After revising its second quarter sales and income guidance downward the previous week (SEW_0429), Oakley reported last week that net income for the quarter fell 12.1% to $16.0 million, or 23 cents per diluted share, compared with $18.2 million, or 27 cents per diluted share, in the second quarter of last year. Sales increased 5.7% as previously reported.

In spite of a $2.00 increase in average selling price, gross margins dropped 220 basis points to 59.0% compared to 61.2% last year. OO said margins were primarily affected by increased costs associated with new sunglass models, increased per unit overhead costs, and increased discounts. OO backlog was $74.4 million, up 11.9% compared with $66.5 million last year. The backlog reflects “large increases” in orders for apparel and sunglasses, modest increases in goggles and a substantial decline in footwear. OO increased its global sales to Luxottica Group 11% with a 13% increase in U.S. inventory levels.

In the company’s conference call with analysts, Link Newcomb, Oakley’s COO, said that the strongest growth channel for the company was the surf/lifestyle, while the weakest was department stores. Newcomb attributes this to a company wide effort to “re-energize our brand among the younger demographic.”