Oakley
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Company Background
Oakley Inc. is a manufacturer of consumer products that specializes in high end sports eyewear, sunglasses, apparel, and accessories. They also focus on design and development of new advancements in technology for sports optical. Headquartered in Orange County, California, they aim to provide the best product for professional and amateur athletes (Oakley.com). The majority of their product is sold in optical stores, sunglass retailers and specialty sports stores, and department stores throughout the United States and in over 100 other countries (Mergent Online). Oakley’s sunglasses and clear prescription eyewear can be fitted with any prescription from the consumer and they offer 19 different colors for the lenses. In 2003 the firm released 535 different apparel styles and accessories (Mergent Online). In addition to eyewear they also produce footwear, analog watch products, goggles for motocross, and hockey gloves (MarketLine Online).
Oakley hold many patents for sunglass and goggle technology to better enhance those involved in demanding sports such as skiing and cycling (Marketline Online). A statement from the company’s website: “It’s in our DNA to identify problems, create inventions, and wrap those inventions in art. And simply to make things better than anyone thought possible” (Oakley.com) shows that it is their goal to continue with new developments that go beyond what is available in the market today. Over the past ten years they have acquired several divisions and distributors throughout and the world and most recently in 2006 acquired the luxury eyewear company Oliver Peoples and in 2007 Eye Safety Systems, Inc. for $110 million cash (Marketline Online). The company’s portfolio now includes Dragon, Eye Safety Systems, Fox Racing, Mosley Tribes, Oliver Peoples, and Paul Smith Spectacles (Oakley.com).
Industry
Oakley Inc. operates in the sporting goods industry under the consumer goods sector. This industry contains many well known sports manufactures including Nike and Adidas that produce some of the same products but have a much wider range than Oakley. One main competitor Luxottica Group S.P.A specializes in high-end sunglasses and prescription frames (Wikipedia.com). The following table from Yahoo! Finance shows a comparison of Oakley (OO) to Nike (NKE), Luxottica Group S.P.A (LUX), and the industry itself:
DIRECT COMPETITOR COMPARISON
Industry
Market Cap:
1.69B
15.82B
27.36B
165.11M
EmployЬees:
3,400
28,000
1.37K
Qtrly Rev Growth (yoy):
20.90%
7.30%
8.70%
7.80%
Revenue (ttm):
761.86M
6.35B
15.95B
394.93M
Gross Margin (ttm):
54.46%
67.28%
43.86%
39.31%
EBITDA (ttm):
113.50M
1.34B
2.39B
29.23M
Oper Margins (ttm):
9.40%
16.44%
12.58%
2.28%
Net Income (ttm):
44.79M
591.17M
1.39B
9.00M
EPS (ttm):
0.649
2.703
0.60
P/E (ttm):
37.83
27.18
20.02
17.05
PEG (5 yr expected):
1.19
P/S (ttm):
0.81
As seen from the chart above, Oakley Inc. performs in some areas similar to the industry average such as EPS, but has a much high P/E ratio than the industry and other firms.
The sporting goods industry itself is split into two major market segments one being individual consumers and the other professional and amateur sports leagues and teams (Lipsey 19). The industry has expanded greatly over the past thirty years with more innovations and the introduction of extreme sports. Relating Oakley to industry trends, it has been observed the optics sales, which the firm specializes in, from 1998 to 2004 increased by 20.9% (Lipsey 22). With consumer’s higher willingness to buy such products it has a positive affect of the individual firm’s performance.
Historical Performance
Over the past five years as seen from the balance sheet and income statement (appendices A & B respectively) the company has grown and increased it’s profitability and net worth. The total shareholders’ equity has increased from $293,831,000 to $458,891,000, which is a 56% increase. From the balance sheet it can seen the total assets and liabilities have both increased, assets going from $384 million to $634 million and liabilities more than doubling from $70 million to $150 million. The net income is also up from five years ago increasing from $40,637,000 to $44,788,000, however this $44 million at the end of 2006 is down from 2005 which was $59,660,000. Total operating expenses have also increased by $129,486,000 over the past five years. For the complete balance sheet and income statement information refer to Appendices A & B.
For a complete list of financial ratios from the past 5 years please refer to Appendix C. Some current profitability ratios for the firm are the ROE: 9.76% and the ROA: 7.07%, these measure the effectiveness of generating profits from the equity investor perspective and from assets respectively. From the liquidity ratios the current quick ratio and current ratio are 0.95 and 2.16. The current P/E ratio of the firm is 37.83 comparatively this is higher than that of NIKE which is at 20.02 and Luxottica which is at 27.18. Refer to Appendix D for comparison of current financial ratios of Oakley to NIKE and Luxottica. From the comparison chart it can be seen that in some areas the firms are close in their ratios but differ greatly in others such as Oakley and NIKE have similar quick ratio but differ greatly with their ROEs.
Ownership and Management Structure
Oakley, Inc. currently is run by a Chairman, James Jannard, President, Colin Baden, and a board of directors. Various Vice Presidencies exist in different areas and positions along the years have been created such as Vice President of Design which Colin Baden was promoted to in 1997 (Mergent Online). No major changes in ownership structure have occurred recently, just different appointments of directors; however no new directors have been appointed in the past seven years according to Mergent Online. 65% of the company is held by 23 insiders and of that 65% James Jannard, chairman and director, owns 99%.
Holdings Summary
Total