Sunglass maker Spy Inc. sharply lowered closeout sales, operating expenses and operating losses in the fourth quarter and year ended Dec. 31, 2012. Cost cutting helped boost gross margin by 1,090 basis points to 44.0 percent and reduce loss from operations to $600,000 from $3.0 million a year earlier.
The better result came amid a 4 percent, or $400,000, decline in total net sales, which reached $8.1 million during the quarter. The decline was attributed to two intended results: lower sales of licensed brands discontinued in 2012 and lower closeouts of the Spy brand. Sales of discontinued licensed brands fell 80 percent to $100,000 during the quarter, while closeout sales of Spy branded products dropped by two thirds to $600,000 compared to the fourth quarter of 2011. Despite the latter, Spy branded product sales increased 1 percent to $8.1 million.
Operating expenses dropped 28.8 percent, or $1.68 million, as the company cut back its sales and marketing and general and administrative expenses by 26.4 percent 45 percent respectively and doubled spending on R&D to $222,000 compared with the fourth quarter of 2011. Net loss for the quarter was $1.2 million compared to a net loss of $3.4 million in the year earlier quarter.
The company ended the year with $6.27 million in inventory, up just 1.36 percent, but significantly more debt. Total liabilities reached $27.9 million, up 36.1 percent as the company folded interest payments due on a shareholder note into principal in lieu of interest payments and borrowed $500,000 from another shareholder.
Spy designs, markets and distributed sunglasses, goggles and prescription frames for the action sports, motorsports, snow sports, cycling and multi-sports markets.