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A Gloomy Quarter for Oakley

NEW YORK — A rain-soaked quarter resulted in a sales and earnings washout for sunglass maker Oakley Inc.<br><br>Oakley, which also sells apparel, footwear and accessories, reported Wednesday an 18.4 percent decline in second-quarter earnings to...

NEW YORK — A rain-soaked quarter resulted in a sales and earnings washout for sunglass maker Oakley Inc.

Oakley, which also sells apparel, footwear and accessories, reported Wednesday an 18.4 percent decline in second-quarter earnings to levels below analysts’ expectations as results for the spring, typically among its busiest seasons, were hampered by wet and chilly weather.

Net income for the Foothill Ranch, Calif.-based company dropped down to $18.2 million, or 27 cents a diluted share, for the three months ended June 30, compared with earnings of $22.3 million, or 32 cents, in the year-ago quarter. On average, analysts had expected 29 cents per share, according to First Call. Total sales for the quarter slipped 0.9 percent to $143.8 million from $145.1 million.

It reaffirmed full-year earnings guidance, noting the yearly results should be near the high end of the 55 cents to 60 cents a share it forecast, based on tighter expense control and an improvement in retail trends. That’s in line with current expectations of 59 cents, but lower than last year’s 61 cents.

Sales are expected to grow 10 percent for the year versus an earlier forecast of 15 percent.

Shares of Oakley slipped 6.5 percent on the results, closing at $11.32 on the New York Stock Exchange Wednesday, and falling another 8.7 percent, to $10.34 on Thursday. However, they strengthened 54 cents, or 5.2 percent, on Friday to end the week at $10.88. During the past 52 weeks, shares have traded as low as $7.14, reached March 12, and as high as $15.30, reached last July 18. WR Hambrecht cut its rating to “sell” from “hold.”

“Our second-quarter sales reflect the tepid retail environment that prevailed across the U.S. as record rainfall and unseasonably cool weather muted what is usually the strongest season for consumer purchases of sunglasses and other summer season products,” Oakley’s chief operating officer Link Newcomb said in a statement.

By merchandise category, sunglass sales ebbed 7.6 percent in the quarter to $105.4 million and sunglass unit shipments declined 9.1 percent worldwide, partially offset by a 1.6 percent increase in the average sunglass selling price. All other categories grew 13.2 percent to $36.7 million and accounted for 23.2 percent of total sales.

This story first appeared in the July 21, 2003 issue of WWD.  Subscribe Today.

U.S. wholesale revenue, excluding Sunglass Hut, dipped 13 percent to $46.4 million. Sunglass sales to Sunglass Hut, a subsidiary of Luxottica Group, evaporated 29 percent to $16.8 million, while global sales to Sunglass Hut fell 24.7 to $20.1 million.

The Sunglass Hut figure referred only to sales made by Oakley to Sunglass Hut. In a separate release, penned in reaction to queries from investors, Luxottica reported that during the quarter, sales of Oakley sunglasses in Sunglass Hut stores were flat when compared to the same quarter of 2002.

More positively, retail sales from the 20 O stores and 67 Iacon units grew 54.8 percent to $13.7 million and international sales grew 13 percent to $67 million, boosted by the weaker U.S. dollar.

Looking ahead, Newcomb said he remains enthusiastic about the potential of Oakley’s lineup of new products, which were introduced during the first half.

For the six months, profits weakened by 23.1 percent to $21.4 million, or 31 cents a diluted share, compared with $27.9 million, or 40 cents, in the corresponding period last year. Total sales perked up 0.1 percent to $255 million from $254.7 million.