Oakley saw its U.S. wholesale business, led by growth in Sunglass sales, rebound in the fourth quarter after trending lower for much of the year. Full year 2003 numbers appear to reflect a trend that sees Oakley relying more on its owned-retail sale to grow revenues in the U.S. as the wholesale sales numbers continue to decline for the year.

Gross margin also continued to narrow a bit for the year as categories other than high margin Sunglasses grow to become a larger piece of the pie.

The resurgence in Sunglass sales in Q4, which increased 9.6% to $63.5 million, was the first quarterly year-on-year increase in five quarters and was driven by a 7.5% increase in the average selling price for sunglasses. Unit sales increased 1.9% for the quarter, but declined 10% for the year. The increase in the Q4 ASP was attributed to stronger sales of higher priced polarized styles.

One large disappointment continued to be in sales of newer sunglass styles, which represented less than 15% of total sales. The lone bright spot was the Monster Dog style, where sales were reported as “strong”.

Net income jumped five-fold, reaching $3.2 million, or 5 cents per diluted share, compared with $0.5 million, or a penny per diluted share, in last year's Q4. The year-ago quarter included a European restructuring charge of $1.8 million after-tax, or 2 cents per diluted share. Without the charge last year, net income would have increased 39.1% year-on-year.

Total fourth quarter net sales increased 18.1% to $121.6 million, compared with $102.9 million in the Q4 of 2002. U.S. net sales, excluding the company's retail store operations, increased 6.7% to $38.6 million in the quarter, compared with $36.1 million in the year-ago period. Sales to Sunglass Hut drive the U.S. sales figures, increasing 9.8% to $6.5 million in the quarter.

Global net sales to Luxottica’s retail group, which includes Sunglass Hut and OPSM, increased 15.5% to $9.1 million during the quarter. Excluding Hut sales, U.S. wholesale sales rose 6.1% to $32.0 million.

OO fourth quarter International sales increased 17.5%, or 2.0% in currency-neutral terms, to $67.3 million, compared with $57.3 million last year. Europe, Latin America and South Africa each achieved double-digit sales growth. Southeast Asia was the lone decliner in the International business, due primarily from a transition to new distribution.

Oakley's U.S. owned-retail sales jumped 65.8% to $15.7 million in Q4, compared to $9.5 million in the fourth quarter of 2002. Oakley opened a total of 25 U.S. stores in 2003, including ten in the fourth quarter, for a total of 103 stores.

Sales in Q4 of OO's newer categories, which include apparel, prescription eyewear, footwear and watches, grew 28.9% to $38.7 million to 29.95 of total sales. Apparel sales grew over 40% for the quarter on strong sell-throughs and re-orders. About 63% of Apparel sales for the full year came from outside the U.S. Women’s Apparel is growing faster than Men’s and represents roughly 20% of Apparel sales. The company said that weak retail sell-through of Oakley footwear from fall is “likely to put pressure” on footwear futures, “especially in fall”.

Gross margins improved 30 basis points to 53.3% as margin improvement in newer categories offset the decline of Sunglasses as a percentage of total sales.

Order backlog in the footwear and apparel categories increased 22% to $43.8 million versus $35.9 million at year-end last year. OO said orders in its International business have increased more significantly than growth in the U.S. backlog.

Military sales grew more than 50% for the year, but still represents just a little more than 3% of total sales, pr about half of what Sunglass Hut represents.

OO is forecasting full year 2004 net sales growth of approximately 10 percent, which assumes a low-single digit increase in sunglass sales, combined with a 15% to 20% increase in newer categories. The company now sees EPS increasing in the 15% range for the year.

>>> Selling more of the brand out of the U.S. and relying on FX rates for growth is a dangerous proposition…