Oakley Q1 profits slump

US sunglass maker and retailer Oakley has reported an 80 percent drop in first quarter profits as operating expenses rose and margins fell. The strong sale of sunglasses did not compensate for the challenges the California-based retailer. The company's clothing, footwear and accessories division realized net sales of $36.8 million (£20.5 million), down 8.8 percent from the same period the year before. Sales in the first quarter rose 7 percent to $151.7 million, while net income dropped to $1.9 million due to restructuring costs.

Operating expenses in the quarter amounted to $77.8 million, or 51.3 percent of net sale. The operating expenses rose due to the addition of Oliver Peoples and the opening of new retail locations, as well as stock option expenses and a marketing push.

"Our first quarter results reflect the initial benefits of Oakley's renewed emphasis on optics," said chief executive Scott Olivet. "We executed well against an earlier sunglass release schedule and successfully launched our first women's eyewear collection. The women's launch was one of the most coordinated and powerful ever, combining excellent design and manufacturing execution with early, integrated sales and marketing effort around the world."

Olivet added that Oakley had taken an "important step forward in our multi-branding strategy with the acquisition of Oliver Peoples". In doing so, the company will be able to reach new customers and distribution channels. "Moving forward, we intend to implement the growth strategies articulated in February which include realigning our apparel platform, restructuring the footwear business, building our retail and international platforms and increasing the investment in overall brand development," he continued. "We believe that focusing on these strategies will position the company for renewed annual earnings growth in 2007."

Oakley said that it continues to expect net sales growth of at least 10 percent.