Vans Reports Third Quarter Sales and Earnings

SANTA FE SPRINGS, Calif.–Vans, Inc. (Nasdaq: VANS) today announced financial results for the third quarter of fiscal 2002 ended March 2, 2002.

Net sales for the quarter were $82.2 million versus $80.9 million last year with net income of $483,000 versus $2.0 million and diluted earnings per share of $0.03 versus $0.13, in line with consensus estimates. For the first nine months of fiscal 2002, sales were $268.5 million versus $256.0 million last year, net income was $12.3 million, versus $12.3 million, and diluted earnings per share was $0.67 compared to $0.82.

“With sales and net income roughly flat for the first nine months of the year, our business remains challenging in the near term,” said Gary H. Schoenfeld, President and Chief Executive Officer. “Wholesale bookings are behind last year, with particularly difficult comparisons in our women’s business, and our retail comps have continued to run negative since September 11th, further impacting our margins and profits.”

Total U.S. sales for the third quarter, including sales through Vans’ U.S. retail stores, were $55.0 million, versus $54.6 million for the same period a year ago. Sales through the Company’s U.S. retail stores increased 6.8% to $30.3 million in the quarter, from $28.4 million for the same period a year ago. Comparable store sales for the quarter declined 5.1% versus the same period last year. U.S. wholesale sales in the quarter declined 5.9% to $24.7 million, versus $26.2 million a year ago. Total international sales were $27.1 million, up 3.4% from $26.3 million a year ago.

Gross margins for the quarter increased 350 basis points to 45.9% versus 42.4% a year ago driven primarily by changes in the channel mix. Inventory decreased $5.1 million to $55.0 million from $60.1 million a year ago.

Mr. Schoenfeld continued, “There are some important bright spots in our business including the continued growth of our men’s footwear in the independent skate shops, as well as in the key lifestyle specialty accounts. The growth of our apparel joint venture with Pacific Sunwear is also accelerating and our balance sheet remains strong as we continue to tighten our inventory and have approximately $45 million in cash.”

With respect to the fourth quarter, the Company stated that it does not believe it will meet its previous guidance of $70 million to $75 million in total revenues and flat to modestly positive earnings. The Company now expects sales to range from $62 million to $65 million and to incur an earnings-per-share loss of between $0.07 and $0.10 for the fourth quarter.(1)

“Obviously we are disappointed by the negative trends we have experienced over the past six months. While retailers seem to be shortening their order cycles, fourth quarter orders for U.S. wholesale simply have not been materializing to the degree we were expecting,” Mr. Schoenfeld said.

Looking ahead to fiscal 2003, with an assumption of flat comp store performance, the Company stated that it expects sales to increase by approximately 10% and earnings per share to range between $0.70 and $0.75, representing approximately a 20% gain.(1) Excluding revenue from the VANS Warped Tour,(R) the Company’s current expectation for the first quarter is that revenue will be approximately even with the first quarter of fiscal 2001, with retail stores opened during the past year offsetting an anticipated 10% decline in U.S. wholesale sales, and that earnings per share will range between $0.45 and $0.50.(1) While still lagging behind last year, current U.S. bookings are above $30 million for the first quarter, with the window still open for July and August deliveries.(1)

Mr. Schoenfeld concluded, “While remaining opportunistic toward other facets of our business, our short term priorities are focused in three major areas: footwear and apparel design and development, retail merchandising and expense management. We believe we have built a great brand and are focused on the tasks at hand as we look to re-establish our sales and earnings momentum in fiscal ’03.”(1)

Vans, Inc. is a leading branded lifestyle company for the youth market. Vans reaches its 10 to 24 year-old target consumers through the sponsorship of Core Sports,(TM) such as skateboarding, snowboarding, surfing and wakeboarding, and through major entertainment events and venues, such as the VANS Triple Crown(TM) Series, the VANS Warped Tour,(R) the VANS World Amateur Skateboarding Championships, 11 large-scale VANS skateparks, and the VANS High Cascade Snowboard Camp,(R) located on Mt. Hood. The Company operates 160 retail stores in the U.S. and Europe, and designs, markets and distributes active-casual footwear, clothing and accessories, performance footwear for Core Sports, (TM) snowboard boots, step-in snowboard boot bindings, and outerwear worldwide. Vans’ Internet address is www.vans.com .