Vans, Inc, continued its climb back in its fiscal third quarter ended February 28, looking to owned-retail and a stronger men’s business to post a nice profit for its ongoing base business as well as its total business. The base business excludes the three skateparks that are expected to close by the end of December and one to close in fiscal 2005.

VANS reported that base business net sales increased 10.0% for the quarter to $86.3 million, compared to $78.4 million in the year-ago period. Net income for the base business was $7.2 million, or 39 cents per diluted share in Q3, compared to a net loss of $3.7 million, or a 21 cents loss per share, in Q3 LY.

U.S. sales for the Q3 base business was up 12.6% to $54.7 million from $48.6 million in the year-ago period. The U.S. wholesale business was up 14.3% to $25.8 million versus $22.6 million in the fiscal 2003 third quarter. Sales to the Core skate channel, while a smaller piece of the pie, was up “about 20%” in Q3.

Then men’s business made up 50% to 55% of sales in the quarter, while the girl’s contribution was in the 30% neighborhood. Kid’s made up the balance of sales.
U.S. gross margins improved by more than 550 basis points, due largely to “better first margins and reduced margins” in the wholesales segment and a “reduction in planned promotions and better inventory management” in the retail end of the business that led to a higher percentage of sales at full margin.

Company president and CEO Gary Schoenfeld said that U.S. bookings are up “north of 20%” versus a year ago. The gains were said to be “across the board” on a channel basis. He also said they no longer are doing any business with Foot Locker or Footaction.

Retail sales, excluding the skateparks to be closed, increased 11.0% to $28.9 million from $26.0 million in Q3 LY. Same-store sales were up 14.4% in the quarter. The men’s business comped up “better than 10%” in the full-price stores after flat sales a year ago.

Schoenfeld said that sales of more “aspirational” product, or footwear out of the Core Skate, Classics, and Vault categories, were driving higher average selling prices on the men’s side of the business.

The company is working on a new store prototype that will take the store size down to around 2,000 sf from its current 2,400 sf to 2,500 sf average for full-price stores. The full-price stores are producing $550,000 to $600,000 in revenues a year and delivering about a 15% four-wall contribution.

Total international sales were up 6.0% to $31.6 million, but would have actually declined approximately 6.7% on a constant dollar basis. International gross margin improved by over 400 basis points, due primarily from the weaker dollar.

The CEO said that they are seeing changes in Europe that are “analogous” to where the U.S. business was a year to 18 months ago, reflecting a market share shift in business away from Skate as a category. He said the Europe business is “roughly flat”, but sees encouraging signs from the independent account base there as well as the Japan business. He also pointed to “good growth” in Canada and Australia. Germany was cited as one region that had not yet “turned the corner”.

For the fiscal fourth quarter base business, Vans sees a diluted loss per share of 11 cents to 13 cents on sales of $64 million to $67 million from continuing operations versus a year-ago Q4 loss of $1.24 per diluted share on sales of $63.3 million. Retail comps are seen in the “mid single-digits” and the rest of the growth is expected to come from the U.S. wholesale side. International is expected to be “relatively flat” on a constant dollar basis.

Full year diluted EPS for the base business is estimated to be in the range of 80 cents to 82 cents per share on sales of $340 million to $343 million, versus a net loss of $1.64 per diluted share on sales of $330.2 million for fiscal 2003.

Earnings for fiscal 2005 are now estimated to be in the range of 95 cents to a dollar based on sales in the $360 million to $370 million range, with top-line contributions coming both the wholesale and retail businesses. For 2005, Vans sees little negative impact from the remaining skateparks to be closed.


>>> Now that they have the skatepark debacle behind them, the renewed focus on product is finally starting to  pay off…