Vans, Inc. saw net sales for the second quarter of fiscal 2004 ended November 29 for the base business (excluding
skateparks expected to be closed) increased 10.4% to $63.4 million, compared to $57.4 million for the second quarter of fiscal 2003. Comparable compnay-owned store sales for the second quarter increased 15.2% versus the same period last year.
The net loss during the quarter from continuing operations for the base business was $4.1 million, versus a
net loss from continuing operations for the base business of $2.8 million in the same period last year, and the Company had a diluted loss per share from continuing operations for the base business of $0.23 for the quarter, versus a diluted loss per share from continuing operations for the base business of $0.16 in the prior year period.
Net sales for the base business for the first six months of fiscal
2004 increased 6.8% to $190.0 million, compared to $177.8 million for
the corresponding period a year ago. Net income from continuing
operations for the base business was $9.8 million compared to $2.8
million in the same period last year, and diluted earnings per share
from continuing operations for the base business was $0.55 versus
$0.16 in the prior year period.
On a GAAP basis, the Company reported net sales for the quarter of
$65.2 million, compared to $59.5 million for the second quarter of
fiscal 2003, and a diluted loss per share from continuing operations
of $0.36, versus a diluted loss per share from continuing operations
of $0.18 a year ago. Net sales for the first six months of fiscal
2004, on a GAAP basis, were $193.9 million, compared to $182.5 million
for the same period last year, and diluted earnings per share from
continuing operations for the period were $0.28, versus diluted
earnings per share from continuing operations of $0.13 a year ago. For
a reconciliation of GAAP results to the Company's base business
results, please refer to Table 2 following the text of this release.
“We are very pleased with the continued strong performance in our
retail stores and the rebound in our domestic wholesale business,
having at the same time also reduced our inventory by more than $20
million over the past six months,” stated Gary H. Schoenfeld,
President and Chief Executive Officer. “Our more than three-fold
increase in earnings for the base business in the first half of fiscal
2004 highlights a significant turnaround in our business and
underscores the meaningful progress we have made with our recent brand
and product initiatives. We remain excited about our prospects as
we head into the second half of this fiscal year and look ahead to
next back to school.”
For the base business, total U.S. sales for the second quarter
including sales through Vans' U.S. retail stores, were $45.8 million
versus $39.1 million for the same period a year ago. On a GAAP basis,
total U.S. sales for the second quarter were $47.6 million versus
$41.1 million. U.S. retail stores sales for the base business
increased 10.5% to $21.9 million in the second quarter of fiscal 2004
from $19.8 million in the same period a year ago. On a GAAP basis,
sales through the Company's U.S. retail stores increased 8.3% to $23.7
million. U.S. national sales in the second quarter were $23.9 million
versus $19.2 million a year ago. Total international sales were $17.6
million versus $18.4 million a year ago.
“This marks our third consecutive quarter of strong comp store
gains which continues to validate the product, merchandising and
operational changes that we have implemented over the past year,” Mr.
Schoenfeld said. “Girls, Core and apparel continue to lead our retail
growth with the same categories beginning to spur the growth in our
U.S. wholesale footwear business as well.”
Gross margins for the quarter increased 70 basis points to 48.2%
vs. 47.5% a year ago. For the first six months of fiscal 2004
inventory decreased $21.4 million to $42.6 million from $64.0 million
reported at May 31, 2003 and the Company's balance sheet remains
strong with $63.9 million in cash and marketable securities.
During the quarter the Company reached termination agreements for
two skateparks resulting in a charge of $1.9 million. The Company
stated that it has now completed all negotiations for the termination
or restructuring of its skatepark leases (with one location still
subject to final documentation). The Company expects that only three
of its remaining eight parks will be open beyond the next 6 to 18
months. The Company further stated that, based upon the agreed-to
substantial rent modifications for two of the three parks that are
expected to stay open, it expects such parks to generally operate at
or above break-even cash flow from this point forward.
The Company also revised upward its guidance for fiscal year 2004.
The Company now expects diluted earnings per share from continuing
operations for the base business and on a GAAP basis to range from
$0.56 to $0.60 and $0.34 to $0.42, respectively, for fiscal 2004. For
the third quarter, the Company now expects diluted earnings per share
from continuing operations for the base business and on a GAAP basis
to range between $0.20 to $0.22 and $0.17 to $0.19, respectively. For
the fourth quarter, the Company now expects diluted loss per share
from continuing operations for the base business and on a GAAP basis
to range between $0.16 to $0.19 and $0.20 to $0.23, respectively. More
detailed guidance is set forth in Table 4 following the text of this
release.
Mr. Schoenfeld continued, “While still early, we are also excited
about the recent opening of our first European full price store on
Carnaby Street in London. As one of the premier international
locations encompassing youth lifestyle and fashion, Carnaby Street
underscores our commitment to creativity and great product and is both
a great showcase for Vans and potentially another source of growth
overseas.”
Mr. Schoenfeld concluded, “We head into a new calendar year with a
lot of excitement within our company. We believe we own a unique
position with the VANS brand which at its core is tied to our
leadership and heritage in action sports while also extending to other
dimensions of youth lifestyle including music and fashion. We continue
to make important progress on several fronts and look forward to
further leveraging the full potential of our business.”
Table 1
Vans, Inc.
Unaudited Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
Three months ended Six months ended
------------------- -------------------
Nov 29, Nov 30, Nov 29, Nov 30,
2003 2002 2003 2002
------------------- -------------------
Retail sales $ 23,681 $ 21,872 $ 60,478 $ 56,274
National sales 23,872 19,243 77,763 74,812
International sales 17,630 18,388 55,629 51,448
------------------- -------------------
Net sales 65,183 59,503 193,870 182,534
Cost of sales 33,737 31,240 103,659 103,300
------------------- -------------------
Gross profit 31,446 28,263 90,211 79,234
Gross profit percentage 48.2% 47.5% 46.5% 43.4%
Operating expenses
Retail 15,439 15,681 32,078 32,044
Marketing, advertising and
promotion 5,851 5,702 15,695 16,365
Selling, distribution and
administrative 13,526 11,147 29,879 25,889
Lease termination costs 1,921 0 3,892 0
Amortization of intangible
assets 92 177 258 365
------------------- -------------------
Total operating expenses 36,829 32,707 81,802 74,663
Operating income (loss) (5,383) (4,444) 8,409 4,571
Operating income (loss)
percentage -8.3% -7.5% 4.3% 2.5%
Other (income) expense, net(a) 453 (502) 376 260
Interest (income), net (126) (157) (185) (425)
------------------- -------------------
Other (income) expense, net 327 (659) 191 (165)
Income (loss) from continuing
operations before income taxes
and minority interest (5,710) (3,785) 8,218 4,736
Income tax (benefit) expense 399 (1,075) 1,708 1,506
Minority interest 417 594 1,483 965
------------------- -------------------
Income (loss) from continuing
operations (6,526) (3,304) 5,027 2,265
Loss from discontinued
operations, net of tax (163) (362) (5,088) (510)
Net income (loss) $ (6,689) $ (3,666) $ (61) $ 1,755
=================== ===================
Earnings (loss) per share:
Basic weighted average shares
outstanding 17,852 17,910 17,840 18,038
Income (loss) from continuing
operations $ (0.36) $ (0.18) $ 0.28 $ 0.13
Loss from discontinued
operations (0.01) (0.02) (0.28) (0.03)
------------------- -------------------
Net income (loss) $ (0.37) $ (0.20) $ 0.00 $ 0.10
