Suddenly reversing a serious downward trend, the wheeled-footwear company enjoyed a 59.2 percent jump in net sales to $15.6 million for the quarter ended Dec. 31. This helped narrow Heelys’ net loss to $5.24 million for the latest quarter from $5.92 million for the same period in 2007.
Turning around from a negative gross profit in 2007, the gross profit margin marked considerable improvement, reaching a positive ratio of 18.9 percent of sales, thanks to lower close-out sales.
The company cited the challenging economic environment, and noted that while its performance in the first nine months of 2008 was promising, it could not sustain the increasing margins and sales in the last quarter. The hardship was felt both in the U.S. domestic market and abroad. American sales made up 57.7 percent of the total.
Sales results for the full year exemplified the difficulties: Revenues fell by 61.5 percent to $70.7 million, and the gross profit margin fell by 6.3 percentage points to 25.3 percent. The net loss for the year was $5.92 million, against income of $21.9 million in 2007.
The company said that it spent much of the year cleaning up its inventories at the wholesale and retail levels; indeed, inventory at the end of the year was half that of 2007, with an improvement in the U.S. more than offsetting a $4.4 million increase in inventory outside the domestic market.
Despite the losses, Heelys still has a $68.5 million cash horde and burned only 2.8 million in cash last year, excluding the payment of $27.6 million in a special cash dividend to shareholders. It also announced that it had settled its shareholder suits in mediation and expects that its liability will be $722,000.
Meanwhile, Heelys continues to look at strategic alternatives, but gave no details on the timing or direction – Skechers has shown interest in the company, but its offers have been repeatedly rejected by Heelys' board. The company's management gave no specific guidance but said it expects sales and margins to remain pressured in the first quarter of this year.