Shoe Line Still Kicking Oakley

Sunglasses maker Oakley Inc. posted lower earnings for the second quarter as its move into athletic shoes continued to drag down profits.

Earnings dropped 5% to $10.6 million, or 15 cents a share, from $11.2 million, or 16 cents a share, in the same period last year. Sales moved up 3% to $72.1 million from $70 million.

The numbers were in line with analysts’ expectations.

The company also said it does not expect its footwear operation to turn a profit this year and that overall sales in the second half of 1999 will be “slightly below” the 8.8% growth rate in the first half of the year.

“Footwear continues to be an issue for the company, as it has been for the last several quarters,” said Marcia L. Aaron, an analyst with Deutsche Banc Alex. Brown. “Without footwear, they would have been basically flat with last year.”

Foothill Ranch-based Oakley moved into the athletic shoe and watch business last year. While its shoe sales have been disappointing, the company is continuing to push its sneakers. In June, Oakley introduced ShoeTwo, which is designed to appeal to a wider audience than its flashier early styles. Another style, ShoeThree, will be ready for the holiday season, the company said.

Oakley said its overall U.S. sales fell 2.6% to $44 million in the quarter, largely because of a 9.8% decrease in sales to Sunglass Hut, its largest customer. International sales were up 13%.

Sunglass Hut sales were down, Oakley said, because it had accelerated sales to the retailer in the first quarter and then was late getting its new sunglasses into the stores. Its new Zeros and M-Frame sunglasses, which were launched in late May, should ideally have been in the stores by late February or March, analyst Aaron said.

The stock closed Wednesday at $8.06, down 6 cents a share, in New York Stock Exchange trading.