CEO Jim Jannard on the conference call with analysts following the companys release of second quarter results as he read weather-related newspaper headline after newspaper headline from around the country.
It was even more painful to have the COO say that the two didnt coordinate their comments for the call, as he too cited weather woes-and a lack of sun-for declining sales of sunglasses in the U.S.
The analysts obviously remembered the weather patterns of the last six months, but nonetheless shrugged off the reminders as at least one downgraded the stock, pushing shares of OO down 10.7% for the week to close at $10.88 on Friday.
Still, COO Link Newcomb said the results were in line with company expectations as total revenues slipped 0.9%, aided by stronger company-owned retail stores and benefits of the weaker dollar on International sales.
Total U.S. sales in Q2 decreased 10.5% to $76.8 million, while the 13.0% growth in International sales of $67.0 million, contained a 11.6% upside coming from exchange rate. The benefit helped the company post “record second quarter international sales”.
Sunglass unit shipments fell 9.1% worldwide, partially offset by a 1.6% increase in the average sunglass selling price resulting from the positive exchange rate effect and increased sales from company-owned retail store operations.
Sales to the specialty accounts and other domestic sales in Q2 excluding Sunglass Hut totaled $46.4 million, a decline of 13.0% from Q2 2002. Sales to Sunglass Hut in the U.S. decreased 29% to $16.8 million for the quarter, while global sales to Sunglass Hut decreased 24.7% to $20.1 million.
Sunglass Hut parent Luxottica Group issued a press release Thursday to clarify the numbers issued by Oakley as sell-in numbers only. Luxottica said that retail sales of Oakley products in the second quarter were flat to the year-ago period.
Sales of non-sunglass categories grew 13.2%, to $36.7 million, and accounted for 23.2% of total Q2 gross sales. The increase came primarily from apparel growth while watch sales declined. Footwear re-orders did not materialize for Q2 after a strong first quarter futures business. The company had planned on the non-sunglass categories to represent 30% of sales.
The shift in sales is both a positive and a curse, as gross margins were impacted by lower high margin sunglass sales as a percentage of total sales.
Management said the increase in inventories at quarter-end reflected higher sunglass inventories established in anticipation of a “more robust summer selling season” and the increase in company-owned retail store sales.
The backlog picture was helped by “significantly higher” footwear and apparel, which were up 37%, but offset by a “substantial decline” in sunglasses, down $9.0 million from the year-ago period. Goggles were also up significantly. Management did say the bulk of last years Q2 backlog was from unshipped sunglasses, not new futures.
Retail trends appeared to improve in late June and early July and the company said they remain enthusiastic about the potential of the “strong line-up of new products”.
Oakley now expects full year sales growth of approximately 10%, compared with the 15% prior guidance. Sales growth from the newer product categories is expected to be in the mid-20% range for the year. The company’s retail store operations are still expected to represent approximately 10% of 2003 net sales.
Cost reductions are expected to provide earnings at the high end of OOs previous full year earnings guidance 55 to 60 cents per diluted share.
>>> One would have to ask, it they dont coordinate for investor calls
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