Scott Olivet said he wanted to show people early on that he’s serious about changing Oakley Inc.
Olivet, since taking over as chief executive from founder Jim Jannard in October, has refocused the Foothill Ranch-based company on sunglasses, made two acquisitions and lead other changes, including nixing some of the company’s shoe line.
“You can wave your arms and say you’re going to do lots of things,” Olivet said. “Those are quick moves in support of the new strategy.”
Wall Street may have needed some reassuring.
Just days after Olivet took over, Oakley warned that 2005 sales were set to come in lower than expected. The company’s shares fell 20% on the news.
Oakley’s stock has mounted a comeback since with a recent market value of $1.1 billion.
The changes are just for starters, Olivet said.
The executive, who’s worked at Nike Inc. and Gap Inc., said he plans to expand Oakley’s retail operation by opening some 60 stores this year.
Olivet’s already made a pair of buys that boost Oakley’s stores.
Last month, Oakley said it planned to buy Aliso Viejo-based Optical Shop of Aspen, which runs an upscale chain of sunglasses stores.
A few weeks earlier, Oakley struck a deal to buy Los Angeles-based Oliver Peoples Inc., which makes fashionable glasses and runs its own boutiques.
The moves are part of Olivet’s bid to refocus Oakley on sunglasses, the company’s bread and butter and about 67% of its $650 million in yearly sales.
In the past few years, sunglasses have “gotten lost with the other things Oakley has done,” said Eric Beder, analyst at Brean Murray, Carret & Co. in New York.
The company has expanded into shoes, clothes, watches, prescription glasses and even electronics with varying degrees of success. Products other than sunglasses grew 16% in 2005 from a year earlier to $240 million.
Now Olivet seems to be set to take the company’s sunglasses business and diversify it with trendy shades from Oliver Peoples and Optical Shop of Aspen.
“It’s well proven that most companies move into new things and try to diversify much too early,” Olivet said. “They don’t take advantage of their core strengths.”
Oakley’s strength has been edgy, sporty sunglasses worn by athletes. The company holds the license to make glasses and goggles for Northern Cali-fornia’s Fox Racing Inc. and owns a majority stake in Carlsbad-based Dragon Optical Inc.
Oakley is on the hunt for other brands. The company plans to be “selective,” Olivet said.
“The fact that we made two acquisitions in 60 days is not indicative of the pace,” he said.
Analyst Beder said Olivet is “doing the right things.”
“The optic business is a very desirable business from a margin standpoint,” he said.
Oakley’s retail push is partly out of necessity. Rival Luxottica Group SPA of Italy owns the biggest seller of Oakley sunglasses, Sunglass Hut International Inc.
Oakley and Luxottica had a falling out in 2001, when Luxottica bought Sunglass Hut and cut Oakley shades from the stores.
The two eventually patched things up. Their latest contract expired in December. A renewal is in the works, according to Olivet.
The company’s own stores (it has 220, including the recent buys) have made Oakley less reliant on Sunglass Hut, said Mitch Kummetz, an analyst at D.A. Davidson & Co. of Great Fall, Mont.
The company reached too far with some of its clothes and shoes, Kummetz said.
“The last few years have been tough for them,” Kummetz said. “They’ve taken their eye off the eyewear business and that’s hurt them a little bit. They’ve lost some (market) share.”
The company’s struggled with shoes, a favorite of Jannard, who remains as Oakley’s chairman and dominant shareholder.
Scrapping Some Shoes
In February, Oakley said it planned to scrap the bulk of its shoes except for better sellers, including sandals, golf shoes and boots.
It’s a big step for Oakley.
In the past, Jannard fought to keep shoes. It was a point of contention between him and former chief executive William Schmidt, who resigned in 1999 after just five months. Schmidt was Oakley’s first chief executive other than Jannard, who took back the reins.
Olivet has his own risks with Jannard owning 63% of the company. But the changes he’s made show “Oakley is growing up,” Beder said. “This is Scott’s company.”
Olivet said he worked closely with Jannard to develop Oakley’s new path.
Jannard is “passionate about design and product” but not “as excited about running things day to day,” Olivet said.
Prior to Oakley, Olivet was vice president of Nike subsidiaries and new business development overseeing several units: Cole Haan, Converse, Starter, Bauer-Nike Hockey and Costa Mesa-based Hurley International.
Before that, Olivet was the Gap’s senior vice president of real estate, store design and construction.
Olivet said he and Jannard “connect” and “play off each other very well in the branding and product side.”
“It’s always difficult when a founder takes on a different role and someone comes in from the outside,” Olivet said. “He was thoughtful about it and supportive. I feel incredible about working here.”
Other changes, according to Olivet, could include bringing in new managers, including a chief financial officer, and tweaking Oakley’s clothing business, which posted sales of more than $100 million in 2005.
The company said it plans to change its clothes in several areas, such as fit and styling.
Oakley also is trying to cater more to women. It recently came out with its first sunglasses collection for women. Plans call for introducing women’s goggles later this year, Olivet said.
Plus, the company is trying to soften its macho image by hiring more female workers, he said.
“We’d like to have a better balance in the company,” Olivet said.
The company plans to stick with clothes, prescription glasses and watches, Olivet said.
But it will have better luck luring customers if its sunglasses are hot, he said.
“We’re more likely to sell Oakley (clothes) to a person who has already fallen in love with us,” he said.
There will be challenges.
Other brands have come on strong with basic, trendy sunglasses for younger customers and stole business from Oakley, D.A. Davidson’s Kummetz said.
They include Irvine-based Billabong USA’s hip Von Zipper and San Clemente-based Electric Visual Evolution.
“It’s one thing to say you’re going to steal market share within that group and it’s another thing to do it,” Kummetz said. “They have to come up with the right designs and right marketing. The competition isn’t going to be any easier.”
