|
Levi's kicks off its shoes
|
 |
October 9, 1998: 2:33 p.m. ET
Licensing agreement with Stride Rite discontinued because of poor sales
|
NEW YORK (CNNfn) - Levi Strauss & Co. is getting out of the shoe business, but analysts say the end of the company's licensing agreement with Stride Rite Corp. won't do much harm to the latter.
The companies said Friday they are discontinuing the Levi's brand of footwear due to disappointing sales.
Stride Rite will record a one-time, pre-tax charge of $5 million, or 7 cents a share after taxes, in the fourth quarter to cover losses from the disposal of inventory and severance costs tied to the decision. About 9 or 10 layoffs are expected.
Lexington, Mass.-based Stride Rite entered into a licensing agreement with privately-owned Levi Strauss in April 1997 to produce a line of shoes targeted at young men and boys, but the venture fell short of expectations.
While Stride Rite had hoped for annual sales of $30 million to $40 million, the collection brought in only about $5 million. The Levi's line accounts for less than 3 percent of Stride Rite's $168 million third-quarter revenue.
Analysts blamed lackluster sales on the decline of the Levi's brand name.
"The brand name was not as great as they had expected," Jeff Stinson, industry analyst at Midwest Research, said, adding younger consumers increasingly are pushing Levi's products aside in favor of "fashion" brands.
"The Levi's line was positioned at a younger audience, competing against Tommy Hilfiger and Nautica," David Mossberg, analyst at First Dallas Securities, said. "It was unsuccessful. It should have been positioned toward an older customer."
But analysts seemed unconcerned about Stride Rite's future, pointing to the success of the footwear maker's other brands.
"The Keds brand is doing phenomenally," Mossberg said. "It's the most profitable line for them."
In addition to Keds, Stride Rite produces several other brand name shoe lines, including Tommy Hilfiger, Nine West Kids and Sperry Top-Sider.
Although the retail sector as a whole and the footwear industry in particular seem to be slipping amid weaker consumer confidence, analysts believe Stride Rite will keep its footing.
In fact, Stride Rite posted exceptionally strong earnings in the second quarter, with net income up 35 percent and earnings per share 43 percent higher.
"There is a tremendous amount of opportunity with their Tommy Hilfiger women's business," Stinson said. "That should allow them to prosper."
Shares of Stride Rite (SRR) gained 5/8 to 7/12 on the New York Stock Exchange Friday afternoon. 
-- by staff writer Nicole Jacoby
|
|
|
|
|
 |
|
