Vans announced financial results for the first fiscal quarter ended August 30, 2003. Net sales for the base business for the quarter (excluding skateparks expected to be closed) increased 5.2% to $126.2 million, compared to $120.0 million for the first quarter of fiscal 2003. Net income for the base business increased 145.1% to $13.8 million, versus net income for the base business of $5.6 million in the same period last year, and diluted earnings per share for the base business were $0.76, versus diluted earnings per share of $0.31 in the prior year period.
On a GAAP basis, the Company reported net sales for the quarter of $129.0 million, compared to $123.3 million for the first quarter of fiscal 2003 and diluted earnings per share from continuing operations of $0.64, versus diluted earnings per share from continuing operations of $0.31 a year ago. As previously announced, approximately $0.11 of the increase in earnings per share was due to a lower effective tax rate in the first quarter that is expected to be largely offset by a higher effective tax rate over the remaining three quarters of fiscal 2004.* For a reconciliation of GAAP results to the Company's base business results, please refer to Table 2 following the text of this release.
Gary H. Schoenfeld, President and Chief Executive Officer of Vans, stated, “The positive momentum that we experienced at the end of fiscal 2003 has continued into fiscal 2004, evidenced by a 13.7% increase in same-store sales and a substantial increase in earnings per share. Our girls business continues to be strong, our mens business had good sell-throughs as well and we are also pleased with the response this summer to our new Vault(TM) collection and the reaction to our Spring '04 Core line at the recent ASR trade show.”
Total U.S. sales for the first quarter, including sales through Vans' U.S. retail stores, were $91.0 million, versus $90.2 million for the same period a year ago. Sales through the Company's U.S. retail stores increased 7.0% to $37.1 million in the first quarter of fiscal 2003, from $34.6 million in the same period a year ago. Comparable store sales for the first quarter increased 13.7% versus the same period last year. U.S. national sales in the first quarter were $53.9 million, versus $55.6 million a year ago. Total international sales increased 15% to $38.0 million, versus $33.1 million a year ago. On a constant dollar basis, international sales would have increased approximately 5%.
“Our strong retail performance during the quarter was driven by a number of factors including significantly improved merchandising assortments and better in-stock positions with our biggest gains in girls and apparel,” Mr. Schoenfeld said. “We also were very pleased with generally strong across-the- board performance in U.S. wholesale during back-to-school, which has led to a more than 5% increase in bookings for the second quarter compared to last year.”*
Gross margin for the quarter increased 470 basis points to 45.2% compared to 40.5% a year ago for the base business. On a GAAP basis, gross margin was 45.7% (See Table 2 for a reconciliation between GAAP results and base business results). The increase in gross margin was due to a combination of favorable exchange rates in Europe, a reduction in wholesale markdowns, higher license income from Japan and an increase in profits from the Vans Warped Tour.(R) Inventory at the end of the quarter was $49.3 million compared to $43.1 million a year ago, and cash and cash equivalents were $52.5 million as of August 30, 2003.
The Company also disclosed that it closed three skateparks during the quarter. Additionally, a termination agreement was reached for one additional park during the first quarter and the Company continues to anticipate resolution on two of its four remaining parks during the second quarter.*
The Company's earnings per share guidance for the base business and on a GAAP basis for the full-year fiscal 2004 is $0.47 to $0.52 and $0.25 to $0.35, respectively. Additional guidance for the full-year and guidance for the second, third and fourth quarters of fiscal 2004 is set forth in Table 4 following the text of this release.
Mr. Schoenfeld concluded, “We are very pleased to see the positive results from our focused efforts in product and merchandising and retail execution coupled with a continued discipline of controlling expenses. Overall, our results demonstrate our enhanced ability to capitalize on the blending of fashion and athletic footwear.* We remain committed to building upon our strong brand position as a leader in the youth market and being at the forefront of action sports.”
Table 1
Vans, Inc.
Unaudited Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
Three months ended
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Aug 30, Aug 31,
2003 2002
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Retail sales $37,080 $34,649
National sales 53,892 55,569
International sales 37,999 33,060
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Net sales 128,971 123,278
Cost of sales 70,035 72,150
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Gross profit 58,936 51,128
Gross profit percentage 45.7% 41.5%
Operating expenses
Retail 16,805 16,513
Marketing, advertising and promotion 9,845 10,663
Selling, distribution and administrative 16,353 14,742
Lease termination costs 1,972 -
Amortization of intangible assets 167 188
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Total operating expenses 45,142 42,106
Operating income 13,794 9,022
Operating income percentage 10.7% 7.3%
Other (income) expense, net (a) (78) 762
Interest (income), net (59) (268)
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Other (income) expense, net (137) 494
Income from continuing operations before income
taxes and minority interest 13,931 8,528
Income tax expense 1,309 2,584
Minority interest 1,067 371
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Income from continuing operations 11,555 5,573
Loss from discontinued operations, net of tax (4,927) (152)
Net income $6,628 $5,421
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Earnings (loss) per share:
Basic weighted average shares outstanding 17,827 18,166
Income from continuing operations $0.65 $0.31
Loss from discontinued operations (0.28) (0.01)
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Net income $0.37 $0.30
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Diluted weighted average shares outstanding 18,096 18,352
Income from continuing operations $0.64 $0.31
Loss from discontinued operations (0.27) (0.01)
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Net income $0.37 $0.30
