Vans, Inc. today announced financial results for the second quarter of fiscal 2004 ended November 29, 2003. Net sales for the base business for the quarter (excluding skateparks expected to be closed) increased 10.4% to $63.4 million, compared to $57.4 million for the second quarter of fiscal 2003. Comparable store sales for the second quarter increased 15.2% versus the same period last year. The net loss during the quarter from continuing operations for the base business was $4.1 million, versus a net loss from continuing operations for the base business of $2.8 million in the same period last year, and the Company had a diluted loss per share from continuing operations for the base business of $0.23 for the quarter, versus a diluted loss per share from continuing operations for the base business of $0.16 in the prior year period. Net sales for the base business for the first six months of fiscal 2004 increased 6.8% to $190.0 million, compared to $177.8 million for the corresponding period a year ago. Net income from continuing operations for the base business was $9.8 million compared to $2.8 million in the same period last year, and diluted earnings per share from continuing operations for the base business was $0.55 versus $0.16 in the prior year period.
On a GAAP basis, the Company reported net sales for the quarter of $65.2 million, compared to $59.5 million for the second quarter of fiscal 2003, and a diluted loss per share from continuing operations of $0.36, versus a diluted loss per share from continuing operations of $0.18 a year ago. Net sales for the first six months of fiscal 2004, on a GAAP basis, were $193.9 million, compared to $182.5 million for the same period last year, and diluted earnings per share from continuing operations for the period were $0.28, versus diluted earnings per share from continuing operations of $0.13 a year ago. For a reconciliation of GAAP results to the Company's base business results, please refer to Table 2 following the text of this release.
#'We are very pleased with the continued strong performance in our retail stores and the rebound in our domestic wholesale business, having at the same time also reduced our inventory by more than $20 million over the past six months,'' stated Gary H. Schoenfeld, President and Chief Executive Officer. #'Our more than three-fold increase in earnings for the base business in the first half of fiscal 2004 highlights a significant turnaround in our business and underscores the meaningful progress we have made with our recent brand and product initiatives. We remain excited about our prospects as we head into the second half of this fiscal year and look ahead to next back to school.''
For the base business, total U.S. sales for the second quarter including sales through Vans' U.S. retail stores, were $45.8 million versus $39.1 million for the same period a year ago. On a GAAP basis, total U.S. sales for the second quarter were $47.6 million versus $41.1 million. U.S. retail stores sales for the base business increased 10.5% to $21.9 million in the second quarter of fiscal 2004 from $19.8 million in the same period a year ago. On a GAAP basis, sales through the Company's U.S. retail stores increased 8.3% to $23.7 million. U.S. national sales in the second quarter were $23.9 million versus $19.2 million a year ago. Total international sales were $17.6 million versus $18.4 million a year ago.
#'This marks our third consecutive quarter of strong comp store gains which continues to validate the product, merchandising and operational changes that we have implemented over the past year,'' Mr. Schoenfeld said. #'Girls, Core and apparel continue to lead our retail growth with the same categories beginning to spur the growth in our U.S. wholesale footwear business as well.''
Gross margins for the quarter increased 70 basis points to 48.2% vs. 47.5% a year ago. For the first six months of fiscal 2004 inventory decreased $21.4 million to $42.6 million from $64.0 million reported at May 31, 2003 and the Company's balance sheet remains strong with $63.9 million in cash and marketable securities.
During the quarter the Company reached termination agreements for two skateparks resulting in a charge of $1.9 million. The Company stated that it has now completed all negotiations for the termination or restructuring of its skatepark leases (with one location still subject to final documentation). The Company expects that only three of its remaining eight parks will be open beyond the next 6 to 18 months. The Company further stated that, based upon the agreed-to substantial rent modifications for two of the three parks that are expected to stay open, it expects such parks to generally operate at or above break-even cash flow from this point forward.
The Company also revised upward its guidance for fiscal year 2004. The Company now expects diluted earnings per share from continuing operations for the base business and on a GAAP basis to range from $0.56 to $0.60 and $0.34 to $0.42, respectively, for fiscal 2004. For the third quarter, the Company now expects diluted earnings per share from continuing operations for the base business and on a GAAP basis to range between $0.20 to $0.22 and $0.17 to $0.19, respectively. For the fourth quarter, the Company now expects diluted loss per share from continuing operations for the base business and on a GAAP basis to range between $0.16 to $0.19 and $0.20 to $0.23, respectively. More detailed guidance is set forth in Table 4 following the text of this release.
Mr. Schoenfeld continued, #'While still early, we are also excited about the recent opening of our first European full price store on Carnaby Street in London. As one of the premier international locations encompassing youth lifestyle and fashion, Carnaby Street underscores our commitment to creativity and great product and is both a great showcase for Vans and potentially another source of growth overseas.''
Mr. Schoenfeld concluded, #'We head into a new calendar year with a lot of excitement within our company. We believe we own a unique position with the VANS brand which at its core is tied to our leadership and heritage in action sports while also extending to other dimensions of youth lifestyle including music and fashion. We continue to make important progress on several fronts and look forward to further leveraging the full potential of our business.''
