Spy Inc. reported net sales increased by 22 percent in the first quarter as its turnaround strategy of divesting licensed brands to focus on its in-house, action-sports inspired Spy optics brand continued to pay off.



Spy Inc. reported net sales increased by $1.4 million to $8.1 million for the quarter ended March 31, compared with total net sales of $6.7 million for the quarter ended March 31, 2011. That included $7.9 million in sales of Spy branded sunglasses, goggles and eyewear, up 22 percent from the year earlier quarter. Other sales, which included closeout sales of substantially all of the remaining inventory of licensed brand products, were $300,000 compared with licensed brand product sales of $200,000 a year earlier.

Gross margin as a percent of sales declined 460 basis points to 46.5 percent as the company liquidated its discontinued licensed brands at close out prices. That contributed to a net loss of $2.6 million compared to a net loss of $1.6 million during the quarter ended March 31, 2011.


Sales and marketing expenses increased by $800,000 due primarily to increased spending on sales and marketing of the Spy brand, including both additional staff and marketing expenses. General and administrative expenses increased by $300,000 primarily due to increased ongoing payroll-related and stock compensation costs, most of which related to the restructuring of management that took place subsequent to the first quarter of 2011, general corporate matters and legal and other professional service fees.