FGX International reports strong sales growth for Q2

30 Jul '08

6 min read

-- In the second quarter of 2008, gross margin as a percentage of net sales was 52.5% versus 54.0% in the comparable period for the prior year. For the first six months of 2008, gross margin as a percentage of net sales was 53.1% compared to 53.0% in the prior year period. The decrease in the quarter was principally due to higher sales of lower margin sunglasses in the current period versus the prior year period.
-- In the second quarter of 2008, operating income increased to $8.1 million from $5.9 million in the second quarter of 2007. For the first six months of 2008, operating income decreased to $13.7 million from $14.0 million in the comparable period for the prior year. The increase in operating income for the second quarter of 2008 was driven by increased sales and a non- anniversaried $1.9 million abandoned lease charge incurred during the second quarter of 2007. This was partially offset by higher operating costs, principally fixture depreciation expense, freight costs and costs associated with being a public company.
-- Capital expenditures were $2.9 million in the second quarter of 2008 compared to $2.3 million in the second quarter of 2007 and $6.9 million in the first six months of 2008 compared to $7.9 million during the first six months of 2007.
-- Days sales outstanding improved to 60 days in the current quarter from 76 days in the second quarter of fiscal 2007 and improved to 74 days in the first six months of 2008 from 80 days in the first six months of 2007. This improvement was due to an increased focus on working capital management.
-- Inventory days on hand improved to 94 days in the current quarter from 128 days in the second quarter of fiscal 2007 and improved to 104 days in the first six months of 2008 from 115 days in the first six months of 2007. This improvement was due to better inventory management.
-- Stock compensation expense was $0.6 million, or $0.02 per diluted share, in the current quarter compared to $0.2 million, or $0.01 per diluted share, in the second quarter of 2007. Stock compensation expense was $1.1 million, or $0.03 per diluted share, in the first six months of 2008 compared to $0.4 million, or $0.01 per diluted share, in the first six months of 2007.
-- During the second quarter of 2008, the Company repurchased an additional 91,788 of its outstanding ordinary shares at an average price per share of $10.64 under its stock buyback program.

Update of Key Accounts
-- During the second quarter, the Company shipped product related to the previously announced reading glasses program at Borders bookstores.
-- During the month of July, the Company reached an agreement in principle to replace a direct import, private label sunglasses program at Walgreens. This program is in addition to the Foster Grant sunglasses program already provided to Walgreens. Subject to signing a definitive agreement, the Company expects to ship approximately $3 to $4 million of product in connection with this program in the fourth quarter of 2008.
-- There has been no change from the previously announced intention of Wal-Mart to begin the direct importing of the opening price point reading glasses program formerly provided by the Company.

Outlook - For the third quarter of 2008, the Company currently expects net sales in the range of $58 to $60 million, earnings per diluted share in the range of $0.15 to $0.17 and EBITDA in a range of $11 and $13 million.

FGX International

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