FOOTHILL RANCH, Calif., July 16, 2003 (PRIMEZONE) — Oakley, Inc. (NYSE:OO):

Selected Second Quarter Highlights

*Net sales through Oakley-owned retail stores grow 54.8 percent to $13.7 million.

*Effective expense management results in slowest year-over-year operating expense growth rate in four years.

*Company reaffirms previous full year earnings guidance near the high end of the range of $0.55 to $0.60 per diluted share.

Oakley, Inc. (NYSE:OO) today reported results of its second quarter ended June 30, 2003. Second quarter net sales totaled $143.8 million, compared with $145.1 million in the prior year period. Net income for the second quarter totaled $18.2 million, or $0.27 per diluted share, compared with net income of $22.3 million, or $0.32 per diluted share, earned in the second quarter of 2002. U.S. net sales in the second quarter, excluding the company’s retail store operations, decreased 17.9 percent to $63.1 million from $77.0 million. Second quarter net sales from Oakley’s retail store operations increased 54.8 percent to $13.7 million from $8.8 million in last year’s comparable period. Total second quarter U.S. net sales decreased 10.5 percent to $76.8 million from $85.8 million last year. International net sales of $67.0 million increased 13.0 percent (including 11.6 percentage points of increase resulting from a weaker U.S. dollar) compared with $59.3 million in last year’s second quarter.

Oakley’s Chief Operating Officer Link Newcomb commented, “Our second quarter sales reflect the tepid retail environment that prevailed across the U.S. as record rainfall and unseasonably cool weather muted what is usually the strongest season for consumer purchases of sunglasses and other summer season products. Outside the U.S., we achieved record second quarter international sales.”

“During the first half, we did an outstanding job launching an expansive group of new products and supporting them with a well-executed advertising and direct mail campaign, including delivery of 2.4 million Oakley-exclusive catalogs. Retail trends appeared to improve in late June and early July and we remain enthusiastic about the potential of this strong line-up of new products. Although we obviously can’t control the weather, we are continuing to take measures to contain our operating costs as we wait for sustained improvement in the retail environment. Because of those efforts, operating costs in the second quarter increased at the slowest rate since the second quarter of 1999.”

Newcomb concluded, “We now expect full year net sales growth of approximately 10 percent, compared with our prior guidance of approximately 15 percent. However, based on the track record of our cost containment efforts and expected benefits going forward, we are reaffirming our previous full year earnings guidance near the high end of the range of $0.55 to $0.60 per diluted share.”

Second Quarter Financial Analysis

Sunglass gross sales decreased 7.6 percent in the second quarter to $105.4 million. Sunglass unit shipments declined 9.1 percent worldwide, partially offset by a 1.6 percent increase in the average sunglass selling price (ASP) compared to the second quarter of 2002. The increased ASP resulted from the positive effect of a weaker U.S. dollar on the company’s reported international sales and an increasing contribution from Oakley’s retail store operations. Combined second quarter gross sales of the company’s apparel, prescription eyewear, footwear and watch categories grew 13.2 percent, to $36.7 million, and accounted for 23.2 percent of total second quarter gross sales.

U.S. net sales to the company’s diverse specialty account base and other domestic sales in the second quarter excluding Sunglass Hut totaled $46.4 million, a decrease of 13.0 percent from the prior year; U.S. net sales to Sunglass Hut totaled $16.8 million, a decrease of 29.0 percent compared with the second quarter of 2002. Global net sales to Sunglass H decreased 24.7 percent to $20.1 million during the quarter. The decline in U.S. net sales reflects cool, wet weather that adversely impacted summer product sales in the U.S., particularly sunglasses, sandals, the summer apparel line and the company’s prescription sunglasses.

Net sales through Oakley’s retail store operations grew 54.8 percent during the quarter to $13.7 million, compared with $8.8 million in the second quarter of 2002. At the end of the second quarter, the company operated 20 O Store(tm) locations, including five new stores opened during the quarter, and 67 Iacon stores, including four new stores opened in the quarter. In last year’s second quarter, the company operated seven O Store(tm) locations and 51 Iacon locations. Oakley’s retail store operations were adversely affected by the U.S. weather conditions referred to above, but began to experience generally improved conditions in late June.

Oakley’s international net sales increased 13.0 percent to $67.0 million in the second quarter, compared with $59.3 million in last year’s comparable period. The weaker U.S. dollar accounted for 11.6 percentage points of this growth. The company’s operations in Europe, Canada, Japan, Latin America and South Africa each reported double-digit sales growth aided by a generally weaker dollar. All product categories except watches experienced growth, although a weak optical retail environment in key European markets resulted in slower growth in the company’s sunglass and prescription eyewear business than originally forecast. Asia was the only region that experienced a sales decline as travel and related retail businesses were hard hit by the SARS crisis during the second quarter.

Second quarter gross margins were 61.2 percent compared with 62.7 percent in last year’s comparable period, due to a lower mix of sunglasses and prescription eyewear and lower sunglass margins due to the decline in production volumes. This was partially offset by improved margins in all categories other than sunglasses and the positive effect of a weaker U.S. dollar. Second quarter operating expenses grew by only $3.0 million, or 5.3 percent, over last year’s second quarter, and represented 41.4 percent of net sales, compared with 38.9 percent of net sales in the prior year. The increase was primarily due to higher foreign operating expenses resulting from a weaker U.S. dollar and higher selling expenses related to the company’s expanded retail operations.

The company’s order backlog as of June 30, 2003 was $66.5 million, an increase of 8.3 percent from $61.4 million at the same time last year. The increase in backlog reflects much stronger pre-book orders for footwear, apparel and goggles. Offsetting those increases, higher sunglass inventory levels compared to last year enabled the company to fulfill a greater proportion of at-once orders received during the second quarter, resulting in a lower sunglass order backlog compared to this point last year. The company’s consolidated inventory totaled $103.7 million at June 30, 2003, compared with $91.8 million at March 31, 2003 and $82.5 million at June 30, 2002. The increase reflects higher sunglass inventories established in anticipation of a more robust summer selling season and the increase in company-owned retail store operations. Accounts receivable days sales outstanding (DSO) improved to 56 at June 30, 2003, compared with 59 at June 30, 2002.

Six-Month Financial Analysis

Net sales through the six months ended June 30, 2003 totaled $255.0 million, up slightly from $254.7 million for the comparable period in 2002. Net income through the first six months of 2003 totaled $21.4 million, or $0.31 per diluted share, compared with net income of $27.9 million, or $0.40 per diluted share in 2002.

Stock Repurchase Program

On September 10, 2002, the company’s Board of Directors authorized the repurchase of up to $20 million of the company’s stock, to occur from time to time as market conditions warrant. Since then, the company has repurchased 754,600 shares for $7.8 million at an average share price of $10.35. During the second quarter of 2003, the company repurchased 97,400 shares for approximately $1.1 million at an average share price of $10.96. The company intends to continue to make repurchases under the share repurchase program at appropriate times.

2003 Guidance

The uncertain economy and generally weak retail environment in most of Oakley’s key global markets continue to make it extremely difficult to predict near-term retail and consumer spending. Because the company’s sunglass sales rely heavily on “at-once” orders from retailers to replenish inventory sold to consumers, an inconsistent retail environment complicates management’s attempts to accurately assess future order and sales trends.

For the full year 2003, the company is revising its guidance for annual net sales to growth of approximately 10 percent over 2002. This outlook reflects the shortfall in second quarter net sales compared with the company’s prior assumptions, assumes favorable consumer response during the third and fourth quarters to new products introduced during the first and second quarters, and gradual, sustained improvement in the retail environment in key global markets as the year progresses. Full year net sales growth from the newer product categories is now expected to be in the mid-20 percent range. The company’s retail store operations are still expected to represent approximately 10 percent of 2003 net sales.

Management has implemented cost control initiatives and continues to take steps designed to minimize future increases in operating expenses relative to the rate of increase in net sales. These efforts are expected to result in full year increases in operating costs of approximately 13 percent, compared with previous expectations of 17 percent growth.

Based on these net sales and expense assumptions, the company is reaffirming full year earnings guidance near the high end of the range of $0.55 to $0.60 per diluted share. Investors and analysts are strongly encouraged to take all of the market and operational factors discussed above into careful consideration in formulating their own full year 2003 Oakley financial models.

About Oakley, Inc.

Oakley: a world brand, driven to ignite the imagination through the fusion of art and science. Building on its legacy of innovative, market-leading, premium sunglasses, the company also offers an expanding line of premium performance footwear, apparel, accessories, watches and prescription eyewear to consumers in more than 70 countries. Trailing-12-month revenues through June 30, 2003 totaled $489.9 million and generated net income of $34.2 million. Oakley, Inc. press releases, SEC filings and the company’s Annual Report are available at no charge through the company’s Web site at www.oakley.com. rket conditions warrant. Since then, the company has repurchased 754,600 shares for $7.8 million at an average share price of $10.35. During the second quarter of 2003, the company repurchased 97,400 shares for approximately $1.1 million at an average share price of $10.96. The company intends to continue to make repurchases under the share repurchase program at appropriate times.

2003 Guidance

The uncertain economy and generally weak retail environment in most of Oakley’s key global markets continue to make it extremely difficult to predict near-term retail and consumer spending. Because the company’s sunglass sales rely heavily on “at-once” orders from retailers to replenish inventory sold to consumers, an inconsistent retail environment complicates management’s attempts to accurately assess future order and sales trends.

For the full year 2003, the company is revising its guidance for annual net sales to growth of approximately 10 percent over 2002. This outlook reflects the shortfall in second quarter net sales compared with the company’s prior assumptions, assumes favorable consumer response during the third and fourth quarters to new products introduced during the first and second quarters, and gradual, sustained improvement in the retail environment in key global markets as the year progresses. Full year net sales growth from the newer product categories is now expected to be in the mid-20 percent range. The company’s retail store operations are still expected to represent approximately 10 percent of 2003 net sales.

Management has implemented cost control initiatives and continues to take steps designed to minimize future increases in operating expenses relative to the rate of increase in net sales. These efforts are expected to result in full year increases in operating costs of approximately 13 percent, compared with previous expectations of 17 percent growth.

Based on these net sales and expense assumptions, the company is reaffirming full year earnings guidance near the high end of the range of $0.55 to $0.60 per diluted share. Investors and analysts are strongly encouraged to take all of the market and operational factors discussed above into careful consideration in formulating their own full year 2003 Oakley financial models.

About Oakley, Inc.

Oakley: a world brand, driven to ignite the imagination through the fusion of art and science. Building on its legacy of innovative, market-leading, premium sunglasses, the company also offers an expanding line of premium performance footwear, apparel, accessories, watches and prescription eyewear to consumers in more than 70 countries. Trailing-12-month revenues through June 30, 2003 totaled $489.9 million and generated net income of $34.2 million. Oakley, Inc. press releases, SEC filings and the company’s Annual Report are available at no charge through the company’s Web site at www.oakley.com.