SANTA FE SPRINGS, Calif.—March 24, 2004–Vans, Inc. (Nasdaq: VANS) today announced record financial results for the third quarter of fiscal 2004 ended February 28, 2004.
Net sales for the base business for the quarter (excluding skateparks expected to be closed) increased 10.0% to $86.3 million, compared to $78.4 million for the third quarter of fiscal 2003. Net income for the base business was $7.2 million for the third quarter, versus a net loss of ($3.7) million in the same period last year, and the Company had diluted earnings per share for the base business of $0.39 for the quarter versus a diluted loss per share of ($0.21) in the prior year period.
Gary H. Schoenfeld, President and Chief Executive Officer, stated, “Following an excellent holiday season, all three channels of our business, U.S. Wholesale, Retail and International exceeded our revised plans both in terms of revenues and gross margins, resulting in total sales and earnings well above expectations.”
Net sales for the base business for the first nine months of fiscal 2004 increased 7.8% to $276.3 million, compared to $256.2 million for the corresponding period a year ago. Net income for the base business was $17.0 million compared to a net loss of ($0.9) million in the same period last year, and diluted earnings per share for the base business was $0.93 versus a diluted loss per share of ($0.05) in the prior year period.
On a GAAP basis (including skateparks expected to be closed), the Company reported net sales for the quarter of $88.6 million, compared to $80.8 million for the third quarter of fiscal 2003, net income from continuing operations of $7.1 million versus a net loss of ($7.2) million, and diluted earnings per share from continuing operations of $0.39, versus a diluted loss per share from continuing operations of ($0.40) a year ago. Net sales for the first nine months of fiscal 2004 on a GAAP basis were $282.4 million, compared to $263.3 million for the same period last year, net income from continuing operations was $12.1 million versus a net loss of ($5.0) million a year ago, and diluted earnings per share from continuing operations for the period were $0.66 versus a diluted loss per share from continuing operations of ($0.28). For a reconciliation of GAAP results to the Company’s base business results refer to Table 2 following the text of this release.
“As evidenced by these results, the VANS brand continues to strengthen as a leader in action sports and youth lifestyle,” Mr. Schoenfeld said. “The focus and creativity given to each segment of our product line is helping further drive the aspiration and affinity towards our brand and the growth of our overall business.”
For the base business, total U.S. sales for the third quarter including sales through Vans’ U.S. retail stores, were $54.7 million versus $48.6 million for the same period a year ago. U.S. national sales in the third quarter were $25.8 million versus $22.6 million a year ago. Comp store sales for retail were up 14.4% for the third quarter. With eight less stores compared to a year ago, total U.S. retail sales for the base business increased 11.0% to $28.9 million in the third quarter of fiscal 2004 from $26.0 million in the same period a year ago. Total international sales were $31.6 million versus $29.8 million a year ago. On a constant dollar basis international sales would have been $27.8 million compared to last year.
On a GAAP basis, total U.S. sales for the third quarter were $57.0 million versus $50.9 million in the same period a year ago. Similarly on a GAAP basis, total sales through the Company’s U.S. retail stores increased 9.8% to $31.2 million.
Gross margins for the quarter increased 520 basis points to 52.5% vs. 47.3% a year ago. Inventory decreased $4.9 million to $45.2 million compared to $50.1 million a year ago and the Company’s balance sheet remains strong with $64.5 million in cash and cash equivalents.
Mr. Schoenfeld said, “We are verry pleased with the overall strengthening of our business and in particular both wholesale and retail in the U.S. The channel segmentation of our products is helping fuel growth with core shops, our larger customers and our own retail stores resulting in a solid year for fiscal 2004 and a substantial increase in bookings for Back to School FY ’05.* With the skatepark terminations having been resolved, we continue to make important progress operationally in several other areas including inventory management, leveraging of expenses and at-once deliveries.”
The Company stated that it has revised upward its guidance for fiscal year 2004. The Company now expects diluted earnings per share for the base business and on a GAAP basis to range from $0.80 to $0.82 and $0.62 to $0.64, respectively, for fiscal 2004.* For the fourth quarter, the Company now expects a diluted loss per share from continuing operations for the base business and on a GAAP basis to range between ($0.11) to ($0.13) and ($0.14) to ($0.16), respectively.* More detailed guidance is set forth in Table 4 following the text of this release.
For fiscal year 2005, based upon current bookings and market trends, the Company’s guidance is for total revenues of $360-370 million and approximately $0.95 to $1.00 of earnings per share on a GAAP basis.* The Company does not currently expect to differentiate its FY ’05 results between GAAP and base business.
Mr. Schoenfeld concluded, “Over the past 12-18 months, we have enacted a number of initiatives to improve our business and enhance our operating platform for growth. To this point we have achieved four consecutive quarters of comp store gains of 9% or above and have significantly expanded our gross and operating margins resulting in an increase in earnings for our base business to $17.0 million compared to a net loss of ($0.9) million one year ago. Our momentum remains strong, our balance sheet is solid and we look forward to further leveraging our unique heritage and global recognition as a leading youth market brand.”*
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 action sports 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, and the VANS High Cascade Snowboard Camp,(R) located on Mt. Hood. The Company operates 155 retail stores in the U.S. and Europe, and designs, markets and distributes active-casual footwear, clothing and accessories, performance footwear for action sports 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 at www.vans.biz.