"At current price levels, we don't see many catalysts for further meaningful share price decline," Sterne Agee said. "However, do not foresee a rapid turnaround for the company given the loss in revenue base and shelf space over the past 5 years."
The firm said K-Swiss does seem to be having some success with new models but it still faces an uphill battle to win back shelf space from competitors like Nike (NKE), Adidas, and Reebok.
"We continue to expect modest backlog growth," Sterne Agee said. "The Clean Classic may provide some momentum for BTS, as retailers are talking about a return to white leather shoes, and Triathlon and running shoes are slowly becoming established. Given the small revenue base, success of one shoe can make a meaningful difference to the numbers. The big question is will any of these efforts translate to material revenue, and increased shelf space?"
At the same time, the balance sheet is still a work in progress."KSWS has been burning cash for the last three years, and at this point we do not see any reprieve until late FY12 or early FY13," the firm said. "The company ended 3Q11 with inventory +69.5%, or over 30 weeks of supply, which should continue to pressure GM%