One of the latest initiatives is a planned co-branded launch of progressive lenses with Essilor's Varilux line in this USA this coming Spring. Oakley is also planning to roll out a variety of new eyewear styles, including the largest frame it has ever designed and more specific sunglass models for women.
Oakley raised its sales by 14.1 percent to $102.9 million in the 4th quarter, generating net income of $2.3 million before an extraordinary $1.8 million charge for the reorganization of European operations, as compared to $2.4 million in the year-ago period. Strong sales of apparel and other products in the quarter helped Oakley to weather out a certain stagnation in its sales of sunglasses, which carry higher margins.
The restored relationship with the Sunglass Hut chain seemed to have a negative impact on Oakley's sales to other US retailers, including Foot Locker. Oakley's total wholesale revenues from sunglasses rose by 1.4 percent to $57.9 million in the quarter, with a 4 percent drop in unit shipments, and most of the gains were outside the USA. While US sales to Sunglass Hut declined by 9.4 percent to $5.9 million, as compared to a period where the chain had restocked heavily, US sunglass sales to Oakley Premium Dealers were off by $2.5 million, and the situation has not improved since.
While total US sales were down 7.4 percent in the quarter, excluding its own retail operations, international sales had the strongest growth in 6 quarters. Europe, Japan, Latin America, Canada and the South Pacific region all had double-digit increases, partially offset by declines in the rest of Asia. Total sales outside the USA grew by 24 percent to $57.3 million in the quarter, with a 19.3 percent rise in local currencies and a double-digit increase in sunglasses.
While Oakley's relationship with Sunglass Hut is improving on various fronts, including the resumption of a weekly replenishment program, the company expects to generate higher revenues this year from own expanding retail network in the USA than from the Hut. In 2002, the company took the number of O stores up from 6 to 14. The number of Iacon stores increased by 21 to 64, and 20 new locations should be added in 2003, including 10 Oakley Icon stores. Oakley also plans to take the number of department store corners up by 49 to 88, including 30 shop-in-shops at Dillard's this Spring.
Oakley still predicts a 15 percent sales increase to about $560 million for 2003, but earnings should decline slightly in spite of budgeted savings of at least $5 million, half of which should come from cuts in advertising and marketing expenses. For the full 2002 financial year, Oakley reports net income of $42.4 million excluding charges, down from $46.1 million the year before, on 14 percent higher sales of $489.6 million.
Retail sales grew by 267.1 percent to $32.6 million in 2002 following Iacon's acquisition in the Fall of 2001. Sunglass sales rose by 9.5 percent to $330.2 million, with sales to Sunglass Hut up 15.8 percent to $59.7 million. A 9.8 percent increase in average selling prices offset a 0.3 percent drop in total unit shipments to 4,707,822.
Other product categories recorded a 32.7 percent boost to $133.7 million, with increases of 49.3 percent in apparel, 4.0 percent in footwear, 41.5 percent in watches, 38.5 percent in prescription eyewear and 8.2 percent in goggles. Apparel and shoe sales reached $56.6 million and $31.2 million, respectively (more details in Sporting Goods Intelligence Europe).