When Heelys Inc. (NASDAQ:HLYS) had its 2006 IPO, financial commentators were united in their opinion that the maker of wheeled sneakers would fade away into oblivion. That was even as shares of the Texas-based Heelys Inc. stock soared 85% on their first day of trading. Heelys has defied skeptics — at least for now — and managed to survive, though HLYS stock is a shadow of its former self.
But hey, if Crocs Inc. (NASDAQ:CROX) could rebound, maybe Heelys could too … right? Maybe not. Shares of the Carrollton, Texas, footwear company recently traded for $2.07, well under the $33.60 high they reached on their first day of trading.� Heely�s shares have plunged more than 30% this year alone.
The reasons for the Heelys struggles are many. First, there were the safety concerns.� The wheeled sneakers soon became the toy parents loved to hate — with good reason.�� A 2007 medical study from Ireland documented cases of 67 children being treated for Heelys-related injuries.� Schools forbade students from wearing Heelys and malls and other public venues cracked down on �heeling� out of a justifiable fear of attracting lawsuits.
Then there is the issue of practicality. Unlike Crocs Inc. (NASDAQ:CROX) shoes, Heelys are of limited use. Crocs too were considered a fad but its brand has endured because the shoes are comfortable, durable and practical.�� Shares of the maker of the plastic sandals that some consider ugly have climbed more than 46% this year.� Net income for the first quarter of 2011 at the Niwot, Colo. company increased 276.1% to $21.5 million, or 24 cents a share.� Revenue increased 35.9% to $226.7 million.
Uggs and Tevas, two trendy footwear brands, are also faring well during these uncertain economic times.� Deckers Outdoors Corp. (NASDAQ:DECK), which makes both brands, reported record first quarter profit of $19.2 million, or 49 cen! ts a sha re, beating Wall Street expectations.� Uggs brand sales rose 42.2% while Teva gained 16.8%. Its shares, which have pulled back lately, are up 4% this year.
Heelys, where business development company Capital Southwest Corp. (NASDAQ:CWSC) was an early backer and remains a significant shareholder, have faltered as its rivals have soared.� Everything that could have gone wrong for Heelys seems to have done so.� In the company�s latest earnings release, CEO Tom Hansen cast a wide net to blame for Heelys� bad luck including the natural disasters in Japan.� He didn�t hold an earnings conference call.
At the end of the last quarter, Heelys had $62.6 million in cash and investments.� Yahoo Finance indicates that the company has no total debt, which offers a rare bit of good news for investors.� The company�s market cap of $56 million makes it an easy acquisition for either Crocs or Deckers Outdoor.� Capital Southwest, which acquired its stake in Heelys in May 2000 for $103,490 that�s worth about $17 million today, may take the company private and re-IPO it later.� Gary L. Martin, Southwest�s CEO, is the Independent Chairman of Heelys.� He may be looking for an exit strategy.
Without a sale there are fewer reasons for investors to get excited about Heelys than ever.� It reported a net loss of $1.18 million, or 4 cents a share, in the three months ending March 31, 2011, little changed from a year earlier.� Revenue fell $549,000 to $6.1 million. Consolidated net sales in 2010 were $30.4 million, down from $43.8 million a year earlier.�� At the time of its IPO, Heelys had been profitable for at least three straight years. Revenue was $117 million in the nine months ended Sept. 30, 2006, up from $29 million in the year-ago period.
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