Oakley Proves Sales Mission Possible
The exploding Oakley sunglasses worn by Tom Cruise in the blockbuster movie “Mission: Impossible 2” have helped trigger a sales explosion for the Foothill Ranch-based maker of stylish eye wear.
Oakley Inc. logged a record $100 million in sales in its second quarter, due in part to strong demand for snazzy styles such as the those shown in “M:I-2.”
Earnings surged 80%, far exceeding analysts’ expectations, marking the company’s second strong quarterly performance after a lackluster 1999.
The “blowout numbers,” as one analyst called them, were fueled by several factors, including exposure in a variety of venues from action-packed movies to high-profile sporting events. Actor James Marsden, who plays the character Cyclops in the just-released “X-Men” movie, dons Oakley shades. And Armani-clad Samuel Jackson briefly sports a pair of Oakleys in “Shaft.”
Before Cruise gave Oakley a publicity boost, he did Ray-Ban the same favor. Ray-Ban sales surged after Cruise wore the sunglasses in the 1983 movie “Risky Business.”
Analysts said such product exposure can do wonders for sales. “You’ve got Tom Cruise wearing your product, you’ve got an X-man wearing your product--it’s much more realistic to kids than seeing an ad in a magazine,” said Deutsche Bank analyst Marcia Aaron.
Oakley’s earnings for the three months totaled a record $18.5 million, or 27 cents a share, compared with $10.6 million, or 15 cents, a year ago. The $100 million in sales represented a 39% increase.
Oakley, which has long linked its brand to high-profile athletes, figures to get another boost when the summer Olympic Games gets underway in September in Australia. About 325 Olympic participants will likely be wearing Oakley sunglasses, ensuring that the brand will be plastered on television screens around the world.
Currently, cyclist Lance Armstrong is wearing Oakley’s wraparound, single-lens Pro M Frame shades as he competes for a second Tour de France championship. Golfer David Duval and home-run hitter Mark McGwire wear the same style, said company spokesman Lance Allega.
But analysts say there’s more to Oakley’s strong numbers than publicity.
The company, which struggled last year after launching its shoe division, has improved its infrastructure, cranked out a record number of new sunglass styles, expanded its line of sneakers and apparel, and pushed to make sure products get to stores early in the season.
“A large part of the turnaround this year has been execution,” said Eric Beder, an analyst with Ladenburg Thalmann. “Its great to be on ‘Mission: Impossible’ or ‘X-Men’ or for 1/30th of a second on ‘Shaft,’ but the products have to be there when people go to buy them.”
Analysts also trace the company’s resurgence to founder Jim Jannard’s decision to take the chief executive’s reins in October after the departure of William D. Schmidt, who had held the job for about five months.
Jannard’s “drive and attitude revitalized the company,” Beder said. Jannard could not be reached for comment.
Still, there is no question that a product on the big screen--or on television for that matter--can boost sales.
After “M:I-2” hit movie screens in May, “people would walk into [a] store and say, ‘I want to wear the sunglasses Tom Cruise wore,’ ” Beder said.
Oakley said it paid nothing to get Cruise to wear its sunglasses. Nor did the company get involved in post-production hype to promote the movie.
“It’s not our style,” Allega said. “It takes away from the quality of the product.”
The fact that one of Oakley’s X Metal sunglasses became a plot point in the movie was another coup, said Patricia Ganguzza, vice president of Aim Promotions, a New York product-placement agency.
In the opening scenes, government agents in a helicopter shoot a canister to the ground. Cruise removes the Oakley sunglasses from the container, then uses them as a sort-of high-tech video conference system to receive his secret message. In typical “Mission: Impossible” fashion, the sunglasses then self-destruct.
“That’s an incredible placement, and they may have gotten it for nothing,” Ganguzza said.
Although some manufacturers can pay as much as $100,000 to have their products displayed in a movie, it’s not unusual for other products to be squeezed in at no charge, according to product-placement agencies.
Ray-Ban, which has been featured prominently in films, did not pay for “Men in Black’s” main characters to wear its shades, said Michael Schrager, head of product placement for Columbia TriStar, the movie’s producer.
“It was so perfect a fit and it was so natural,” Schrager said. “The look was perfect, the prop master loved it, the director liked it, it just worked all the way around.”
Oakley also said other segments of its business contributed to its strong quarter.
The once-struggling shoe division was profitable in June and is expected to remain in the black, Oakley said.
The company’s stock moved up 19 cents a share Wednesday to close at $11.88 on the New York Stock Exchange, closing in on its 52-week high. The stock has more than doubled so far this year, but remains about 50% below its price when the company went public in 1995.
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Cool on Wall Street Too
Shares of Oakley (ticker symbol: OO) have more than doubled from their depressed levels of early this year--though the price still is a far cry from its peak of $27 in 1996. Weekly closes and latest on the NYSE:
Oakley shares on Wednesday: $11.88, up 19 cents
Source: Bloomberg News