Oakley Reports Profit Down 66%

Trendy sunglasses maker Oakley Inc., feeling the effects of a sluggish economy and a feud with its biggest customer, said Wednesday that fourth-quarter profit fell 66% on lower sales.

The Foothill Ranch company said earnings should climb this year, now that its dispute with Sunglass Hut’s owner has been patched up, but will rise less than analysts were expecting because of sluggish sunglass sales. The company also said it expects sales of other products such as shoes and clothes to account for a bigger part of its revenue, but those products don’t generate as much profit as sunglasses.

The firm’s growing international sales--they surpassed U.S. sales for the first time last year--also are generating less profit because of the strong U.S. dollar, spokesman Gar Jackson said.

Oakley said it expects to earn 77 cents to 80 cents a share this year, below analysts’ estimates of 82 cents a share. For the fourth quarter, earnings fell to $3.3 million, or 5 cents a share, from $9.7 million, or 14 cents a share, a year earlier. Sales decreased 3.4% to $90.2 million.

The stock closed at $16.45, off 34 cents a share, on the New York Stock Exchange.

Oakley’s sunglass sales tumbled last year when its biggest customer, Sunglass Hut, slashed orders after being acquired by competitor Luxottica Group.

Oakley and Luxottica have since signed a new three-year contract that should generate significant sales for Oakley but won’t reach “pre-acquisition levels,” Chief Operating Officer Link Newcomb told analysts in a conference call. Before the Luxottica acquisition, Sunglass Hut accounted for about 20% of Oakley’s sunglass sales.

Oakley executives were upbeat about the company’s future prospects despite what Newcomb described as a global retail environment that’s still “choppy at best.”

“Truth be told, I’d rather just skip the discussion of the quarter and brag about the performance of our sports marketing effort at the winter Olympics,” Newcomb said. About 150 athletes will wear the company’s products in the Games, the company said, including 11 who won medals in the first four days of competition.

Oakley also announced it has struck a deal to sell its products in some Macy’s stores and will open a division in Brazil this year. The company has sold eyewear since 1996 through a Brazilian distributor.