strongest performance in more than five years with sales increasing 49% from 1997. Sales of the Stride Rite Children's Group increased 6% during the third quarter of 1998 with retail sales 3% higher and sales to department stores and independent specialty stores 8% above the comparable period in fiscal 1997. Sales at comparable company-owned retail stores in the third quarter increased 3.6% from 1997 even with a later back-to-school selling season in fiscal 1998. During the latest fiscal quarter, sales of Sperry Top-Sider products increased 6% following a difficult Spring season when sales were below the comparable period of fiscal 1997. Sales of the Tommy Hilfiger division decreased 6% in the third quarter of fiscal 1998 with the launch of the Tommy women's product line partially offsetting lower sales of Tommy Hilfiger men's products. International revenues in the third quarter of fiscal 1998 were below the comparable period of 1997 by $1.9 million or 19%, largely due to a restructuring of the Company's international operations which changed distribution arrangements to license agreements in certain countries.
Robert C. Siegel, Stride Rite's Chairman and Chief Executive Officer, commented, ''We are very excited about the turnaround of our Keds brand. The Keds division's performance in the third quarter of 1998, with sales up almost 50% from last year, built on the success of the Spring season when strong reorder trends produced the first sales gain for the Keds brand in several years. During the third quarter of 1998, Keds new and improved basics, the ''Ready to Wear'' and ''Relaxed Fit'' collections, continued to perform well in spite of a somewhat difficult retail environment for women's footwear.
In the recently completed quarter, we also introduced three new product lines to further diversify our portfolio of footwear brands, Tommy Hilfiger women's, Nine West Kids and Levi's. We are encouraged by the early reaction of consumers to the Tommy Hilfiger women's collection of athletic, casual and dress casual footwear, which was introduced in leading department stores on August 7, 1998. The Nine West Kids product line has performed well and, while sales are relatively small at this point, the brand should help address the needs of 6-10 year old girls who graduate from the Stride Rite children's brand. In the third quarter, we also introduced our Levi's line of casual footwear and boots for boys and young men. While Levi's is obviously a very powerful apparel brand, the early read on this product line is disappointing. We are working with our key retailers in an effort to improve the performance of the Levi's line for the balance of the Fall season, while we evaluate future alternatives.
Mr. Siegel continued, ''Our fourth quarter is generally the weakest period of our fiscal year due to the seasonal nature of our product lines. Our investment in national television advertising during September to promote the Keds 'Relaxed Fit' product line is intended to help our retailers achieve their goals for the season. The upcoming quarter is an important time for our brands as we finalize Spring plans with our key retailers. Generally, our Spring 1999 product lines have been well received, especially for the Keds and Tommy women's businesses, and we expect to make progress in the first half of fiscal 1999.''
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 brands names, including Keds, Sperry Top-Sider, Tommy Hilfiger, Levi's, Nine West Kids, Grasshoppers and Street Hot.
A summary of sales and net income for the third quarter and nine month periods is provided below. A more detailed balance sheet and income statement follows this release.
For the Quarter Ended For the Nine Months Ended August 28, August 29, August 28, August 29, 1998 1997 1998 1997 Net sales $168,516,000 $144,463,000 $440,677,000 $417,872,000 Net income 12,766,000 8,186,000 26,763,000 19,383,000 Net income per share of common stock: Diluted $.27 $.17 $.56 $.39 Basic .27 .17 .57 .40 Shares used in per share computations: Diluted 47,707,000 48,675,000 47,647,000 49,287,000 Basic 47,261,000 48,220,000 47,275,000 48,863,000
This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words ''expect'', ''estimate'', and other similar expressions which do not relate solely to historical matters identify forward-looking statements. Undue reliance should not be placed on forward-looking statements because they involve known and unknown risks and uncertainties which may cause actual results to differ materially from anticipated, projected or implied future results. Factors that may cause such a difference include, among others: revenues from new product lines may fall below expectations; the launch of new product lines may be delayed; and additional factors discussed in the Company's reports filed with the Securities and Exchange Commission and the exhibits thereto. The Company disclaims any responsibility to update these statements.
The Stride Rite Corporation Summarized Financial Information for the periods ended August 28, 1998 and August 29, 1997 Statements of Income Third Quarter Nine Months 1998 1997 1998 1997 Net sales $168,516 $144,463 $440,677 $417,872 Cost of sales 105,772 90,419 279,820 266,555 Gross profit 62,744 54,044 160,857 151,317 Selling and administrative expenses 42,973 41,632 122,151 121,996 Operating income 19,771 12,412 38,706 29,321 Other income (expense), net 535 480 3,644 1,061 Income before income taxes 20,306 12,892 42,350 30,382 Provision for income taxes 7,540 4,706 15,587 10,999 Net income $ 12,766 $ 8,186 $ 26,763 $ 19,383 Balance Sheets Assets: 1998 1997 Cash and short-term investments $ 22,177 $ 52,110 Accounts receivable 101,796 85,893 Inventories 108,909 116,012 Other current assets 33,247 35,633 Total current assets 266,129 289,648 Property and equipment, net 56,498 54,016 Non-current fixed income investments 10,816 9,556 Other assets 9,137 9,235 Total assets $342,580 $362,455 Liabilities and Stockholders' Equity: Short-term debt -- 10,533 Other current liabilities 79,086 93,997 Deferred income taxes 6,504 8,796 Stockholders' equity 256,990 249,129 Total liabilities and stockholders' equity $342,580 $362,455
The Stride Rite Corporation John M. Kelliher, (617) 824-6028