K-Swiss’ sales decreased by 24.8 percent for the first quarter to $74.0 million, although $7.4 million of that came from the newly acquired Palladium. K-Swiss reported a loss of $1.1 million for the period, ended March 31, compared with income of $7.1 million last year, with a $58,000 loss at Palladium as its parent company invested in its launch in the U.S. On the other hand, the recent sale of the shoe brand Royal Elastics to its own product design director, which was announced last week is expected to result in a $1.4 million gain in the second quarter.
K-Swiss said the performance sector fell by 11 percent compared with the prior year to $17.8 million; the sport style business decreased by 40 percent to $46.6 million; and other activities, which include Palladium, rose by 565 percent to $9.6 million. Average sale prices fell to $23.84 from $28.65 and the gross margin declined by 8.5 percentage points to 38.2 percent on a weaker mix and more closeouts. The company sold 2.6 million pairs in the quarter, down by 13.6 percent from a year ago.
Domestic revenues fell by 26.7 percent to $30.4 million, while those generated in the rest of the world declined by 24.3 percent to $43.7 million including Palladium, and by 37 percent excluding this French brand of casual footwear. European sales declined by 43 percent.
Futures orders were down by 41 percent to $73.7 million, including a 39 percent decline in orders in the U.S. to $28.3 million and a 43 percent decline in overseas orders to $454 million. They were off by 56 percent in Europe.
K-Swiss reduced guidance on weaker-than-expected sales in Europe, saying that full-year revenues will now be $200-230 million. Earlier, it had forecast revenues of $210-250 million.
A loss of $20.9-31.4 million is projected. The company said it would continue investing in Palladium’s U.S. entry and as well as developing its running, tennis and classic platforms. It also reiterated that it was not opening new channels of distribution despite its sales performance.