K-Swiss has a well-known new testimonial - Anna Kournikova – and it will use her image in television and in advertisements in fashion and lifestyle magazines. K-Swiss is hoping that the attractive Russian tennis player will attract more consumers aged between 13 and 30, and bring the brand back to its tennis heritage.
Meawnhile K-Swiss is intent on developing its apparel business. Apparel currently represents only 1-2 percent of K-Swiss’ overall business, but the company has ambitions to increase this to around 20 percent. The new apparel line will probably not reach European markets until the 3rd quarter.
Nonetheless, K-Swiss is launching a global apparel initiative and plans to back it up by opening eight to 10 concept stores in European and American cities, such as Amsterdam, Los Angeles, SoHo in New York and Miami South Beach – although it is unlikely to open any concept stores in the USA until 2008. It has launched a shop-in-shop concept in Dr Jay’s hip urbanwear chain in the USA.
The European order backlog for shipments in the 2nd quarter has increased by less than 10 percent, raising some eyebrows after strong growth in the continent in recent times. In the 4th quarter, which finished on Dec. 31, European sales were up by 44 percent and accounted for around 27 percent of total sales, as compared to just 19 percent for the same period in 2005. Worldwide sales to Foot Locker still represented 12 of total sales, but they fell by 24 percent, while sales to other customers rose by 6 percent.
K-Swiss total revenues increased by 2 percent in the quarter to $93.8 million. Repeating a pattern seen in previous quarters, international sales soared by 48 percent to $41.3 million during the quarter while U.S. sales were down by 18 percent to $52.5 million. Net income decreased by 8 percent to $10,670,000.
For the entire year, net income rose by 2 percent to $75,864,000, while sales dipped by 1 percent to $501,148,000. International sales rose by 42 percent to $182.5 million while domestic sales fell by 16 percent to $318.7 million. Futures orders were down by 23 percent to $168.9 million, with a decline of 44 percent in the USA but a 23 percent increase for the rest of the world.
The company is forecasting sales of $420-460 million for the full year, which would include a 30 percent decline in domestic sales. The company plans to concentrate on developing its brands but considers 2007 as a year for making investments. It does not expect to reap any benefits until 2008.
