Oakley has lowered its earnings and sales guidance for the 2004 fiscal year to reflect what the company is describing as softer than expected sales in the second quarter and production shortfalls that resulted in decreased inventory turns. The company previously announced that it anticipated its full year earnings to be 65 cents per share on 12% net sales growth to approximately $585.0 million. Now, Oakley is revising its 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.

During a conference call with analysts, Link Newcomb, Oakley’s COO, said that Q2 sales “fell below expectations in several areas, and we did not offset these declines by increases to expectations in other areas.”

OO sunglass sales were said to be up for the quarter due to higher average selling prices on “relatively flat” units. The U.S. eyewear business performed “reasonably well” and international footwear and apparel was said to have “met or exceeded plan,” but domestic footwear and apparel was down.

Newcomb also said that internationally the company is seeing, “a market where styles have moved away from the sport looks a bit, especially in Europe.”

OO also said dealers were paring down older styles in preparation for new releases, but Newcomb said “we under-delivered (the new styles) during the quarter.”

Oakley also reported that because of higher start-up costs related to new product, the company’s gross margins would be lower than previously indicated. OO margins were 54.1% during the first quarter of 2004, and no guidance was given on the exact decline in GM for Q2.

Oakley also announced that it has signed a limited exclusive distribution agreement with Circuit City for the new ‘Thump’ sunglass model with an integrated MP3 player. The agreement only applies to the consumer electronics channel, so the product will also be sold in Oakley-owned retail stores and available to other specialty retailers.

Oakley’s revised guidance includes Circuit City’s agreement to purchase “a large number” of the Thump MP3/sunglasses, and according to Oakley there is no right to return or consignment agreement between the two companies.

OO shares were down 17.8% for the week to close at $10.61 on Friday.


>>> Oakley has been accused of putting all of their eggs in one basket with the Thump, but the Circuit City deal sounds relatively bullet-proof…

>>> Hopefully they wont have the same production shortfalls with this latest product