Oakley saw its third straight quarter of earnings growth and is looking at improved sell-through trends of new sunglass styles and lower inventories at Sunglass Hut as the basis for an upward revision of its sales and earnings guidance for the year.

After a tough 2003 when newer sunglass models failed to excite the consumer, OO is quite pleased with the early response to this year’s new models, primarily the Dartboard and Why 8 styles, as well as the continued strength of the Half Jacket series. Management said the early 2004 intros made “twice the impact” to sales and at “significantly higher” average selling price than had been expected.

Prescription Eyewear products and Apparel led a 33.6% increase in new category sales to $52.2 million, while Footwear continued to disappoint. OO said all Apparel subcategories grew by at least 30% with the exception of accessories. Women’s Apparel outpaced Men’s, accounting for roughly 18% of spring sales excluding accessories.

Watch sales also exceeded plan and Goggles were said to have “exceeded plan and the prior year by a small margin”. Sunglass sales were “just under” half the company’s sales while new categories contributed 39.3% of sales and Owned-Retail accounted for 10.8% of total sales.

In apparel, management said the sporting goods channel was the largest channel worldwide, representing about 40% of sales. The surf lifestyle and golf channels hold the number two and three spots followed by bike specialty, department stores and ski channels. In the U.S., department stores hold the largest share of the Apparel business. The U.S. makes up about 25% of total Oakley Apparel sales. All channels showed “strong” increases in the quarter on a constant-dollar basis, with the exception of department stores and bike specialty.

Footwear sales are expected to show increases in the golf, sandal and military/industrial lines, while the other subcategories will decline.

While Sunglass sales were essentially flat compared to the year-ago period, the category increased 9.6% when excluding the impact of the Sunglass Hut business. Unit sales outside of Hut also showed a “modest increase”, reflecting a 3.9% increase in ASP for the company’s core category this year. Unit sales, including Hut, declined 3.6%.

Total U.S. net sales increased 9.0% to $60.6 million from $55.6 million during the same period last year. Excluding owned-retail and sales to Sunglass Hut, U.S. net sales increased 6.3% in the quarter. Owned-retail stores, which includes 28 “O” stores and 78 Iacon stores, showed a double-digit gain in same-store sales for the period.

International sales continued to outpace the U.S. and now make up approximately 52% of total revenues. Excluding the effects of the weaker dollar, International sales would have increased 6.4% in the quarter and total sales would have gained 7.6% for the period. Latin America, Europe, Canada, Asia and Japan all saw double-digit sales growth driven by FX upside and “strong newer category momentum”, but sales in the South Pacific region declined 7.0% due, in part, to Luxottica’s acquisition and integration of Australian-based retailer OPSM.

Global sales to the Luxottica Retail group declined 20% in Q1 to $7.3 million, including a 32.2% decrease in U.S. Sunglass Hut purchases to $5.1 million from $7.5 million in Q1 LY, as the Luxottica retail nameplate continued its efforts to reduce inventories. The U.S. Hut business accounted for roughly 10.5% of global Sunglass sales for Oakley.

OO said that retail sales of Oakley product at Hut increased in the quarter and the retailer has increased their projected purchases for the balance of the year.

Oakley said the backlog increase at the end of March would have been even higher if not for seasonal Sunglass Hut orders that shifted to April this year from March last year. Excluding Hut, OO backlog was up 14.9% at month-end. Fall Footwear and Apparel Futures were up 13.8% to $35.4 million at quarter-end, which reflects a large increase in Apparel offset by an “equally large” decline in Footwear futures.

Oakley now expects full year 2004 net sales growth of approximately 12% from a previous estimate of 10% growth and sees earnings growth of about 16%, to 65 cents per diluted share, up a penny from is previous forecast.