GAMCO Investors' Chairman and Chief Executive Officer
initiated a long position in K-Swiss Inc. (
), after the company received a buyout offer from E. Land World
for $4.75 per share in cash on Feb. 25, 2013. Billionaire
investor Gabelli bought 556,000 shares of KSWS at a current price
of $4.72, indicating that KSWS was possibly an undervalued stock.
The KSWS deal is not unlike Gabelli's purchase of Caribou Coffee
) in December 2012, when the coffee company was offered $16 per
share in cash. At that time, Gabelli said of Caribou Coffee, "We
think it's statistically undervalued even at $16."
Maybe KSWS is undervalued, but here are three severe warning
signs issued for KSWS by GuruFocus: K-Swiss has a low Piotroski
F-score of 3, declining revenue per share for the last five years
and a declining gross margin averaging 6.1% per year. K-Swiss'
deteriorating performance, as viewed in its extended cash
conversion cycle, has consistently generated losses for the past
five years. Poor performance from business management resulted in
high SG&A (selling, general and administrative expenses), as
much as 48.4% of total sales in 2012.
see in the global footwear sector at large and KSWS whose price
is close to a one-year high of $4.73, and whose P/S Ratio
(0.7557) is also close to one-year high of 0.7557? The answer may
be that the athletic footwear industry has experienced growth
globally over the last five years and is anticipated to reach $51
billion by 2017. Key factors are major sporting events such as
the 2014 FIFA World Cup and the 2016 Olympics in Brazil.
Additionally, the Asia Pacific region is forecast to have the
highest growth in athletic footwear retail in the next five
years. Why? Increasing levels of household income are injecting
the performance footwear market in every economic tier of
emerging Asian countries.
K-Swiss competes in the athletic footwear industry against much
larger companies Nike and Adidas. K-Swiss purchases lifestyle and
performance footwear from independent manufacturers located
predominantly in China. For a KSWS and Competitors Comparison of
10-Year Historical P/E ratios:
data by GuruFocus.com
Founded in 1966, K-Swiss Inc. designs and develops athletic
footwear for sports use, fitness activities and casual wear. In
addition to the K-Swiss brand, K-Swiss also designs and
manufactures all-terrain, adventure footwear under the Palladium
brand. K-Swiss sells primarily in the U.S., and Asia Pacific,
Europe and Africa, to specialty athletic footwear stores, pro
shops, sporting goods stores and department stores.
Take a look at the 10-year financials of KSWS:
KSWS data by GuruFocus.com
While anticipated global sporting events can present major
opportunities for the performance footwear sector, will K-Swiss
continue net losses? After the World Cup and the Olympics, maybe
we'll better comprehend the K-Swiss conundrum.
Here's a look at Mario Gabelli's recent Top Buys, Top Sales and
GuruFocus "Real Time Picks" reports the stock purchases and sales
that Gurus have made within the prior 2 weeks. The report time
lag can be as short as 2 days after the date of the transaction.
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