Sunny Sales at Sunglass Hut Put a Glow on Its Stock Price
STOCK of Sunglass Hut International has been so hot, you might want to put on a pair of shades just to check it out.
The international chain's stock has appreciated 365 percent since June 1993, when it went public at $20 a share.
The company, based in Coral Gables, Fla. (appropriately the Sunshine State), had a 2-for-1 stock split in November 1994. The stock, listed on the NASDAQ market, then rose to just under $50 and split 2-for-1 again on Oct. 16, with the stock now priced at around $25.
Sunglass Hut's earnings have been growing at an average of 35 percent a year, and analysts say this rate should continue for the next several years.
Earnings for 1996 could well be 42 percent above 1995, says analyst Thomas Filandro with Gerard Klauer Mattison & Co. in New York. With a price-earnings ratio of 31, he adds, the $25 price is a 24 percent discount.
Sunglass Hut is what analysts call a ''category killer'' store (like office-supply company Staples and home-improvement retailer Home Depot Inc.), which sells in one category and ''kills'' much of the competition - or buys it up.
This year, it bought out its only direct competitor, Sunsations, says David Buchsbaum, an analyst with Southeast Research Partners Inc. of Boca Raton, Fla.
In each of its 1,600 stores, Sunglass Hut offers some 1,000 different styles of sunglasses from the top vendors, including Ray-Ban, Diesel, Liz Claiborne, Guess, and Nikon. Prices start at $19 and go up to $270 for Revos. Stores even carry Cartiers (a rare sale), which can cost more than $1,000.
Engaging in some name-dropping, the company notes that Britain's Prince Edward and the Dutchess of York bought sunglasses from its London store.
The company is ahead of its plans to add 350 new stores this year (40 to 50 overseas). It's stores have already spread across the United States and are in many European countries. It recently acquired a chain of outlets in Australia. Management expects to have 3,400 stores by 2000.
A study by Southeast Research Partners, done earlier this month, says: ''At year end, Sunglass Hut will control over 35 percent of the premium sunglass market [glasses costing more than $30 a pair], which we estimate will grow from $1.2 [billion] to a little over $1.4 billion dollars at year end.'' And according to Mr. Buchsbaum, this high-end market is far from saturated.
Another reason for the firm's phenomenal growth is that it has managed to capitalize successfully on a sunglass-wearing fad that's spread from continent to continent. Sales of sunglasses have doubled since 1986. The company attributes this to a combination of reasons:
* Celebrities have popped on sunglasses and made them status symbols, sometimes very expensive ones. Cyclist Greg LeMond, tennis star Andre Agassi, and quarterback Steve Young all sport expensive shades.
* In fashion, sunglasses have caught on as an accessory, offering a chic statement, or perhaps a ''bad'' attitude. The popularity comes, in terms of regions, from Europe, Latin America, and southern California.
* Sunglasses are also promoted as a plus for healthy vision, good for kids, and a necessity for comfortable driving, and many outdoor activities, including sports.
* Sunglasses have become much lighter, tougher, and varied in their configurations and styles. Hence their uses have multiplied, and people with the means might own three or more pairs.
Buchsbaum notes that Sunglass Hut is moving into prescription sunglass sales and will open upscale eyeglass stores to sell regular glasses as well as sunglasses, pushing its earnings potential up considerably.
Southeast Research estimated that Sunglass Hut earnings this year, before the most recent stock split, will be $1.10 a share and $1.50 next year, even without adding income from the expansion into upscale eyeglass stores, expected to be highly profitable.
Counting activity in new acquisitions, Sunglass Hut's 1994 sales were $290 million, a 41 percent increase over 1993, with a compounded 34 percent annual growth rate over the last five years, company spokeswoman Sara Wilkins says.
Could there be clouds in the future for the company? Analysts - including Mr. Filandro of Gerard Klauer - say they haven't spotted dark ones. The company did go public during an economic upswing. It has not faced a decline in the business cycle.
'At year end, Sunglass Hut will control over 35 percent of the premium sunglass market [more than $30 a pair].'
- Southeast Research