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 Breaking Headlines

Oakley Posts Record Q1 Revenues, 32% Net Income Growth

APRIL 21, 2004 -- Oakley's Q1 net sales increased 14.3% to $127.1 million, a Q1 record. Net income totaled $4.2 million, or $0.06 per diluted share, compared to net income of $3.2 million, or $0.05 per diluted share.

COO Link Newcomb commented, "During the first quarter of 2004, our new sunglass offerings were welcomed enthusiastically by retailers and we saw early signs of positive consumer sell-through, especially on the new Dartboard and Why 8 styles. In addition, first quarter gross sales of our newer categories improved by 33.6% to a record $52.2 million, led by strong spring launches of the company's apparel and prescription eyewear products. Combined sales from the newer categories accounted for 39.3% of first quarter sales, providing further evidence that our diversification strategy is working and reinforcing our belief that these categories continue to offer substantial growth opportunities. Net sales from Oakley retail stores also showed continued momentum, growing 55.2% and representing 10.8% of total sales for the quarter.

"During the first quarter, worldwide gross sunglass sales of $64.0 million were essentially equal to last year's first quarter. Gross sales of sunglasses to Oakley's diverse base of retailers other than Sunglass Hut, combined with sales through our own retail operations and other channels, increased 9.6%, which we believe reflects increased consumer demand for Oakley's new and existing sunglass products. Offsetting that increase, US net sales to Sunglass Hut declined significantly during the quarter, reflecting their efforts to attain a more efficient Oakley inventory level at their distribution center. This was consistent with guidance we gave during last quarter's earnings conference call.

"We now expect full year 2004 net sales growth of approximately 12% and earnings growth of approximately 16% to $0.65 per diluted share. This increased guidance is based on several assumptions, including a continuation of the improved retail trends we experienced during the first quarter leading to stronger anticipated sunglass sales growth for the full year, newer category gross sales growth at the higher end of the 15-20% range previously announced and higher projected orders from Sunglass Hut over the

Total Q1 US net sales increased 9.0% to $60.6 million. US net sales, excluding the company's retail store operations, totaled $46.8 million, equal to the comparable quarter of 2003. Excluding the company's retail store operations and sales to Sunglass Hut, US net sales increased 6.3%.

An improved retail environment boosted sales across virtually all of the company's product categories. US net sales to Sunglass Hut declined 32.2% as a result of inventory management efforts. Q1 net sales at Oakley's retail locations increased 55.2% to $13.8 million, including a double-digit increase in comparable-store sales. At the end of Q1, the company operated 28 O Store locations, including one new store opened during the quarter, and 78 Iacon stores, including two new stores opened during the quarter. At the end of last year's first quarter, the company operated 15 O Stores(tm) and 66 Iacon locations.

Q1 international net sales increased $11.0 million, or 19.8%, to $66.5 million. The weaker US dollar accounted for 13.4 percentage points of this growth. The company's operations in Latin America, Europe, Canada, Asia and Japan each reported double-digit sales growth driven by currency benefits and strong newer category momentum. Sales in the South Pacific region declined 7.0% due, in part, to reduced orders resulting from Luxottica retail group's integration of Australian-based retailer OPSM, following the acquisition completed in September 2003.

Worldwide sunglass gross sales increased slightly to $64.0 million from $63.9 million. Sunglass unit-shipments declined 3.6% worldwide, offset by a 3.9% increase in average selling prices driven by the effect of a weak dollar on international sales, the strength of Oakley's retail store operations and a higher sales contribution from polarized styles that carry higher price points.

Combined Q1 gross sales of the company's newer categories, consisting of apparel, prescription eyewear, footwear and watch categories, grew 33.6% to a record $52.2 million, and accounted for 39.3% of total gross sales, driven by continued momentum from the apparel and prescription eyewear.

The company's order backlog was a record $76.0 million, up 6.9%. This increase occurred despite a large decline in seasonal orders from Sunglass Hut which were received in March last year but not until April this year. Excluding orders from Sunglass Hut, the company's order backlog was up 14.9%. Prebook orders from retailers for the company's fall footwear and apparel lines totaled $35.4 million at March 31, 2004, up 13.8%.

The company's consolidated inventory totaled $104.3 million, compared to $98.7 million at December 31 and $91.8 million at March 31, 2003, reflecting increased inventory in newer categories to support their growth and expanded company-owned retail store operations. Accounts receivable totaled $88.0 million at March 31, 2004, compared to $78.0 million at December 31, 2003 and $78.5 million at March 31, 2003. Accounts receivable days sales outstanding improved to 63 from 64. Both inventory and receivables grew at slower rates than net sales.


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