Trendy sunglasses maker Oakley Inc. said Wednesday that fourth-quarter earnings fell 85% as costs increased and sales were less than expected.
Net income for the quarter ended Dec. 31 dropped to $487,000, or a penny a share, from $3.26 million, or 5 cents, a year earlier, the company said. Sales rose 14% to $102.9 million, less than the company's initial forecast.
Earnings were hurt as Foothill Ranch-based Oakley increased its offerings of clothing, goggles and shoes, which are less profitable than sunglasses, and more items were sold at reduced prices through closeout retailers.
Oakley cut its fourth-quarter profit forecast twice in the last five months as demand slowed.
The company's shares fell 64 cents to close at $8.48 on the New York Stock Exchange, a 52-week low.
Oakley had fourth-quarter costs of $1.8 million, or 2 cents a share, mostly to terminate some relationships with outside sales agents.
Excluding those costs, profit would have been $2.3 million, or 3 cents a share. On that basis, profit matched the reduced estimates of analysts surveyed by Thomson First Call.
Oakley also said it was unable to reaffirm a first-quarter forecast that profit will be similar to its fourth-quarter results.
"Our sales were weak in January, so we're just not in a position to reiterate our guidance for the first quarter," spokesman Gar Jackson said. February sales have been challenging because of uncertainty surrounding geopolitical affairs, Oakley said.
Full year 2002 income, excluding charges, totaled $42.4 million, or 61 cents a share, on $489.6 million in sales, compared with a profit of $46.1 million, or 66 cents, on sales of $429.3 million in 2001.
The company reiterated its 2003 earnings forecast of 55 to 60 cents a share.
Oakley's inability to affirm its earlier first-quarter projections concerned Mitch Kummetz, an analyst with Wedbush Morgan Securities.
"They gave first-quarter guidance a month ago when they were just starting the quarter, and now that we're a month and a half into it, why do they not know?" he said.
Oakley's gross margin, or percentage of sales left after subtracting the cost of goods sold, fell to 53% from 54.9%.