Vans Reports Second Quarter Sales And Earnings

SANTA FE SPRINGS, Calif.–Dec.19, 2002–Vans, Inc. (Nasdaq:VANS) today announced financial results for the second quarter of fiscal 2003 ended November 30, 2002.

Net sales for the quarter were $60.6 million compared to $68.3 million in the second quarter of last year. The Company reported a net loss of $3.7 million, or ($0.20) per diluted share for the quarter versus net income of $0.5 million, or $0.03 per diluted share in the same period a year ago. Net sales for the first six months of fiscal 2003 were $185.2 million compared to net sales of $186.4 million for the same period a year ago. Net income was $1.8 million, or $0.10 per diluted share versus $11.9 million, or $0.64 per diluted share in the corresponding period of fiscal 2002.

For the second quarter, total U.S. sales, including sales through Vans’ U.S. retail stores, were $42.2 million, versus $49.2 million for the same period a year ago. Sales through the Company’s U.S. retail stores decreased 0.7% to $23.0 million in the second quarter of fiscal 2003, from $23.1 million in the second quarter of fiscal 2002. Comparable store sales for the second quarter declined 9.3% versus the same period last year. U.S. wholesale sales in the second quarter were $19.2 million, versus $26.1 million a year ago. Total international sales were $18.4 million, down 3.8% from $19.1 million a year ago.

“Although our business in the U.S. has continued to be impacted by the changing trends in the athletic footwear market, our international business remains solid, up 8% excluding Argentina and Brazil, led by particular strength in the U.K. and France,” stated Gary H. Schoenfeld, President and Chief Executive Officer. “With regard to our retail operations, a significant part of our comp store decline during the quarter was a function of being underinventoried, particularly in the areas of apparel, accessories and skate hardgoods.”

Gross margins for the quarter decreased 80 basis points to 47.9% vs. 48.7% a year ago. Operating expenses increased by 7% from $31.9 million to $34.1 million, primarily due to a $2.3 million increase in retail expenses which includes three additional skateparks and eleven new stores. Inventory decreased $9.5 million to $45.8 million from $55.3 million year-over-year and the Company’s balance sheet remains strong with $57.6 million in cash and marketable securities.

The Company stated that for the third quarter of fiscal 2003 it expects sales in the range of $82 to $85 million and that it remains comfortable with the third quarter First Call earnings per share consensus estimate of $0.03.*

Mr. Schoenfeld concluded, “As we look out to the remainder of this year and into fiscal 2004, our objectives are clear – – we need to continue to improve our product and merchandising, better align our sales and marketing efforts and rejuvenate our retail business. The marketplace has become increasingly fragmented with customers focused on different attributes ranging from brand image to performance to lifestyle and fashion. In Europe and Japan we have been successful in growing our business by competing on each of these dimensions. Our unique 36-year heritage tied to Core Sports(TM) and Southern California lifestyle gives us the opportunity to similarly evolve our business here in the U.S.”*

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 168 retail stores in the U.S. and Europe, and designs, markets and distributes active-casual footwear, clothing and accessories, performance footwear for Core Sporrts, (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