Oakley Starts Year with Strong Organic Growth…

Oakley, Inc. recorded double-digit sales growth in the first quarter, pairing that gain with a triple-digit earnings jump. In addition, the company closed on its acquisition of Australian retailer Bright Eyes, and saw its renewed focus on optics fuel sales growth. Even goggles were a bright spot for OO as the warm winter could not prevent a double-digit sales gain. The company’s other recent acquisitions accounted for a double-digit benefit to the sales line, but organic sales were up even higher.

In a conference call with analysts, CFO Richard Shields commented that the 31.3% sales gain “breaks down as 19% organic growth and 12% growth driven by the acquisitions of Oliver Peoples, the Optical Shop of Aspen, [the company’s] Swiss distributor and ESS.” Currency exchange rates also benefited the company, by approximately two percentage points.

The 35.0% gain in optics sales was attributed to “significant double-digit increases in sunglasses, prescription eyewear, goggles and electronics,” as well as “incremental sales from Oliver Peoples, The Optical Shop of Aspen, and Eye Safety Systems.” Shields said that goggles had “strong double-digit organic growth” and that the category had an additional benefit from the acquisition of ESS. Excluding acquisitions and electronics from the equation shows the optics category growing by 22%, or $23 million, according to Shields.

AFA growth included “significant double-digit” gains from apparel and watches offset by a “modest decline” in footwear sales due to a narrowed product offering. On a like-for-like line basis, excluding the lifestyle product that was dropped this year, footwear “saw a return to growth,” said CEO Scott Olivet.

First quarter net sales of other products, which consist of non-Oakley owned brands sold through the company's multi-branded Sunglass Icon and OSA retail stores, increased 80.3% to $14.5 million from $8.0 million and were “driven primarily by the acquisition of OSA and the addition of new Sunglass Icon locations.”

Oakley's first quarter U.S. retail net sales increased 55.7% to $45.7 million, compared with $29.3 million last year, driven by a “strong increase in comparable store sales,” as well as a “significant double-digit increase in Web and telesales volume.” Olivet said the company “saw similar strength across the various nameplates,” that comprised the comparable store base. Overall first quarter U.S. net sales totaled $108.4 million, increasing 33.8% from $81.1 million last year.

The 28.5% increase in international sales came from a weaker U.S. dollar increasing international net sales growth by 4.7 percentage points. Geographically, the Americas region saw “significant double-digit optics and AFA growth;” EMEA experienced a “significant double-digit increase in optics sales and a moderate increase in AFA;” and Asia Pacific had a “significant double-digit increase in optics sales and significant increase in AFA net sales.”

The margins improvement of approximately 110 basis points came from the increased amount of optics sales in the mix; increased margins themselves in optics; favorable currency exchange rates, and improved manufacturing efficiencies.

As a result of a discrete income tax refund benefit of approximately $850,000, the company increased its 2007 earnings per share guidance to 95 cents to 98 cents per diluted share from the previous range of 94 cents to 97 cents per diluted share.