Vans Reports Fourth Quarter And Year-End Financial.
First quarter domestic bookings remain up approximately 40 percent.
Edited By Sean O'Brien
(7-20-98)

(Press Release, July 22)—Vans, Inc. (Nasdaq:VANS) announced financial results for the fourth quarter and year ended May 31, 1998.

"As previously discussed, the company incurred a substantial charge in the fourth quarter related to the closing of our domestic factory and the restructuring of our European distribution," stated Gary H. Schoenfeld, president and chief executive officer.

"Now that we are several weeks into the first quarter, we believe that these and other initiatives undertaken over the past year have us very well positioned as evidenced by the continued strength in our domestic bookings for back-to- school and our own stores' retail sales, both of which continue to be up approximately 35 to 40 percent compared to the same period a year ago."

Net sales for the fourth quarter were 32.8-million dollars, compared to 39.2-million dollars for the fourth quarter of fiscal 1997, a decrease of 16.3 percent. Before a one-time restructuring charge and domestic inventory write- down of 11.9-million dollars after tax, or $.90 per share, fourth quarter net income from operations was 0.1-million dollars, versus net income of 2.7-million dollars in the same period last year. Excluding the one-time charge, earnings per share for the fourth quarter were $.01, versus diluted earnings per share of $.20 in the fourth quarter of 1997. Inclusive of the one-time charge, the company recorded a net loss of 11.8-million dollars, or $.89 per share, on a diluted basis, for the fourth quarter of fiscal 1998.

"Sales and earnings during the second half of the year were significantly affected by both the worldwide oversupply of athletic footwear and the difficult economic situation and weak currencies overseas, particularly in Japan," said Schoenfeld. "On the positive side, gross margins improved (before the restructuring charge and inventory write down), both as a result of better sourcing in Asia and a shift in sales mix as our own stores continue to perform extremely well, with our third straight year of double-digit comp store increases."

Net sales for the year increased 9.5 percent to 174.5-million dollars, compared to 159.4-million dollars in fiscal 1997. Excluding the one- time charge for restructuring and domestic inventory write down, net income for the year was 9.3-million dollars, versus 10.4-million dollars last year. Before the restructuring and inventory write down, earnings per share were $.67, versus $.76 a year ago. Inclusive of the one-time charge, the Company recorded a net loss of 2.7-million dollars, or $.20 per share, on a diluted basis, for fiscal 1998.

Vans' wholesale business decreased approximately 30 percent for the fourth quarter, versus the same period a year ago, but increased 4.2 percent year-over- year. Fourth-quarter sales to national accounts decreased approximately 24 percent and were essentially flat at 77.5-million dollars for the year. Total international sales decreased approximately 42 percent for the fourth quarter, versus the fourth quarter of fiscal 1997, but increased thirteen percent for the year, versus fiscal 1997.

Sales through the company's 101-store retail chain in the fourth quarter increased close to 28 percent to 12.4-million dollars from 9.7-million dollars for the same period a year ago. Retail sales for the year increased 27 percent to 47-million dollars from 37-million dollars for fiscal 1997, and comparable store sales rose nearly fourteen percent for the quarter and 16.2 percent for the year.

Gross margins (before the fourth-quarter charge) increased to nearly 43 percent in the fourth quarter compared to 38.4 percent for the same period in the prior year, and for the year improved to approximately 41 percent versus 39.3 percent in fiscal 1997. The Company's pre-tax income for the fourth quarter, before the restructuring charge and inventory write-down, was 162,000 dollars, versus 3.8-million dollars a year ago, and for the year decreased 11.9 percent to 14.5-million dollars from 16.4-million dollars.

"Clearly this spring was a challenging period for the footwear industry and our wholesale business in the fourth quarter was the most difficult we have seen in several years," Schoenfeld continued. "For the year, we certainly did not meet all of our goals, yet as we start fiscal '99 we have strengthened our business in several important areas with more cost-efficient sourcing arrangements, key additions to our senior management, and greater control of the distribution and marketing of our brand overseas."

Schoenfeld concluded, "Looking at where we are now, domestic bookings are up substantially, our retail stores are similarly performing well and are above plan both in the U.S. and in Europe, and year-over-year we anticipate returning to significant growth internationally in the second half of this year.* The Vans Triple Crown Series for skateboarding, snowboarding, wakeboarding, and surfing, which we created, has begun airing this month on the ESPN Networks adding tremendous worldwide exposure for the brand, the Vans Warped Tour is getting great reviews and setting attendance records in nearly every city this summer, and we are very close to finalizing a second major corporate sponsor in addition to Casio/G-Shock to help leverage our larger marketing investments. Our balance sheet is strong, our inventory is in-line, and we have a very passionate and highly talented management team committed to capitalizing on the opportunities that we have created and to building value for our stockholders."

*These are forward-looking statements regarding the company's domestic, international, and retail sales. Vans' actual results could vary significantly. Important factors which could affect the company's domestic and international sales results include but are not limited to: the continuing worldwide oversupply of footwear, which could result in cancellation of orders or downward pressure on prices and margins; the occurrence of downward trends in the U.S. economy, foreign economies and/or the footwear industry; and changes in the fashion preferences of the company's target customers and the company's ability to anticipate and respond to such changes.

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