SANTA FE SPRINGS, Calif.–Sept. 25, 2002–Vans, Inc. (Nasdaq:VANS) today announced financial results for the first fiscal quarter ended August 31, 2002.
Net sales for the quarter increased 5.5% to $124.6 million, compared to $118.1 million for the first quarter of fiscal 2002. Net income was $5.4 million, versus net income of $11.3 million in the same period last year, and diluted earnings per share were $0.30, versus diluted earnings per share of $0.61 in the prior year period.
Gary H. Schoenfeld, President and Chief Executive Officer of Vans, stated, “While we still have much work ahead, we were encouraged by the improving trends we experienced during back to school. Wholesale sell-throughs improved compared to the prior six months, retail same store sales declines narrowed to 2.3% for the month of August, our international business was up over last year, and our inventories at the end of the quarter were down by 25% on a same store basis and more than $15 million overall. While each of these are important steps forward, our skateparks continued to underperform expectations and for the past two weeks of the second quarter we have not seen the comp store gains that we thought we would achieve given the decline in sales which began at this time last year.”
For the first quarter, total U.S. sales, including sales through Vans’ U.S. retail stores, increased 5.5% to $91.6 million, versus $86.8 million for the same period a year ago. U.S. wholesale sales in the first quarter, which included sales of Pro-Tec branded products and revenue from the 2002 Vans Warped Tour,(R) increased 4.5% to $55.6 million, versus $53.2 million a year ago. Sales through the Company’s U.S. retail stores increased 7.1% to $36.0 million in the first quarter of fiscal 2003, from $33.6 million for the same period a year ago. Comparable store sales for the first quarter declined 4.9% versus the same period last year. Total international sales in the first quarter increased 5.8% to $33.1 million, versus $31.3 million a year ago.
“Back to school is the biggest season for our business and our improving performance, highlighted by positive footwear comps of 1.8% during this period, begins to validate that we are taking the right steps to improve our business,” Mr. Schoenfeld said. “Wholesale sales were in line with our expectations and we were pleased with our international growth, particularly in Europe.”
Gross margin for the quarter was 41.8% compared to 46.9% a year ago. The reduction in gross margin was due to the inclusion of all Vans Warped Tour costs in cost of goods, plus the liquidation of excess inventory at no margin that had been reserved for in the fourth quarter of fiscal 2002. The Company’s balance sheet as of August 31, 2002 was strong with over $48 million in cash and marketable securities and virtually no long-term debt. Inventories were reduced by $15.6 million or 26% to $43.1 million. Vans also stated that during the first quarter the Company repurchased 400,000 shares of common stock.
Mr. Schoenfeld further commented, “Following six years of rapid growth, events over the past twelve months have necessitated that we make some significant organizational and operational changes in order to further expand our share of the market. Historically our strengthening trends during back to school would be a positive barometer for the balance of the year. Yet the combination of September comp sales running unexpectedly behind last year, further weakness in our skateparks and increasing concern about the overall footwear and retail climate leads us to a more conservative view for our business near term.”(a)
The Company stated that for the second quarter of fiscal 2003 it expects sales in the range of $60 to $65 million and an earnings per share loss of approximately $0.20. For the second half of the year, the Company is presently forecasting sales in the range of $145 to $155 million and earnings per share ranging from a $0.10 loss to a $0.10 gain.(a) Included in these estimates for the remaining three quarters of the year is a projected loss of approximately $0.10 to $0.15 for the Company’s skatepark operations.(a)
Mr. Schoenfeld concluded, “Our priorities are clear for turning the business around and dramatically improving profitability in fiscal 2004. Our balance sheet is healthy and our brand equity is strong. The marketplace has changed in many respects over the past 12 to 18 months and we need to respond with great product and focused execution.”
Vans, Inc. is a leading branded lifestyle company for the youth market. Vans reaches its 10 to 24 year-old target consumers through the sponsorship of Core Sports,(TM) such as skateboarding, snowboarding, surfing and wakeboarding, and through major entertainment events and venues, such as the VANS Triple Crown(TM) Series, the VANS Warped Tour,(R) the VANS World Amateur Skateboarding Championships, 12 large-scale VANS skateparks, and the VANS High Cascade Snowboard Camp,(R) located on Mt. Hood. The Company operates 169 retail stores in the U.S. and Europe, and designs, markets and distributes active-casual footwear, clothing and accessories, performance footwear for Core Sports,(TM) snowboard boots, step-in snowboard boot bindings, and outerwear worldwide. The Company also offers the PRO-TEC line of protective helmets and pads through its subsidiary, Mosa Extreme Sports, Inc. Vans’ Internet address is www.vans.com.