SOURCE: The Walking Company Holdings, Inc.

November 14, 2008 08:00 ET

The Walking Company Holdings, Inc. Announces Third Quarter 2008 Financial Results

SANTA BARBARA, CA--(Marketwire - November 14, 2008) - The Walking Company Holdings, Inc. (NASDAQ: WALK) (www.thewalkingcompany.com; www.bigdogs.com), a developer and retailer of branded, lifestyle consumer products, today reported the financial results for the third quarter ended September 30, 2008.

For the quarter ended September 30, 2008 consolidated net sales were $59,470,000 as compared with $56,554,000 in the third quarter 2007. Our consolidated net sales increased 5.2%, primarily due to the addition of 39 (net) new The Walking Company ("TWC") stores, offset by the closure of 67 (net) Big Dogs stores. The Company had a total of 276 stores opened (205 TWC stores and 71 Big Dogs stores) at the end of September 30, 2008, as compared to 303 stores (165 TWC stores and 138 Big Dogs stores) as of September 30, 2007. Comparative retail store sales increased 4.8% for the third quarter 2008 (1.5% increase for TWC, and a 12.6% increase for Big Dogs). Consolidated gross profit decreased to $28,691,000 or 48.2% of sales in the third quarter 2008, as compared with $30,195,000 or 53.4% of sales in the third quarter 2007. The overall decrease in consolidated gross profit is primarily the result of the planned liquidation of Big Dogs inventory. TWC gross margin was 50.1% compared to 51.6% last year. Big Dogs' gross margin decreased to 43.4% from 56.8% last year.

Consolidated operating expenses in the third quarter 2008 were $31,564,000, or 53.1% of consolidated net sales, compared to $29,251,000 or 51.7% in 2007. Consolidated operating loss for the third quarter 2008 was $2,873,000, compared to income of $944,000 for the third quarter 2007. The increase in operating expenses as a percentage of sales and the decrease in operating income, are largely attributable to the reduction in Big Dogs' revenue and contribution ($1,294,000 was recorded for store closure expense). As a result, the consolidated fully diluted net loss per share decreased to ($.27) per share as compared with ($.01) per share last year.

The Walking Company Holdings, Inc. consists of The Walking Company and Big Dogs. The Walking Company is a leading independent specialty retailer of high quality, technically designed comfort shoes and accessories that features premium brands such as ECCO, Mephisto, Dansko, Ugg, Pikolinos and MBT among many others. These products have particular appeal to one of the largest and most rapidly growing demographics in the nation. The Walking Company currently operates 207 stores in premium malls across the nation. Big Dogs develops, markets and retails a branded, lifestyle collection of unique, high-quality, popular-priced consumer products, including activewear, casual sportswear, accessories and gifts. The BIG DOGS® brand image is one of quality, value and fun. The BIG DOGS® brand is designed to appeal to people of all ages and demographics, particularly baby boomers and their kids, big and tall customers, and pet owners. In addition to its 71 retail stores, Big Dogs markets its products through its catalog, internet and corporate sales accounts.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 -- With the exception of historical information, the matters discussed in this press release are forward looking statements that involve a number of risks and uncertainties. The actual future sales and other results of the Company could differ significantly from those statements. Further information on the Company's risk factors is contained in the Company's quarterly and annual reports as filed with the Securities and Exchange Commission.

                THE WALKING COMPANY, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                                (Unaudited)


                                                      September 30,
                                                ---------------------------
                                                    2008          2007
                                                ------------- -------------
                    ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                     $     536,000 $     911,000
  Receivables, net                                  5,098,000     4,039,000
  Inventories, net                                 75,028,000    82,620,000
  Prepaid expenses and other current assets         1,600,000     2,528,000
  Deferred income taxes                             2,081,000     7,248,000
                                                ------------- -------------
    Total current assets                           84,343,000    97,346,000
PROPERTY AND EQUIPMENT, Net                        38,817,000    32,483,000
INTANGIBLE ASSETS, Net                              3,361,000     3,797,000
GOODWILL                                            6,296,000     3,131,000
DEFERRED INCOME TAXES                               8,000,000     2,104,000
OTHER ASSETS                                          388,000       362,000
                                                ------------- -------------
 TOTAL                                          $ 141,205,000 $ 139,223,000
                                                ============= =============

       LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term borrowings                         $  38,580,000 $  36,124,000
  Current portion of long-term debt                 2,385,000     3,348,000
  Accounts payable                                 24,115,000    20,580,000
  Accrued expenses and other current liabilities    7,539,000     5,809,000
                                                ------------- -------------
    Total current liabilities                      72,619,000    65,861,000
LONG-TERM CONVERTIBLE DEBT                         17,549,000    17,269,000
NOTES PAYABLE                                       2,313,000     2,265,000
CAPITAL LEASE OBLIGATIONS                           1,262,000     1,968,000
DEFERRED RENT AND LEASE INCENTIVES                 10,393,000     6,601,000
DEFERRED GAIN ON SALE-LEASEBACK                        50,000       103,000
                                                ------------- -------------
  Total liabilities                               104,186,000    94,067,000
STOCKHOLDERS' EQUITY                               37,019,000    45,156,000
                                                ------------- -------------
  TOTAL                                         $ 141,205,000 $ 139,223,000
                                                ============= =============





                THE WALKING COMPANY, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)


                     Three Months Ended             Nine Months Ended
                        September 30,                 September 30,
                -------------  -------------  -------------  -------------
                    2008           2007           2008           2007
                -------------  -------------  -------------  -------------

NET SALES       $  59,470,000  $  56,554,000  $ 161,869,000  $ 156,632,000
COST OF GOODS
 SOLD              30,779,000     26,359,000     81,264,000     72,640,000
                -------------  -------------  -------------  -------------
GROSS PROFIT       28,691,000     30,195,000     80,605,000     83,992,000
                -------------  -------------  -------------  -------------
OPERATING
 EXPENSES:
  Selling,
   marketing and
   distribution    27,255,000     25,388,000     79,492,000     76,304,000
  General and
   administrative   1,880,000      2,020,000      5,883,000      6,495,000
  Depreciation
   and
   amortization     2,429,000      1,843,000      7,008,000      5,331,000
                -------------  -------------  -------------  -------------
    Total
     operating
     expenses      31,564,000     29,251,000     92,383,000     88,130,000
                -------------  -------------  -------------  -------------
INCOME (LOSS)
 FROM
 OPERATIONS        (2,873,000)       944,000    (11,778,000)    (4,138,000)
INTEREST INCOME             -          2,000          2,000          8,000
INTEREST
 EXPENSE           (1,032,000)    (1,173,000)    (3,139,000)    (3,010,000)
                -------------  -------------  -------------  -------------
LOSS BEFORE
 BENEFIT FROM
 INCOME TAXES      (3,905,000)      (227,000)   (14,915,000)    (7,140,000)
BENEFIT FROM
 INCOME TAXES      (1,366,000)       (87,000)    (5,221,000)    (2,678,000)
                -------------  -------------  -------------  -------------
NET LOSS        $  (2,539,000) $    (140,000) $  (9,694,000) $  (4,462,000)
                =============  =============  =============  =============
NET LOSS PER
 SHARE
  BASIC         $       (0.27) $       (0.01) $       (1.02) $       (0.47)
                =============  =============  =============  =============
  DILUTED       $       (0.27) $       (0.01) $       (1.02) $       (0.47)
                =============  =============  =============  =============

WEIGHTED
 AVERAGE SHARES
 OUTSTANDING:

  BASIC             9,541,000      9,457,000      9,513,000      9,403,000
                =============  =============  =============  =============
  DILUTED           9,541,000      9,457,000      9,513,000      9,403,000
                =============  =============  =============  =============



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