Rain, Weak Economy Hurt Oakley’s Results

Sunglass maker Oakley Inc. said Wednesday that second-quarter earnings fell 18% as a weak economy and drab weather cast a pall over its peak selling season. The company also cut its sales growth forecast for the year.

Oakley reported that net income in the period ending June 30 dropped to $18.2 million, or 27 cents a share, compared with $22.3 million, or 32 cents, a year earlier. Analysts surveyed by Thomson First Call had expected Oakley to earn 29 cents.

Sales dipped 0.9% in the quarter to $143.8 million from $145.1 million a year earlier. U.S. sales fell 10% to $76.8 million, while international sales grew 13% to $67 million, largely because of a weaker dollar.

“The sunglass part of our business just got rained out,” Jim Jannard, Oakley founder and chief executive, said in a conference call with analysts.

Because of the poor performance, Oakley said sales for this year would rise 10%, less than the 15% increase forecast earlier. However, company officials said cost cutting should keep the company’s profit in line with its earlier projection of 55 cents to 60 cents a share

The company, based in Foothill Ranch in Orange County, supplies sunglasses to athletes such as Tour de France champion Lance Armstrong. But it has had a more difficult time getting consumers to buy its high-priced sunglasses as the economy has softened, analysts say.

“They are in a tough spot right now,” with their “premium pricing,” said analyst Raymond J. Jones of Seattle-based Delafield Hambrecht Inc. In difficult economic times consumers are not as eager to spend money on less familiar brands, he said. Jones doesn’t own any Oakley stock, and his company doesn’t have an investment banking relationship with Oakley.

Oakley said its sunglass sales dropped 8% to $105.4 million in the second quarter. Sales of shoes, watches and other apparel items the company manufactures also were weaker than analysts had expected.

“It’s just another disappointing quarter where earnings came in below expectations,” WR Hambrecht & Co. analyst Kristine Koerber told Reuters.

Oakley shares fell 79 cents, or 6.5%, on the news, closing Wednesday at $11.32 on the New York Stock Exchange. The stock has dropped 26% from its 52-week high of $15.30 last July.