Exhibit 99.1
THE STRIDE RITE CORPORATION March 29, 2007
NEWS RELEASE FOR IMMEDIATE RELEASE
CONTACT: Frank A. Caruso, Chief Financial Officer - (617)-824-6611
STRIDE RITE REPORTS INCREASED
FIRST QUARTER SALES AND PROFITS
Lexington, MA, March 29, 2007 - The Stride Rite Corporation (NYSE: SRR)
today reported record first quarter fiscal 2007 sales of $194.7 million, an
increase of 6% compared to the same period in the prior year. Net income for the
first quarter totaled $11.1 million or $.30 per diluted share, compared to the
net income of $8.3 million or $.22 per diluted share in the first quarter of
2006.
The first quarter financial results include a pre-tax expense of $0.3
million related to Robeez integration costs. The prior year first quarter
financial results included a pre-tax expense of $2.6 million related to the flow
through of the remaining write-up of inventory purchased in the Saucony
acquisition as required by GAAP accounting rules. In addition, the prior year
first quarter results included pre-tax Saucony acquisition related integration
expenses of $1.2 million.
Excluding acquisition-related integration costs, net income would have been
$11.3 million for the first quarter, while diluted earnings per share remain at
$.30 for the first quarter of fiscal 2007. Excluding acquisition-related
integration costs and the Saucony inventory write-up, net income would have been
$10.6 million for the first quarter of fiscal 2006, while diluted earnings per
share would have been $.28. See the section entitled "Non-GAAP Pro Forma
Financial Measures" and the "Reconciliation of Non-GAAP Measures" provided in
this release for an additional description of these Non-GAAP Measures.
David Chamberlain, Chairman and CEO of Stride Rite commented, "Although we
made progress in the first quarter, the uneven retail environment had an effect
on the first quarter results.
"The combined Children's Group first quarter sales increased 9% compared to
last year. The Children's Retail Group sales were up 14% in the quarter. Same
store comps were up 6.3%. February retail sales were helped by an earlier start
to our annual pre-Easter promotion. We expect retail to continue with positive
comps for the year. However, wholesale sales were down 1%. The introduction of
our Saucony children's line in December has enjoyed a solid start in both our
stores and wholesale businesses. Over time, this should allow us to open new
distribution. We remain on target to turn in another year of growth in our
Stride Rite children's business.
"Keds had a weak first quarter, with sales down 9%. The new, younger
product offerings met expectations, but could not offset the decline in women's
core product and lower children's sales. We anticipate an improving sales trend
for the remainder of the year.
"Sperry Top-Sider, up 10%, enjoyed another strong quarter of sales. Our
products are performing well. We expect a year of solid growth.
"Saucony domestic sales were up 6% over a year ago. We are seeing excellent
response to our updated technical running lines, particularly in the Triumph,
Omni and Hurricane models, which all feature our new ProGrid technology. We feel
positive about the steps we are taking to build Saucony.
"International sales were up 2%. Keds continues to enjoy strong sales
growth in Europe, Canada and Australia. The Mischa Barton campaign and younger
products are driving the Keds momentum.
"Our Tommy Hilfiger footwear sales were 4% above last year. We are pleased
with the progress of the Tommy Hilfiger brand. However, we remain cautious in
our outlook for the year.
"Robeez results met expectations for the quarter."
Mr. Chamberlain continued, "The strength of our brands and the acquisition
of Robeez has provided sales growth in the quarter. We are committed to
delivering the financial results this year, while we invest to support long-term
growth. Assuming reasonable retail and economic conditions in 2007, we are
reaffirming our projected sales growth of 5% to 8% and earnings per share of
$1.10 - $1.15, including a full year of Robeez financial results and excluding
any Robeez integration costs. Acquisition related integration costs are
estimated at approximately $1.0 million or $.02 per diluted share for the year."
NET SALES HIGHLIGHTS:
o Net sales for the quarters ended March 2, 2007 and March 3, 2006 are
summarized in the table as follows:
The Stride Rite Corporation
Net Sales (in thousands)
First Quarter
-------------
Percentage
2007 2006 Change
---- ---- ------
(Unaudited)
Stride Rite Children's Group - $20,980 $21,156 (1)%
Wholesale
Stride Rite Children's Group - 43,130 37,924 14%
Retail
--------- -------- ----------
Stride Rite Children's Group - 64,110 59,080 9%
Combined
Keds 38,097 41,991 (9)%
Sperry Top-Sider 26,015 23,588 10%
International 23,295 22,818 2%
Saucony 22,412 21,075 6%
Hind 2,415 3,488 (31)%
--------- -------- ----------
Other Wholesale - Combined 112,234 112,960 (1)%
Tommy Hilfiger Adult 15,472 14,933 4%
Robeez 7,084 - 100%
Intercompany Eliminations (4,229) (3,557) n/a
--------- -------- ----------
Total $194,671 $183,416 6%
========= ======== ==========
o Stride Rite Children's Group-Wholesale net sales were down 1% for the
quarter as compared to the prior year. This decrease was primarily
attributable to decreased sales of first quality products, mainly in
the Stride Rite and Tommy Hilfiger product lines, as well as a decrease
in closeout products sales. Offsetting these declines were positive
sales of Sperry Top-Sider and Saucony children's products.
o Net sales of the Stride Rite Children's Group-Retail division increased
14% in the first quarter versus the prior year. Sales at comparable
Children's Group retail stores (open 52 weeks in each fiscal year)
increased 6.3% for the first quarter of 2007. At quarter-end, the
Stride Rite Children's Group-Retail operated 322 stores, including 15
Saucony stores. This is a net increase of 26 stores, or 9% from the
comparable period last year.
o Net sales in the Keds division decreased 9%. The Keds sales decline was
primarily attributable to a decrease in women's core product sales in
the mid-tier and value sales channels, as well as lower children's
sales. The younger product offerings have performed well.
o Sperry Top-Sider net sales increased 10% for the first quarter on
higher sales of men's and women's products.
o Saucony domestic net sales were up 6% for the first quarter of 2007.
Saucony technical running and athletic products performed well in the
quarter.
o The Stride Rite International division's net sales growth of 2% in the
first quarter of fiscal 2007 was primarily the result of strong sales
of Saucony and Keds products in Europe, as well as Keds sales increases
in Canada.
o Net sales of Tommy Hilfiger products for the first quarter increased 4%
with positive trends in both women's and men's product lines.
OTHER FINANCIAL HIGHLIGHTS:
o The gross profit rate of 40.8% was improved 0.9 percentage points
compared to 39.9% reported in the comparable period in 2006. The
prior year gross profit rate was negatively impacted 1.5 percentage
points by the $2.6 million flow through of the remaining acquired
Saucony inventory write-up to fair value. The current year gross
profit margin was adversely affected by increased promotional
activity in our Stride Rite children's company-owned retail stores
and a shift in product mix.
o Operating expenses increased 3% for the quarter. As planned, the major
operating cost increases were related to Robeez expenses, investments
in European operations and Stride Rite Children's Group-Retail store
expansion.
o Operating income increased 31% on a GAAP basis and was up 5% excluding
the acquisition related integration costs of $0.3 million and $1.2
million for 2007 and 2006, respectively and the $2.6 million flow
through of the remaining acquired Saucony acquisition related inventory
write-up to fair value in 2006.
o Accounts receivable increased 6% compared to last year consistent with
the sales increase in the quarter. DSO was 56 days, which is flat
versus the comparable period last year.
o Inventories of $127 million were up 10% versus the comparable period of
2006. The increase was due in part to the addition of Robeez and the
timing of certain product receipts.
o Cash and cash equivalents were $20 million at the end of the first
quarter with $99 million in outstanding debt. The outstanding debt
increase versus our 2006 year-end balance is related primarily to
building inventory for spring sales.
o The Company did not repurchase any common shares under the share
repurchase program during the first quarter. As of March 2, 2007 we had
approximately 3.0 million shares remaining on our share repurchase
authorization.
COMPANY OVERVIEW & CONFERENCE CALL INFORMATION:
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,
PRO-Keds, Sperry Top-Sider, Robeez, Tommy Hilfiger, Saucony, Grasshoppers,
Munchkin and Spot-bilt. Apparel products are marketed by the Company under the
Saucony and Hind brand names. Information about the Company is available on our
website - www.strideritecorp.com. The Company will provide a live webcast of its
first 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 March 29, 2007. An on-line
replay will follow two hours after the call and will continue through April, 5
2007. Information about the Company's brands and product lines is available at:
www.striderite.com, www.keds.com, www.sperrytopsider.com, www.robeez.com,
www.grasshoppers.com, www.saucony.com, and www.hind.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
This press release includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. These forward-looking statements, including,
but not limited to, statements regarding upcoming product lines, division sales
expectations, growth expectations, and sales growth for the Company, 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. Investors are cautioned that forward-looking 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, and should not place undue reliance on these statements. 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 or contribute to such
differences include, among others: international, national and local general
economic, political and market conditions; our reliance on independent
manufacturers in China and potential disruptions in such manufacturing caused by
difficulties associated with political instability in China, the occurrence of a
natural disaster or outbreak of a pandemic disease in China, labor shortages or
work stoppages, and changes in duty structures; the impact of changes in the
value of foreign currencies, including the Chinese Yuan; the possible failure to
retain the Tommy Hilfiger footwear license or other current license agreements;
the possible failure to successfully integrate the Robeez brand into the Company
operations; increased leverage from the financing of our recent acquisitions;
intense competition among sellers of footwear; delay in opening new stores; a
decline in the volume of anticipated sales; revenues from new product lines may
fall below expectations; a delay in the launch of new product lines; an
inability to achieve expected results for new retail concepts; general retail
sales trends may be below expectations; consumer fashion trends may shift to
footwear styles not currently included in our product lines; our retail
customers, including large department stores, may continue to 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 (the "SEC"), all of which are available at the SEC's website
at www.sec.gov. We expressly disclaim any responsibility to update
forward-looking statements.
NON-GAAP PRO FORMA FINANCIAL MEASURES:
This release contains certain non-GAAP financial measures, specifically
non-GAAP historic and anticipated net income and diluted earnings per share,
each of which excludes certain cash and non-cash charges. These non-GAAP
financial measures are used by management to evaluate the Company's historical
and prospective financial performance and to indicate underlying trends in the
Company's business. Although the non-GAAP measures provided by the Company may
be different from the non-GAAP measures provided by other companies, management
believes that these non-GAAP financial measures provide useful information to
investors because, by excluding non-cash items related to the write-up to fair
value of inventory and one-time cash items related to integration costs of the
Company's recent acquisitions, it provides investors with a better understanding
of the performance of the Company and allows investors to evaluate the
effectiveness of the methodology and information used by management in its
financial and operational decision-making. These non-GAAP financial measures
should be considered in addition to results prepared in accordance with GAAP,
but should not be considered a substitute for or superior to GAAP results. The
GAAP measures most directly comparable to the non-GAAP measures are net income
and diluted earnings per share.
The Stride Rite Corporation
Summarized Financial Information
for the periods ended March 2, 2007 and March 3, 2006
Statements of Income
(in thousands) First Quarter
-------------
2007 2006
---- ----
(Unaudited)
Net sales $194,671 $183,416
Cost of sales 115,181 110,184
---------- ---------
Gross profit 79,490 73,232
Selling and administrative expenses 60,799 58,910
---------- ---------
Operating income 18,691 14,322
Other income (expense), net (1,050) (823)
---------- ---------
Income before income taxes 17,641 13,499
Provision for income taxes 6,546 5,214
---------- ---------
Net income $11,095 $8,285
========== =========
Earnings per share:
Diluted $0.30 $0.22
Basic $0.30 $0.23
Weighted average shares outstanding:
Diluted 37,537 37,703
Basic 36,556 36,588
Balance Sheets
First Quarter
-------------
2007 2006
---- ----
Assets: (Unaudited)
Cash and cash equivalents $19,982 $23,219
Accounts receivable 128,733 121,098
Inventories 126,651 115,594
Deferred income taxes 14,275 14,262
Other current assets 17,048 18,074
---------- ---------
Total current assets 306,689 292,247
Property and equipment, net 52,950 51,625
Goodwill 70,257 56,732
Trademarks 71,890 58,590
Other assets 18,731 19,301
---------- ---------
Total assets $520,517 $478,495
========== =========
Liabilities and Stockholders' Equity:
Current liabilities 74,237 67,765
Long-term debt 98,500 95,000
Deferred income taxes and other liabilities 39,840 38,934
Stockholders' equity 307,940 276,796
---------- ---------
Total liabilities and stockholders' $520,517 $478,495
equity ========== =========
The Stride Rite Corporation
Reconciliation of Non-GAAP Measures
(in thousands, except share data)
For the Quarter Ended March 2, 2007
Reported Adjusted Results
First Quarter First Quarter
2007 Adjustments 2007
----------- ------------ -----------
Net sales $194,671 $194,671
Operating income 18,691 $320 (a) 19,011
Provision for income taxes 6,546 134 (b) 6,680
Net income $11,095 $186 (a),(b) $11,281
Earnings per share:
Diluted $0.30 $0.30
Basic $0.30 $0.31
Weighted average shares
outstanding:
Diluted 37,537 37,537
Basic 36,556 36,556
Pro forma adjustments:
(a) Robeez integration expenses $.3 million (pre-tax).
(b) Income tax effect at the incremental rate.
The Stride Rite Corporation
Reconciliation of Non-GAAP Measures
(in thousands, except share data)
For the Quarter Ended March 3, 2006
Reported Adjusted Results
First Quarter First Quarter
2006 Adjustments 2006
----------- ------------ --------------
Net sales $183,416 $183,416
Operating income 14,322 $3,785 (a) 18,107
Provision for income taxes 5,214 1,461 (b) 6,675
Net income $8,285 $2,324 (a),(b) $10,609
Earnings per share:
Diluted $0.22 $0.28
Basic $0.23 $0.29
Weighted average shares
outstanding:
Diluted 37,703 37,703
Basic 36,588 36,588
Pro forma adjustments:
(a) Flow through of the Saucony inventory write-up to fair value $2.6
million and Saucony integration expenses $1.2 million (pre-tax).
(b) Income tax effect at the effective rate.