"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
"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% [gross margins] in the upcoming quarters. However, we believe cutting SG&A and managing inventory growth should help the company's financial position."
Sterne Agee is expecting a loss of 36 cents a share in the quarter on revenue of $41.3 million, and it noted that K-Swiss is in the process of negotiating an asset-based line of credit to "ensure liquidity" through the end of this year.
Check out TheStreet's quote page for K-Swiss for year-to-date share performance, analyst ratings, earnings estimates and much more.
Other companies opening their books on Friday include
Brookfield Asset Management
Yingli Green Energy
The economic calendar features the consumer price index for January at 8:30 a.m. ET, the consensus view is for an increase of 0.3% with the core number ticking up 0.1% ; and leading indicators for January at 10 a.m. ET, economists are expecting a 0.5% boost, according to