L.A. Gear Has $12.5-Million Quarterly Loss
Sneaker maker L.A. Gear on Wednesday reported a first-quarter loss of $12.5 million, its second unprofitable quarter in a row.
The Marina del Rey-based company, the nation’s No. 3 sneaker firm, announced previously that it would lose money in the three-month period ended Feb. 28. L.A. Gear has been hurt by, among other things, the nationwide retailing slowdown and the company’s apparent lack of new hit products.
It has discounted the price of its slow-selling sneakers sharply to clear out overloaded inventories.
L.A. Gear posted its first loss ever in the fourth quarter of last year, when it reported a loss of $7.1 million. For the full year, it reported profit of $31.3 million on sales of $902.2 million.
The company’s first-quarter loss contrasts with net income of $13.9 million in the same period a year earlier. Revenue for the first quarter fell nearly 9% to $170.9 million.
L.A. Gear went into technical default on its bank loan agreement when it posted its fourth-quarter loss. The pact was renegotiated last month, however, and the company said it remains in compliance with the new agreement despite the first-quarter loss.
The new bank agreement, however, requires L.A. Gear to return to profitability in the current quarter.
As of Feb. 28, L.A. Gear’s inventory totaled $147.9 million, down 17% from the year-earlier inventory level of $160.7 million.
“We have taken and continue to take steps to decrease inventory levels and reduce operating expenses,” said Robert Y. Greenberg, chairman and chief executive.
L.A. Gear released its first-quarter report after the close of stock market trading. Its shares finished the day at $12.625 on the New York Stock Exchange, off 12 1/2 cents from the day before and down from a 52-week high of $50.375.
Separately, the stock of the nation’s No. 1 sneaker firm, Nike Inc., fell $2.75 to $43.125 as concern mounted over a possible decline in future orders. Merrill Lynch analyst Brenda Gall said there was evidence that the firm’s 10% rise in orders for June and July delivery may not be sustained in August and September, and she lowered her earnings estimate for the company slightly.
