L.A. Gear Ekes Out Profit Despite Decline in Sales
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Despite a 19% decline in sales, L.A. Gear said Tuesday that it pulled out of the red and posted a small profit of $258,000 in its second quarter.
The Marina del Rey-based sneaker marketer also said it has come to terms with its banks on a new $200-million credit line, moving it closer to completing a previously announced deal to sell 30% of the company for $100 million.
L.A. Gear’s second-quarter profit, after two consecutive money-losing quarters, came on sales of $182.8 million. A year earlier, it turned a profit of $10.2 million on sales of $225.4 million.
The company said its profit margins continue to be squeezed by the discounting it has relied on to reduce its inventory of slow-selling sneakers.
At the same time, L.A. Gear said it benefited in the past quarter from one-time credits from suppliers and reduced expenses in areas such as advertising.
L.A. Gear’s new bank agreement cuts its credit line from $300 million but also eliminates a requirement that the company show a profit every quarter.
Reaching a new agreement was a key condition of the deal announced in May for L.A. Gear to sell a 30% stake to a Roy E. Disney investment fund, Trefoil Capital Investors.
The deal, which still hinges on shareholder approval and meeting other financial requirements, is scheduled to close in August.
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