Term Paper on "Company Analysis on K-Swiss"

Term Paper 4 pages (1132 words) Sources: 4

[EXCERPT] . . . .

K-Swiss

Company Description

K-Swiss is an American footwear company, traded on the NASDAQ exchanged under the ticker symbol KSWS. The company is a niche player in the industry. The athletic footwear industry in the U.S. was worth $12.39 billion in 2008 (SGMA, 2009). K-Swiss had U.S. revenues of $99 million, which implies a 0.8% market share. The company also had international sales of $110 million, for total revenues of $209 million (2009 Annual Report). Compared with its competitors, K-Swiss has a relatively limited product line. The company competes primarily in the Tennis, Classic and has recently added Running to its lineup (2009 Annual Report).

K-Swiss has its roots in tennis shoes, and considers this to be its strongest category. It recently re-introduced its Classic shoe in order to compete in the industry's second-largest segment. The company attempts to compete as a differentiated producer, positioning itself somewhat away from the major brands. Brand positioning tactics include styling and exclusivity. The company does use celebrity endorsement in its niches, a common practice in the athletic footwear industry.

According to MSN Moneycentral (2011), the company lost $68.21 million in 2010, after earning revenues of $216.99 million. K-Swiss has seen declining revenues in each of the past fives, attributable to a combination of general industry slowdown (SGMA, 2009) and firm-specific weakness. Sales in 2006 were $489 million, so the most recent figure represents a decline of 55.6% in the past five years. The company has failed to downsize its operations in response to this revenue decline, with its selling/general/administrative (SGA) expense being $131.91 million in 2010 compared with $130.81 million in 2006. The 2010 figure represents 60.8% of revenue while the 2006 figure was just 26.7% of revenue. The company has lost money in each of the past two years and has seen its profits decline in at least the past five years consecutive (MSN Moneycentral, 2011).

K-Swiss currently trades at $11.55, which is in the middle of its 52-week range ($8.75 - $14.53). The company in 2009 stopped paying a dividend to its shareholders, a reflection of its ongoing weakness (Marcus, 2009). The company's current stock price therefore reflects some degree of investor optimism with respect to either future dividends or future stock price appreciations, neither of which is congruent with the firm's performance of the past five years.

The company does have a healthy balance sheet, however. Its current ratio is 7.13. K-Swiss has no debt. The company's equity is 81.5% of its capital structure. This balance sheet performance is out of character for a company that has struggled as much as K-Swiss, but it demonstrates that the company successfully saved for a rainy day. While it has struggled for a couple of years it has the financial ability to do so, a key source of internal strength for the company. K-Swiss' conservative approach to finances will help buy it time to fashion a turnaround strategy.

The Athletic Footwear Industry

The athletic footwear industry was worth $12.95 billion in the U.S. alone in 2008 (SGMA, 2009). The industry is global is scope, with international markets worth at least double the U.S. market and probably much more. The industry in the U.S. is relatively concentrated, with a handful of major companies dominating. Nike is the industry leader, with Adidas, Puma and a few other companies competing at that level. Firms such as K-Swiss are forced to compete as niche… READ MORE

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