Rising Sales Put Oakley Back on the Bright Side

Oakley Inc. reported Wednesday that quarterly sales rose for the first time in a year, a sign that the sunglasses manufacturer has overcome problems plaguing both its largest customer and its industry.

The company said that fourth-quarter sales rose 13% to $45 million, thanks to a 56% gain in sales to its largest customer, optical retailer Sunglass Hut International.

A buildup of inventory at the Florida-based chain in 1996 caused Oakley to cut off its fourth-quarter shipments to Sunglass Hut that year. That move, plus an oversupply of sunglasses industrywide, resulted in a series of quarterly declines in profits and sales, a sinking stock price and three shareholder lawsuits against Oakley.

Despite the sales gain for the recent quarter, Oakley’s profits slipped, largely because of a seasonal increase in sales of lower-margin goods such as goggles and apparel. Net income totaled $3.4 million, or 5 cents a share, down from $3.6 million, or 5 cents a share on a higher number of shares outstanding, a year earlier.

Still, analysts were buoyed by the numbers. “I don’t think we’re going back to the breakneck pace of a few years ago, but this is definitely a step in the right direction,” said Mike Conn, an analyst at Gruntal & Co. in New York.

Oakley shares rose 3%, or 31 cents a share, to $10.38 Wednesday on the New York Stock Exchange. More than 398,000 shares traded, nearly double the three-month daily average.

Conn said a spate of new products scheduled to debut this year likely will allow the company to post higher profits in 1998.

Among them is a highly anticipated athletic shoe. Oakley has said little about the product, except that it hopes to have the shoe in stores by midyear. Also on tap are two new types of sunglasses called Mars and Racing Jackets, which are aimed at the non-sports market. Mars will sell for $250, while Racing Jackets will range in price from $110 to $125.

In a conference call with analysts Wednesday, Oakley executives acknowledged that they also are developing a wristwatch. An Oakley spokeswoman declined to comment further. One likely customer is Sunglass Hut, which operates a 77-store chain called Watch Station.

Oakley’s products are getting huge exposure on television this month at the winter Olympics in Nagano, Japan. More than 100 athletes from 19 countries are wearing Oakley glasses, goggles and face shields during skiing, speed skating, snowboarding and hockey competition.

For the year, Oakley’s profits fell 57% to $19.6 million, or 28 cents a share, from $45.9 million, or 64 cents a share, in 1996. Sales fell 11% to $193.9 million from $218.5 million.