Jordan Quits Oakley Board as Firm Struggles to Rebound
Basketball star Michael Jordan resigned Monday as a director of Oakley Inc., the maker of avant-garde sunglasses that’s having its own troubles getting the ball through the hoop.
Jordan, who endorses Oakley’s eyewear, said he quit because of demands on his time and his desire to help Oakley increase the independence of its six-member board, as proposed by new government and market regulations. He was replaced by Lee Clow, chairman and creative director of TBWA Worldwide, an advertising agency owned by Omnicom Group Inc.
Jordan will continue to promote Oakley under an endorsement pact that runs until 2005. And Oakley, based in Foothill Ranch, will need his help.
The company, led by eccentric founder and Chief Executive Jim Jannard, is dealing yet again with slower sales growth. At a time when retailers generally are grappling with the sluggish economy and weak consumer spending, sales of Oakley’s expensive sunglasses are flagging.
Twice in the last four months, Oakley has scaled back its sales and earnings forecasts to reflect the trend.
“It’s hard to sell $150 to $200 sunglasses in this sort of environment,” said Mitch Kummetz, an analyst at Wedbush Morgan Securities in Los Angeles. Kummetz cut his rating on Oakley to “hold” two weeks ago after the company’s latest cut in its forecast.
Oakley’s stock, after peaking at $26.50 a share in mid-2001, has plunged 60% since then. It closed Monday at $10.57 a share, up 19 cents, on the New York Stock Exchange.
In its Dec. 5 forecast, Oakley said sunglass sales in the United States and Europe were softer than expected. Also, Oakley’s deliveries of summer eyewear to retailers was delayed, lowering retailers’ reorders in advance of the current holiday season. Oakley is trying to pare its reliance on sunglasses by diversifying into shoes, apparel, watches and other accessories, but that effort isn’t yet making up the difference.
The company also said this month that Foot Locker Inc. planned to reduce the number of stores carrying Oakley’s sunglasses and thus had placed minimal orders in the current quarter as Foot Locker “reduces inventory in preparation of this change.”
Oakley, whose glasses carry such names as X Metal and Frogskins, also had a rift last year with its biggest eyewear customer, retail chain Sunglass Hut, that badly disrupted Oakley’s performance coming into this year.
Sunglass Hut unexpectedly slashed its orders for Oakley products after the 1,900-store chain was acquired last year by an Oakley rival, Italy’s Luxottica Group, whose eyewear brands include Ray-Ban and Anne Klein. Oakley moved to compensate by striking deals with outlets such as Foot Locker. But in December 2001, Oakley and Sunglass Hut renewed their relationship by signing a three-year distribution pact.
Through the first nine months of this year, Oakley’s sales rose 14% from a year earlier to $387 million, while profit fell 15% to $40 million from $47 million.
The sales gain came from higher prices, as unit sales of Oakley’s sunglasses were flat at 3.9 million.
Sunglasses account for 70% of Oakley’s total sales, and 16% of those eyewear sales are made to Sunglass Hut.
