VANS shares jumped more than 7% on Friday, recovering a bit to show a 5.2% decline for the week after the company announced fiscal 2003 fourth quarter results that included a $10.5 million pre-tax charge for the termination of a number of skatepark leases. Excluding the charge, Vans said its pre-tax loss from continuing operations would have been $10.9 million compared to $15.9 million for the fourth quarter last year.
While U.S. wholesale sales fell sharply in the quarter and the year, the company pointed to positive results in its company-owned retail unit as an indicator of brand strength and potential. U.S. retail stores grew 9.6% to $25.9 million in the quarter, from $23.7 million in the year-ago period. Retail comparable store sales gained 9.0% for the quarter, “led by double-digit comparable store gains in both footwear and apparel”.
Vans president and CEO Gary Schoenfeld pointed to the positive comps against a negative 6.6% in Q3. Same-store sales for the year, including sales through European stores, declined 3.2%.
The owned retail results helped Vans post a flat quarter for the U.S. at $43.8 million. Total year sales for the U.S., including Vans U.S. retail, were off 2.0% to $229.4 million versus $234.1 million for fiscal 2002.
The 650 basis point gain in gross margin in Q4 was attributed to “a substantial reduction in inventory obsolescence charges and mark-downs, channel mix shift to a higher percentage of retail sales and better margins internationally” from stronger foreign currencies.
The increased inventory exposure at quarter-end is not expected to impact margin.
VANS also said it was taking a $4.6 million non-cash charge against the goodwill associated with the 1998 acquisition of the Switch brand. The write-down was due to a “shift in consumer preference to conventional snowboard boot binding” which “negatively impacted Vans step-in snowboard boot binding business”.
The company expects total revenues for fiscal Q1 2004 to be in the $123 million to $126 million range, excluding skatepark revenues. Full year sales are seen ranging from $320 million to $330 million, with U.S. company-owned retail sales forecast up 5.0%, the Domestic wholesale business flat to 2003 and International wholesale up 5.0%. The U.S. wholesale business is expected to be down in the first half of the year, but up in the back half.
Earnings are expected to be in the 55 to 58 cents range for Q1 and 35 to 40 cents for the year. Both forecasts are before any skatepark closure charges.
>>> Unfortunately, most of the factors that drove positive retail comps were operational rather than product related…
