Vans Scales Down Earnings Estimates, Citing Rain, INS Raid

This has not been a lucky month for Vans Inc. Thirteen days of rain slowed down shoe shipments to Mexico and kept Southern California shoppers at home. And on Jan. 14, immigration agents arrested 233 workers at the sneaker manufacturer’s plant in Orange.

The rain, the raid and the recession conspired to pull down sales and earnings projections for the quarter that ends Feb. 28, Vans said Thursday. As a result of the lackluster third fiscal quarter, earnings for fiscal 1993 also will fall below previous estimates.

Quarterly sales will probably be down $1 million to $2 million from last year’s third quarter, when the company reported revenue of $19.7 million and a profit of $1.5 million.

For fiscal 1992--its first year as a publicly traded company--Vans posted earnings of $6.5 million on sales of $91.2 million.

The drop in sales for the current quarter will probably “result in a small net loss, with the company returning to strong profitability in the fourth quarter,” Vans said in a press release Thursday.

Vans President Richard P. Leeuwenburg said the company had been more optimistic earlier in the quarter because of expanded marketing outside California. “Maybe we got too excited,” he said, “and added two and two and got five.”

But the recession continues to batter sales, Leeuwenburg said. “Our trade base has been to small independent retailers, and those folks are doing very poorly.”

The recent raid by the U.S. Immigration and Naturalization Service did not help. “Expenses related to the raid have had a negative effect on the company’s gross margin,” said Seth Feinstein, an analyst for the brokerage Crowell, Weedon & Co. in Los Angeles. “They had to hire 70 new people, and it takes time to train new employees.”

Vans was also hurt by January’s relentless downpour. Historically, Mexico accounts for 15% of the company’s sales, and flooding made transportation across the border difficult. California accounts for almost half of the company’s sales and many consumers were housebound by the rains. In one week during January, sales at company-owned stores were down 29% from the corresponding week last year, Vans said.

In Thursday’s trading on the NASDAQ market, Vans stock closed at $13 a share, up 62.5 cents.