K-Swiss has decided to throw in the towel in the French market, where it has not been able to reach the intended economies of scale in spite of big investments on its classics line over the past three and a half years. Renaud Barillon, who was running the subsidiary, is going to leave the company by June at the latest. A distributor or an agent may take over the French business for performance footwear at that stage.
European sales made up 23 percent of K-Swiss’ total revenues in the 4th quarter of 2008, down from 39 percent in the same period a year earlier. Globally, K-Swiss saw a 28 percent drop in sales for the quarter, with total turnover of $56.3 million. This led to a net loss for the period of $13.7 million, against a loss of $596,000 for the year earlier. Volume sales were down by 17.3 percent to about 2 million pairs.
Sales in the home U.S. market fell by 20 percent to $27.3 million, and elsewhere were down by 34 percent to $29.0 million. The company said this was because it did not sell highly promotional, low-quality shoes, which are selling well in the difficult economic climate. In Europe, the drop was a precipitous 59 percent, while in Asia sales were basically flat.
For the fiscal year, the company’s loss declined to $20.9 million compared with a loss of $39.1 million the previous year, though sales fell by 17 percent to $340.2 million. The gross margin dropped by 6.5 percentage points to 39.8 percent.
The performance business, which made up 14 percent of sales, rose by 8 percent for the latest quarter while classics, at 74 percent of sales, fell by 36 percent. “Other,” which includes Palladium, Royal Elastics and apparel, made up 10 percent of sales and increased by 10 percent. However, excluding Palladium, that category fell by 20 percent, while Royal Elastics dropped by 28 percent. Royal Elastics lost an indicated $1.7 million.
Orders declined by 36.7 percent to $93.6 million at year-end. Orders in Europe fell by 52 percent, Asian orders declined by 38 percent, and U.S. orders dropped by 37.2 percent.
To preserve liquidity, K-Swiss is suspending its dividend indefinitely, which will save $7 million. K-Swiss expects 2009 sales of $210-250 million, against a peak of $508 million in 2005, and an unspecified loss for the year. It is looking to classics, tennis and running to expand this year, with an update to the classic planned to make it more comfortable.
As part of an attempt to increase the brand’s association with running, it is partnering with the World Triathlon Corporation to make an Ironman co-branded shoe.
