Stride Rite Corporation intends to renew its license with Tommy Hilfiger when it expires next March in spite of poor sales of the line. They dropped by 41 percent to $14.6 million in the company’s 2nd quarter, ended June 2, and sales are expected to continue to plummet in the 2nd half .

Keds didn’t do well in the period either, falling by 16 percent $34.9 million – a result below the company’s expectations. Lower than anticipated reorders were said to be responsible for the drop, and Stride Rite said that the brand is not likely to improve in the 2nd half. Colorful styles sold well while more basic white models had a poor reception.

The company is still in the process of repositioning the brand to be younger and trendier. Keds began shipping to the youthful Journeys retail chain last month. The brand’s celebrity spokeswoman, Misha Barton, is no longer appearing in a very popular American TV series, The O.C., that made her famous (she died in the show’s story line), so she may be pressed to gain further exposure for Keds through films or other TV program. Keds has teamed up with a U.S. fashion designer, Nanette Lepore, for a collection of ballet flats, skimmers, peep toes and d’Orsay flats, to be worn by Mischa Barton in a marketing campaign planned for Spring 2007.

Overall, Stride Rite’s wholesale turnover ended up falling by 6 percent to $18.3 million. Drops for Keds and Tommy Hilfiger were offset by higher sales at Sperry Top-Sider, which rose by 24 percent to $28.5 million. Saucony’s sales totaled $25.6 million in the quarter, with technical running products performing well. The company will release an updated Saucony Originals line and a children’s line under the brand for Spring 2007.

Turnover for the Stride Rite children’s group increased by 13 percent to $74.1 million, as a 6 percent drop in wholesale turnover was offset by a 21 percent climb in retail sales for the group. The lower wholesale volume was attributed to the changing product flow of certain department stores, to a shift in buying patterns in the discount segment and to a decline in sales to smaller accounts. On the retail side, Stride Rite plans to raise the store count, which is currently at 288, adding 33 new outlets this year. The group also has 16 Saucony stores.

Sales outside of the USA jumped by 143 percent for the group to $19.2 million, thanks mainly to Saucony’s acquisition. To a lesser extent the rise was aided by higher sales of Tommy Hilfiger footwear in Canada and South America, Keds shoes in Canada and Sperry Top-Sider footwear in Europe.

Net income for the group was up by 43 percent to $16.9 million on 22 percent higher total revenues of $194.0 million. Excluding acquisition costs, net income stood at $17.5 million. The gross margin expanded by 160 basis points to 42.4 percent.