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Oakley's Woes Continue as Earnings Slump

Eye wear: The sunglasses maker will fall 'substantially below' third-quarter estimates, with sales and production problems unsolved.


FOOTHILL RANCH — Blunting hopes that its sales and production problems had been worked out, Oakley Inc. on Tuesday said its third-quarter earnings would fall "substantially below" estimates.

The Foothill Ranch maker of trendy eye wear said its profit for the three months ending Sept. 30 would fall well short of the 16 cents a share that analysts had projected, while its net sales would probably log in at about $55 million.

In the year-earlier quarter, Oakley earned 22 cents a share on net sales of $67.8 million.

The company's stock sank $1.13 a share on Tuesday to close at $11.63 in New York Stock Exchange trading.

The announcement came one day after a management shake-up that saw longtime chief executive Mike Parnell replaced by former chief operating officer Link Newcomb. Parnell is remaining with Oakley as vice chairman, and will focus exclusively on sales and marketing.

Oakley blamed the anticipated earnings shortfall on a variety of sales and production issues. It said that production of its new Fives line of small-framed sunglasses, and of two recently introduced polarized glasses, was lower than expected.

It also cited the recent United Parcel Service strike, which the company said disrupted shipments. Other factors mentioned were lower-than-expected sales of its M Frame line of sports sunglasses in the domestic market, and weakness in certain international markets, in part because the strong dollar has made its products more expensive overseas.

Oakley's problems began late last year, when its largest customer, the Sunglass Hut retail chain, miscalculated demand and cut orders. After reaching a yearly high of $24.50 a share, Oakley's stock tumbled to a low of $8.38 in February.

In a prepared statement, Newcomb said that retailers are responding positively to Oakley's new products, but "our production capacities have not yet caught up with the increasing demand."

With a strong backlog of orders, Newcomb said, Oakley will benefit as it steps up production during the remainder of the year. He could not be reached for additional comment.

Oakley spokeswoman Renee Law said the company is taking steps to address the issues affecting its earnings, including ramping up production on the Fives line. It is also trying to boost promotional efforts with retailers on its sports glasses.

The company is also looking for more ways to leverage its brand, including its recently announced decision to enter the athletic footwear market next year. Law said Oakley also plans to produce more "soft goods" such as T-shirts, caps and backpacks.

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