Heelys Revenues Slide 73.5%

heelys.gifMay 8, 2008

Publicly traded Heelys, Inc. reported sales tumbled 73.5% for the first quarter of 2008, to $13.1 million from $49.4 million a year ago. The company reported a net loss for the quarter of $1 million, or 4 cents a share, compared to net income of $8.5 million, or 30 cents a share, a year ago. Excluding the costs associated with the transition to a new CEO, Heelys lost 2 cents a share.

Gross profit was $2.8 million, or 21.5% of net sales, compared to $17.5 million, or 35.4%, a year ago. Total selling, general and administrative expenses were $6.1 million, or 46.4% of net sales, compared to $5.2 million, or 10.6% of net sales in the first quarter of last year.

Ralph Parks, interim chief executive officer of Heelys, Inc., said, "During the first quarter we continued to deal with many of the same issues that negatively impacted our business during the second half of 2007. That said, over the past few months we have witnessed improving trends in several key areas, including lower inventory levels in the channel, a modest increase in average selling prices, and a reduction in markdown assistance. In addition, recent feedback from many of our retail partners regarding consumer demand for our wheeled footwear has been encouraging. We are working hard to rebuild momentum in the marketplace through enhanced marketing and advertising programs that highlight the fun and excitement of our products and connect with our target demographic."

The company also announced that it has entered into a termination agreement with Trotwood Import/Export and will take over direct distribution of Heelys in France and Monaco. Heeling Sports EMEA, Heelys' European subsidiary will open a sales office based in Annecy, France in May.

Parks concluded, "Despite the difficult start to 2008 we believe we are moving in the right direction. Domestically, we remain focused on better aligning inventory with demand while overseas we have recently expanded our presence in Europe and begun implementing a direct sales model in select markets. We are confident that our strong brand equity combined with our unique and patent-protected product offering provides us growth opportunities well into the future."