K-Swiss Reports Q3 Numbers, Prompts Far-From-Neutral Trading (KSWS)

Brendan Byrne - November 2, 2012

K-Swiss (NASDAQ: KSWS), the Van Nuys, California-based shoe company, was among the biggest movers on the NASDAQ earlier this week as its shares soared to a gain of over 35%. Following the two day suspension of trading caused by Super Storm Sandy, K-Swiss closed Wednesday’s trading fairly uneventfully with the exception of the last 20 minutes of trading that saw the stock drop sharply but was literally saved by the bell when it closed the day at $2.28.

Today, November 1, was a completely different story as the company released its Q3 numbers ahead of today’s opening of the markets. The numbers were wildly different than expected and this was shown immediately as K-Swiss opened at $2.52. The report showed a loss of $0.05 per share, $0.08 better than the Capital IQ Consensus Estimate of a $0.13 loss per share.

K-Swiss showed an immediate, near meteoric, rise in its share price as it reached its high for the day of $3.22 just before noon. From there, the stock rose and fell repeatedly throughout the day before closing up $0.81 at $3.09. This $0.81 rise represented a gain of 35.5% on a day of very heavy trading. K-Swiss generally sees 187,000 shares traded on an average day while today saw over 1.5 million shares changing hands.

This is not to say that all is perfect in the world of K-Swiss. The company is still losing money, though not at nearly the same rate nor amount that analysts expected.

The net loss for the third quarter of 2012 was $1.9 million, or $0.05 per diluted share, compared with a net loss of $15.4 million, or $0.43 per diluted share, for the prior-year period. The net loss for the nine months ended September 30, 2012, was $20.2 million, or $0.57 per diluted share, compared with a net loss of $45.2 million, or $1.28 per diluted share, for the nine months ended September 30, 2011.

Additionally, revenues continue to decline. For the third quarter of 2012, total worldwide revenues decreased 16% to $67.5 million compared with $80.4 million in the prior-year period. Domestic revenues decreased 31.8% to $22.3 million in the third quarter, and international revenues decreased 5.3% to $45.2 million for the same period.

Total worldwide revenues for the first nine months of 2012 decreased 16.8% to $181.6 million from $218.2 million for the first nine months of 2011. Domestic revenues decreased 35.8% to $61.8 million in the first nine months of 2012, and international revenues decreased 1.7% to $119.8 million.

This is far from a rosy picture. Without getting into the details and numbers, future order numbers were not all rainbows and unicorns prompting Steven Nichols, Chairman of the Board and President, to say, “The third quarter results benefitted from the positive contribution from our Palladium brand as well as disciplined expense and inventory controls. While we continue to gain momentum and demonstrate product innovation with the K-Swiss brand, we have yet to convert these efforts into a sustainable futures order trend.”

While K-Swiss’ future remains a mystery, Thursday’s trading was nothing less than a fantastic day for K-Swiss shareholders.

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Brendan Byrne

While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. You may contact Brendan via his email ([email protected]) or his Google+ page (https://plus.google.com/u/0/116608759701551457422).

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