The Stride Rite Corporation (NYSE: SRR) today reported financial
results for its 2005 third fiscal quarter and nine months ended
September 2, 2005. Third quarter net sales in fiscal 2005 were
$146.2 million, an increase of 4% from the net sales of $140.4
million in the comparable period of fiscal 2004. Operating income
in the third quarter of 2005 was $11.1 million, an 18% increase
from the prior year's quarter. Net income for the third quarter
totaled $7.7 million or $.21 per diluted share, an increase of 24%
compared to the net income of $6.2 million or $.16 per diluted
share in the third quarter of 2004. For the first nine months of
fiscal 2005, net sales were $456.5 million, an increase of 3% from
the net sales of $441.5 million for the same period in fiscal 2004.
Fully diluted earnings per share were $.74 for the first nine
months of fiscal 2005 versus $.65 in fiscal 2004. Net income for
the first nine months of fiscal 2005 totaled $27.6 million, an
increase of 8% from the $25.6 million reported in the comparable
period in 2004. Third quarter sales of the Stride Rite Children's
Group increased 9% compared to the third quarter of fiscal 2004.
The Children's Group company-owned retail stores recorded a sales
increase of 20% for the third quarter over the same period of
fiscal 2004. Sales at comparable Children's Group retail stores
increased 7.4% in the third quarter versus last year. Year-to-date
comparable retail store sales are now up 5.5% through the first
nine months of 2005. Sales by the Children's Group to independent
retailers decreased 6% during the third quarter of fiscal 2005 as
compared to the same period last year. At the end of the third
quarter of fiscal 2005, the Stride Rite Children's Group operated
264 stores, an increase of 9% from the prior year. Sales of Sperry
Top-Sider footwear increased 53% in the third quarter of fiscal
2005 versus the same period of fiscal 2004. Sales of Keds and Tommy
Hilfiger products decreased 9% and 27%, respectively, in the third
quarter of fiscal 2005 from the prior year's comparable period.
International sales for the third quarter increased 33% versus the
same period in 2004. The Company's gross profit percentage of 39.8%
in the third quarter of fiscal 2005 increased 3.3 percentage points
as compared to the same period last year. Keds, Stride Rite
Children's Group and Sperry Top-Sider all had strong gross profit
percentage improvements versus last year. Operating expenses in the
third quarter of 2005 increased 13%, as compared to the same period
last year. As planned, the major operating cost increases for the
period related to higher advertising costs and the Stride Rite
Children's Group retail store expansion. Excluding those costs,
operating expenses increased 3% versus last year. The quarter end
balance sheet was strong. Accounts receivable was increased 1%
compared to last year on a 4% quarterly sales increase. DSO was 40
days, a decrease of 3 days versus the same period last year.
Inventories of $86 million were up 7% compared to the same period
of 2004. Net cash and marketable securities were $92 million and
the Company had no outstanding debt at the end of the third
quarter. David M. Chamberlain, Chairman and Chief Executive
Officer, commented, "The third quarter was a nice reflection of the
strength of our brands and product offerings, even as we work
through the Keds repositioning. Children's Group store comps
increased 7.4%, reflecting the strength of our retail strategy and
our key product lines. The Children's Group wholesale business was
impacted by declines in Tommy Hilfiger and Munchkin. We continue
our strategy of opening additional doors and expect to have a net
increase of 21 stores this year, up 8% from a year ago. Keds
continues its transition to an active, upscale lifestyle brand.
Their sales were down 9% for the quarter reflecting significantly
fewer sales to the value channel and closeout retailers, reduced
sales in the mid-tier channel and increased sales in premium
department and specialty stores. We also continued the advertising
campaign featuring Mischa Barton of "The O.C." into the fall season
as part of our effort to attract younger customers." "Sperry
Top-Sider sales increased 53% for the quarter and are up 31% for
the nine months. The quarter increase reflected growth in men's,
women's and the outdoor and marine channels. Tommy sales, excluding
PRO-Keds, which is now licensed, and the discontinued Tommy H line,
were down 20% for the quarter. The decline was primarily in men's.
International sales are up 33% for the quarter and 25% for the nine
month period." Mr. Chamberlain continued, "As previously announced,
we completed the Saucony acquisition on September 16, 2005 and are
moving ahead quickly to implement our integration plans. Saucony
expands Stride Rite's portfolio of nationally recognized footwear
brands, and has excellent long-term growth potential. We expect the
Saucony acquisition to be accretive to earnings starting in 2006
before any non-cash purchase accounting inventory impact. In the
fourth quarter of 2005, the acquisition is expected to be dilutive
to earnings by approximately $.04 per share before the non-cash
purchase accounting inventory impact." A summary of sales and net
income for the third quarter (unaudited) is provided below. A more
detailed balance sheet and income statement follows this release.
-0- *T (in thousands, except per share amounts) For the Quarter For
the Nine Ended Months Ended ----------------- ------------------
September August September August 2, 27, 2, 27, 2005 2004 2005 2004
------------------------------------ Net sales $146,237 $140,382
$456,469 $441,525 Net income 7,715 6,219 27,628 25,603 Net income
per common share: Diluted .21 .16 .74 .65 Basic .21 .17 .76 .66
Average common shares used in per share computations: Diluted
37,396 38,159 37,188 39,311 Basic 36,292 37,467 36,158 38,508 *T
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, Saucony, Grasshoppers, Munchkin, Spotbilt and Hind.
Apparel products are marketed by the Company under the Hind brand
name. Information about the Company is available on our website -
www.strideritecorp.com. The Company will provide a live webcast of
its third 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
September 27, 2005. An on-line replay will follow shortly after the
call and will continue through October 4, 2005. Information about
the Company's brands and product lines is available at
www.striderite.com, www.keds.com, www.sperrytopsider.com and
www.saucony.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 inability to fully
realize the anticipated benefits from the acquisition of Saucony;
the challenges of achieving the expected synergies with Saucony;
the possibility of incurring costs or difficulties related to the
integration of the businesses of Stride Rite and Saucony; 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. -0- *T The
Stride Rite Corporation Summarized Financial Information for the
periods ended September 2, 2005 and August 27, 2004 Statements of
Income (in thousands) Third Quarter Nine Months -------------
-------------------- 2005 2004 2005 2004 ---------- ---------
---------- --------- (Unaudited) (Unaudited) Net sales $146,237
$140,382 $456,469 $441,525 Cost of sales 88,047 89,197 272,536
273,825 ---------- --------- ---------- --------- Gross profit
58,190 51,185 183,933 167,700 Selling and administrative expenses
47,136 41,831 141,615 127,760 ---------- --------- ----------
--------- Operating income 11,054 9,354 42,318 39,940 Other income,
net 695 134 1,065 874 ---------- --------- ---------- ---------
Income before income taxes 11,749 9,488 43,383 40,814 Provision for
income taxes 4,034 3,269 15,755 15,211 ---------- ---------
---------- --------- Net income $7,715 $6,219 $27,628 $25,603
========== ========= ========== ========= Balance Sheets 2005 2004
----------- ----------- Assets: (Unaudited) Cash and cash
equivalents $92,281 $19,056 Marketable securities - 65,850 Accounts
receivable 70,440 69,998 Inventories 86,171 80,604 Deferred income
taxes 16,363 15,167 Other current assets 10,383 10,140 -----------
----------- Total current assets 275,638 260,815 Property and
equipment, net 50,964 56,874 Other assets 14,039 12,582 -----------
----------- Total assets $340,641 $330,271 =========== ===========
Liabilities and Stockholders' Equity: Current liabilities 55,531
55,902 Deferred income taxes and other liabilities 16,486 13,989
Stockholders' equity 268,624 260,380 ----------- ----------- Total
liabilities and stockholders' equity $340,641 $330,271 ===========
=========== *T
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