OAKLEY SALES RISE AS EARNINGS DROP
Byline: Vicki M. Young
NEW YORK — Oakley Inc. on Wednesday posted a 17.5 percent drop in third-quarter earnings, but a 6.5 percent increase in sales.
Net income for the three months ended Sept. 30 was $14.4 million, or 21 cents a diluted share, down from $17.4 million, or 25 cents, in the year-ago quarter. The results, the company said, were in line with expectations resulting from the reduction in orders from Oakley’s previous largest customer, Sunglass Hut, after Luxottica Group SpA acquired the retail chain in April 2001.
Third-quarter sales rose to $114 million from $107 million. International sales were up 19.8 percent, to $62.4 million from $52.1 million last year, but U.S. sales dropped 6.2 percent, to $51.6 million from $55 million. Sales growth in all international markets was strong, with the highest increases in Latin America, Japan and Europe. Domestically, the company’s specialty retail account base grew 30 percent in the quarter, which helped partially offset the 97.5 percent decline in sales — to $400,000 from $15.8 million in the year-ago period — to Sunglass Hut.
Jim Jannard, chairman and chief executive officer, said in a statement: “In response to a significant shift in our relationship with Sunglass Hut, we successfully launched several strategic distribution initiatives designed to strengthen our presence at retail and make a broader assortment of our six product categories more accessible to consumers.”
Link Newcomb, chief operating officer, explained that the company has expanded relationships with Venator Group’s Foot Locker and Champs Sports divisions, as well as enhanced existing partnerships with Finish Line, Sport Chalet and other key regional and national accounts.
Newcomb noted that the pending acquisition of Iacon Inc., a specialty sunglass retail chain, will add 40 mall-based retail sites to its network. In addition, the company is in the midst of fine-tuning its plans to open more “O” stores and other Oakley-only retail concepts.
Nonetheless, Newcomb cautioned: “The full effect of these additional points of distribution may not be felt for some time. However, we believe we are well on our way to eventually replacing the lost Sunglass Hut business, which in the third quarter alone declined more than $18 million, or 91 percent, from last year’s third quarter, and led to a 14 percent decline in worldwide gross sunglass sales.”
Newcomb said that an already weakened economic climate, aggravated by the softening in retail, dampened the company’s growth expectations. Oakley provided fourth-quarter guidance of 9 cents in earnings per share, compared with 14 cents in the year-ago period.