K-Swiss Inc. (KSWS) will soon report earnings for the holiday quarter.  The last time management reported, it was November 5th, 2008.  The stock was trading at around $14.  Skechers USA, Inc., a competitor, was trading at $12.

Today, the stock trades at around $10.50, a 25% drop while the S&P has dropped about 15%.  Based on recent trading, expectations are clearly not high.  But there is good reason for that.  Skechers USA, Inc. warned on February 5th and saw its stock drop toward the low $7 range, where it rests today, a 25% plus drop in one day.  K-Swiss, meanwhile, has not issued any warnings.

With about 60% of K-Swiss sales being international and mostly in Europe, foreign exchange trading rates have not been favorable for the company.  Further, the company nor its executives have been willing to buy more of the K-Swiss stock, despite the company being cash rich, having about $6 cash on hand.  Also, trends have not been favorable for K-Swiss.  In their November report, they noted domestic sales were down 32% for the year and 29% in the third quarter.  Total sales were down 15% for the year and 27% in the third quarter, suggesting a more recent acceleration to the downside.

There is some hope, however.  International sales are up 3% for the year and 7% in the third quarter, mostly due to the acquisition of French shoe maker Palladium SAS in July.  Without the acquisition, international sales were down in the third quarter by 11%.

With bad trends but over $6 on the balance sheet, K-Swiss is in a special position to acquire their way into increasing shareholder value.  But with no…