Sunglass Hut Buys Online Competitor Shades.com

As part of its e-commerce expansion plan, Sunglass Hut International (Nasdaq:RAYS) has acquired Internet competitor Shades.com, its sister site Swiss Army Depot.com, and related wholesale operations for approximately US $4 million.

The E-Commerce Times first recognized these two sites as “E-Commerce Success Stories” back in November, when president Peter Adler shared his thoughts in an exclusive interview about what makes his sites such a hit with online buyers. Apparently Sunglass Hut took notice, and perhaps was starting to feel the heat of competition for online sales. Shades.com calls itself ‘Earth’s Biggest Sunglass Site’, while SwissArmyDepot.com sells knives, watches, sunglasses, tools and gifts that are manufactured by the two companies that make Swiss Army(R) knives.

Together, the two sites have approximately 7,000 visitors per day. Their combined online sales for 1998 increased more than 170% over the prior year. The two sister sites added more than 5,000 promotional affiliates in 1998, including EarthLink, TalkCity, PC World and Switchboard. Both sites are merchants on Microsoft Network, Microsoft Plaza, and Prodigy. Shades.com is also a merchant on America Online and Compuserve.

James N. Hauslein, chairman of the board for Sunglass Hut commented on the acquisition. “We believe that the acquisition of these two Web sites will significantly enhance our existing Internet development efforts and provide substantial infrastructure for our expanding e-commerce activities. However, he emphasized that the company must also “continue to develop or acquire additional resources” and successfully execute its Internet strategy in order to fully accomplish its objectives.

While there was hardly a mention of e-commerce in Sunglass Hut’s annual report last year, it is clear that the company now recognizes the need to expand online sales efforts. In addition to the acquisition of Shades.com and SwissArmyDepot.com, the company has left the door wide open for possible purchase of other online stores. Hauslein indicated that the company will, “continue to explore the possible development and acquisition of other sites (including sites tied to our Watch Station retail format and our private label sunglass products) to expand our market penetration in what we view as an increasingly important distribution channel.”

Commenting further on the company’s e-commerce plans, president and CEO, John X. Watson said that the company will continue operating its existing sunglasshut.com Web site in a way that is consistent with marketing strategies for its retail locations. At the same time, the company will expand shades.com to offer a broader assortment of sunglasses and related products. The company also sees a useful fit between its existing Watch Station stores and its newly acquired Swiss Army Depot e-commerce site.

In addition to the two Web stores, the acquired business also includes wholesale operations, serving L.L. Bean, Cendant, and Wal-Mart Online. Total 1998 revenues were US$1.6 million, including $1.2 million from e-commerce sales. The purchase price for the acquisition was approximately $2.8 million in cash and a convertible subordinated note in the amount of $1.2 million.

Additional Company Background

The founders of Shades.com have more than 25 years experience in the sunglass business, and have been selling over the Internet since 1995. In fact, they were among the pioneers of online sellers, beginning in 1990, when they opened their first sunglass site on the now-defunct Genie system. A year later, they became a merchant site on CompuServe; and in 1991, they also launched their Swiss Army site.

In addition to its “Success Story” recognition by the E-Commerce Times, Shades.com has also been named “The Sunglass Super Site” by Excite, and voted by Buyers Index as the “Best Sunglass Site.”

Sunglass Hut International has headquarters in Coral Gables, Florida, and is the world’s largest specialty retailer of sunglasses. The company operates nearly 2,000 sunglass stores and 119 Watch Station stores, located throughout the U.S., Canada, the Caribbean, Europe, Australia, New Zealand and Singapore.