Oakley expects to report its second quarter net sales will be approximately $152.0 million, an increase of 5.7% over its second quarter net sales in 2003. As a result of these sales, the company has revised its previously announced annual earnings guidance.
Chief Operating Officer Link Newcomb commented, “While we are disappointed with the outcome of the quarter, we continue to be focused on opportunities to restore growth to our core sunglass business. We believe that second quarter sales weakness is the result of several dynamics. First, during most of the quarter, we continued to experience production shortfalls on our two most popular new sunglass releases, the Dartboard(tm) and the Why 8(tm), resulting, we believe, in a loss of potential turns at retail. Other new sunglass styles didn't achieve the level of sales we had originally anticipated as a result of launch delays and soft consumer reception. In many of our international markets, we also experienced a much larger decline in sales of our existing sunglass styles than we had expected, and although sales of prescription eyewear increased slightly over the prior year, these sales also fell significantly below expectations. In addition, we experienced slower-than-expected U.S. sales of spring footwear and apparel due to lower-than-expected reorders and some order cancellations.”
Newcomb continued, “While sales through Oakley-owned retail stores experienced positive comparable store sales for the quarter, results in June weakened from earlier in the quarter. Sales through the company's website and other direct sales were also soft during the quarter.”
Newcomb concluded, “Due to the sales volumes discussed above, as well as higher production start-up costs on new sunglass styles, the second quarter gross margin is expected to be approximately 200 basis points below last year's level, contributing to the company's lower quarterly earnings.”
The company previously announced on April 21, 2004 that it anticipated its full year earnings to be 65 cents per share on 12% net sales growth to approximately $585.0 million.
Although second quarter earnings will be lower than what the company had expected as part of its annual guidance, the company expects a significant new sales and earnings contribution in the fourth quarter from the anticipated holiday launch of Thump(tm), Oakley's new integrated MP3 player sunglass. This contribution reflects the agreement by Circuit City Stores, Inc. to order a large number of units as part of its exclusive distribution arrangement with Oakley for the 2004 holiday season.
As a result, the company today revises its full-year 2004 net sales guidance to a range of $575.0 to $585.0 million and its earnings guidance to a range of 60 cents to 65 cents per share.
