Vans Reports $29 Million Loss

SANTA FE SPRINGS, Calif.– July 22, 2003–Vans, Inc. (Nasdaq:VANS):

— Company incurs charge associated with skatepark terminations and an impairment of its snow business goodwill —

— Company sets pro-forma FY’04 EPS guidance of $0.35 to $0.40 —

— FY ’04 GAAP EPS approximately break even — the fourth quarter and fiscal year ended May 31, 2003.

Net sales for the fourth quarter were $63.3 million, compared to $63.6 million in the fourth quarter of last year. The Company reported a net loss from continuing operations of $22.1 million, or $1.24 per diluted share for the quarter, versus a net loss from continuing operations of $13.8 million, or $0.76 per diluted share in the same period a year ago. Excluding a pre-tax charge of $10.5 million associated with skatepark asset impairment and lease terminations, the Company’s pre-tax loss from continuing operations would have been $10.9 million compared to $15.9 million for the fourth quarter last year. For an analysis of the adjustments, please refer to table 2 following the text of this release for a reconciliation of GAAP results to adjusted results.

Net sales for fiscal 2003 were $330.2 million compared to net sales of $331.4 million in fiscal 2002. For the year, the Company reported a net loss from continuing operations of $29.4 million, or $1.64 per diluted share, versus a net loss from continuing operations of $1.3 million, or $0.07 per diluted share a year ago.

Gary H. Schoenfeld, President and Chief Executive Officer stated, “We’ve said previously that we expected fiscal 2003 to be a turnaround year for Vans and that we needed to aggressively respond to changes in the marketplace. While the costs associated with exiting the skateparks are significant, we are encouraged by the steps we have taken and in particular the positive comp turnaround we experienced in our retail stores during the fourth quarter which has continued into the first quarter.(a) Our 9% same store sales gain compared to a negative 6.6% in the third quarter represents a dramatic sequential improvement and positive reaction from customers to our new product and merchandising efforts and has raised our outlook as we look ahead to back to school and the new fiscal year.”(a)

Total U.S. sales for the fourth quarter, including sales through Vans’ U.S. retail stores, were $43.8 million, versus $43.9 million for the same period a year ago. Sales through the Company’s U.S. retail stores increased 9.6% to $25.9 million in the fourth quarter of fiscal 2003, from $23.7 million in the same period a year ago. U.S. national sales in the fourth quarter decreased 11.8% to $17.8 million, versus $20.2 million a year ago. Total international sales were $19.5 million, down approximately 1.1% from $19.8 million a year ago primarily due to decreased sales in Latin America and Southeast Asia, partially offset by favorable exchange rates in Europe.

Total U.S. sales for the year ended May 31, 2003, including sales through Vans’ U.S. retail stores, were $229.4 million, versus $234.1 million for the year ended May 31, 2002. Sales through the Company’s U.S. retail stores increased 3.8% to $114.2 million from $110.0 million for the year. Comparable store sales for the year, including sales through European stores, declined 3.2 %. U.S. national sales for the year declined 7.2% to $115.2 million, versus $124.2 million a year ago. Total international sales were $100.8 million, up 3.6% from $97.3 million a year ago.

“For the quarter, our retail growth was lead by double-digit comparable store gains in both footwear and apparel,” Mr. Schoenfeld said. “Internationally our biggest increases for the year were in France and the U.K.”

Gross margins for the quarter increased 650 basis points to 47.2% vs. 40.7% a year ago primarily due to a combination of a substantial reduction in inventory obsolescence charges and mark-downs, channel mix shift to a higher percentage of retail sales and better margins internationally in rt due to stronger foreign currencies. Operating expenses for the quarter were $51.5 million, which includes $15.9 million of charges associated with asset and goodwill impairment and lease termination costs, compared to $44.6 million of operating expenses last year, which included $5.0 million of asset impairment charges. Inventory increased to $64.0 million from $48.8 million year-over-year primarily due to an increase in in-transit goods and a deeper fill position for the retail stores. Cash and marketable securities were $52.8 million at the end of the fiscal year.

The Company stated that it has reached resolutions on eight of its skateparks. Of these parks, six resulted in lease termination costs of $10.1 million in the fourth quarter. The other two, which are subject to final documentation, will result in lease termination costs in the first quarter of fiscal 2004. As part of the agreements with the landlords, three of the eight parks are expected to stay open at reduced rents for approximately one more year.

“As we have previously discussed, an estimated nearly ten-fold increase in public skateparks has necessitated our decision to substantially exit this business. While it has taken longer to conclude some of the negotiations due to various issues, including the fact that two of the remaining malls are in the process of being sold, we remain comfortable with our liquidity position.(b) Based upon current assumptions, we expect to end fiscal 2004 with cash and marketable securities of approximately $40-45 million compared to the $52 million as of May 31, 2003,” Mr. Schoenfeld said.(b)

The Company also announced that it was taking a $4.6 million non-cash charge due to the impairment of its snow business. A shift in consumer preference to conventional snowboard boot bindings has negatively impacted Vans’ step-in snowboard boot binding business. As a result, the goodwill associated with the 1998 acquisition of the Switch(R) brand was determined to be fully impaired.

With respect to guidance for fiscal 2004, excluding skatepark operations and future estimated lease termination charges, the Company stated that it expects total revenues for the first quarter and for the year of approximately $123 million to $126 million and $320 million to $330 million, respectively, and earnings per share from continuing operations, excluding skatepark operations and future estimated lease termination charges, of approximately $0.55 to $0.58 for the first quarter and $0.35 to $0.40 for the year.(a) Excluding skatepark operations and lease terminations, the Company expects gross margins for the first quarter to be approximately 44%, and 46% to 47% for the full year; operating expenses for the first quarter to be approximately $41 million and, for the year, in the range of $140 million to $145 million; and the Company’s combined effective tax rate between its domestic and international business to be in the range of 20-22% for the year.(a)

With respect to guidance for fiscal 2004, as determined in accordance with generally accepted accounting principles (“GAAP”) and therefore including skatepark operations and future estimated lease termination charges, the Company stated that it expects total revenues for the first quarter and for the year of approximately $125 million to $128 million and $325 million to $335 million, respectively, and earnings per share from continuing operations of approximately $0.53 to $0.56 for the first quarter and approximately break even for the year.(a) On a GAAP basis, the Company expects gross margins to be approximately 44% for the first quarter and approximately 46% to 47% for the year; operating expenses to be approximately $43 million for the first quarter and $150 million to $155 million for the year; and the Company’s combined effective tax rate between its domestic and international business to be approximately 70% for the year.(a) For an analysis of the reconciliation of GAAP guidance to adjusted guidance, and the Company’s earnings per share guidance for the second quarter and second half of fiscal 2004, on an as-adjusted and GAAP basis, please refer to table 5 following the text of this release.

Mr. Schoenfeld concluded, “Clearly the athletic footwear industry has undergone a major shift, from an emphasis on technical performance to more fashion-oriented athletic footwear. While staying true to our unique California heritage and leadership position in action sports, we have made significant changes to our product and execution strategies and restructured certain areas of our organization. We believe we have taken several important steps during fiscal 2003 to get us back on track for growth in sales and profits and that we are entering this fiscal year with our strongest combination of segmented product, aspirational athletes, and positive momentum in key independent accounts and in our own retail stores.(a) We believe that we are well positioned for back to school and look forward to the prospects of further strengthening in our base business.”(a)

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, large-scale VANS skateparks, and the VANS High Cascade Snowboard Camp,(R) located on Mt. Hood. The Company operates 161 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, strap snowboard boot bindings under its AGENCY(TM) brand, step-in snowboard boot bindings under its SWITCH(R) brand, and outerwear worldwide. The Company also offers the PRO-TEC line of protective helmets and pads through its subsidiary, Pro-Tec, Inc. Vans’ website is www.vans.com and its news releases, SEC filings, and other investor information can be accessed by clicking on the vans.biz button on the website.ed guidance, and the Company’s earnings per share guidance for the second quarter and second half of fiscal 2004, on an as-adjusted and GAAP basis, please refer to table 5 following the text of this release.

Mr. Schoenfeld concluded, “Clearly the athletic footwear industry has undergone a major shift, from an emphasis on technical performance to more fashion-oriented athletic footwear. While staying true to our unique California heritage and leadership position in action sports, we have made significant changes to our product and execution strategies and restructured certain areas of our organization. We believe we have taken several important steps during fiscal 2003 to get us back on track for growth in sales and profits and that we are entering this fiscal year with our strongest combination of segmented product, aspirational athletes, and positive momentum in key independent accounts and in our own retail stores.(a) We believe that we are well positioned for back to school and look forward to the prospects of further strengthening in our base business.”(a)

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, large-scale VANS skateparks, and the VANS High Cascade Snowboard Camp,(R) located on Mt. Hood. The Company operates 161 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, strap snowboard boot bindings under its AGENCY(TM) brand, step-in snowboard boot bindings under its SWITCH(R) brand, and outerwear worldwide. The Company also offers the PRO-TEC line of protective helmets and pads through its subsidiary, Pro-Tec, Inc. Vans’ website is www.vans.com and its news releases, SEC filings, and other investor information can be accessed by clicking on the vans.biz button on the website.