Phoenix Footwear Group Announces its Fiscal 2017 Year End Results

Phoenix Footwear Reports fiscal 2016 year End results and Preliminary 2017 First Quarter Results

CARLSBAD, Calif., April 25, 2017 -- Phoenix Footwear Group, Inc. (OTCMarkets.com: PXFG) today reported results for the year ended December 31, 2016 and preliminary results for the first quarter ended, April 1, 2017.

Fourth Quarter and Fiscal Year 2016

Ø  Net Sales for the fourth quarter of fiscal 2016 decreased 7.3% to $4.7 million.  For the 2016 fiscal year, Net Sales decreased 6.5% to $20.2 million compared to $21.7 million in fiscal 2015. The decrease in fourth quarter and full year Net Sales was a result of the Company exiting select locations of a large national account, combined with the failure of FootSmart, an internet retailer, in the third quarter of 2016.

Ø  In January of 2017, Shoes.com, another significant internet based retailer with whom the Company was doing business, ceased operations.  The failure of Shoes.com resulted in a bad debt of $181,000 which the Company recognized in the fourth quarter of 2016.  This bad debt contributed to the Operating Loss of $348,000 for the fourth quarter, compared to an Operating Loss of $135,000 for the fourth quarter of fiscal 2015.  For the 2016 Fiscal Year, the Company reported an Operating Loss of $631,000, of which $451,000 is attributable to the write off of receivables from FootSmart and Shoes.com.  For fiscal 2015 the Company reported an Operating Loss of $256,000.

Ø  Earnings before interest, taxes, depreciation and amortization (EBITDA) for fiscal year 2016 declined to an EBITDA loss of $423,500 compared to a $34,300 gain for fiscal year 2015.  Included in the loss for 2016, is $451,000 of bad debt expense. 

Ø  In the fourth quarter, the Company was not compliant with loan covenants contained in the Loan and Security Agreement with its lender, Sterling National Bank.  On April 21, 2017 the Company entered into the Second Amendment of the Loan and Security Agreement which waived these covenant violations and established new covenants.  The Company is in compliance with these newly revised covenants.

First Quarter 2017 Preliminary Results

Ø  For the first quarter of fiscal 2017 the Company expects to report Net Sales of $5.0 million compared to $5.5 million, for the first quarter of 2016, a decrease of 9.4%.  The majority of this decrease is attributable to the loss in revenue from Shoes.com and FootSmart. 

Ø  Operating Income and EBITDA for the quarter is expected to total $37,000 and $75,500, respectively.  This compares to an Operating Loss of $51,200 and break even EBITDA in the first quarter of 2016. 

Ø  The Company plans to report its 2017 first quarter results during the week of May 8^th.

Fiscal 2016

For the fiscal year ended December 31, 2016, Net Sales decreased $1.4 million, or 6.5%, to $20.2 million from $21.7 million in the fiscal year ended January 2, 2016.  The decrease in net sales was primarily the result of the Company exiting select locations of a large national account together with the failure of FootSmart in the third quarter.

Gross profit for fiscal 2016 increased $146,000, or 2.0%, to $7.4 million from $7.3 million in fiscal 2015.  Gross margin improved 310 basis points to 36.7% from 33.6% when compared to fiscal 2015. The improvement in the gross margin is a result of a change in the sales channel mix along with a reduction in the amount of airfreight incurred by the Company in sourcing its product.

Selling, general and administrative expenses (SG&A), increased to $8.1 million during fiscal 2016 compared to $7.5 million for fiscal 2015. The increase in SG&A included $451,000 of bad debt expense associated with the bankruptcy of FootSmart and Shoes.com.  SG&A as a percentage of net sales increased to 39.8% for fiscal 2016, compared to 34.8% for fiscal 2015.

The Company has taken steps to reduce its SG&A in 2017.  These steps include, but are not limited to; the elimination of three sales positions, reductions in marketing expenditures and the consolidation of service functions.

The Company reported a Net Loss of $1.2 million, or $0.10 per share, for the fiscal year ended December 31, 2016, compared to a Net Loss of $1.0 million or $0.11 per share for the fiscal year ended January 2, 2016.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal year 2016 declined to an EBITDA loss of $423,500 compared to a $34,300 gain for fiscal year 2015.  Included in the loss for 2016, is $451,000 of bad debt expense. 

About Phoenix Footwear Group, Inc.

Phoenix Footwear Group, Inc., headquartered in Carlsbad, California, specializes in quality comfort women’s and men’s footwear with a design focus on fitting features. Phoenix Footwear designs, develops, markets and sells footwear in a wide range of sizes and widths under the brands Trotters® and SoftWalk®, These brands are primarily sold through department stores, leading specialty and independent retail stores, mail order catalogues and internet retailers and are carried by approximately 835 customers in over 1,405 retail locations throughout the U.S. Phoenix Footwear has been engaged in the manufacture or importation and sale of quality footwear since 1882.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. These forward-looking statements include, but are not limited to, statements regarding Phoenix Footwear’s ability to repay its bank debt in a timely manner, future growth and performance of its individual brands, expected financial performance and condition for fiscal 2017and/or statements preceded by, followed by or that include the words “believes,”“could,”“expects,”“anticipates,”“estimates,”“intends,”“plans,”“projects,”“seeks,”“exploring,” or similar expressions. Although Phoenix Footwear believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by Phoenix Footwear or any other person that the objectives and plans of Phoenix Footwear will be achieved. All forward-looking statements included in this press release speak only as of the date of this press release and are based on Phoenix Footwear's current expectations and projections about future events, based on information available at the time of the release, and Phoenix Footwear expressly disclaims any obligation to release publicly any update or revision to any forward-looking statement contained herein if there are changes in Phoenix Footwear’s expectations or if any events, conditions or circumstances on which any such forward-looking statement is based.

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