Eyewear Maker Oakley’s Stock Drops

LOS ANGELES (AP) _ The stock of major eyewear maker Oakley Inc. plunged nearly 37 percent Thursday on the news that its largest customer, Sunglass Hut, will not carry most of its 2001 line.

The move by Sunglass Hut came three months after the chain of 1,900 stores was bought by Luxottica Group SpA, the Italian rival of Oakley.

The development prompted Foothill Ranch-based Oakley to downgrade its third-quarter earnings estimate from 31 cents a share to between 21 cents and 23 cents. The company also dropped its estimated sales from $130 million to somewhere between $114 million and $118 million.

Analysts had expected Luxottica to gradually phase out Oakley products at the Sunglass Hut stores over three years and showcase more of its own products.

Instead, the Italian company informed Oakley of the change on Monday, said Oakley chief operating officer Link Newcomb.

“It is a little bit unusual in the consumer products world for a company’s biggest customer to be its biggest competitor, and that dynamic is in play today,″ Newcomb said.

With the news, shares of Oakley closed at $11.03 on Thursday, down $6.46.

Luxottica investor relations director Alessandra Senici insisted that Sunglass Hut still intends to carry other brands. The retailer dropped Oakley after a disagreement over pricing, she said.

“Oakley was the only important supplier with which we could not reach an agreement on the price of the product,″ Senici said.

Sunglass Hut accounted for about 20 percent of Oakley’s sales, Newcomb said. The chain had accounted for as much as 40 percent before branching out into other products like footwear and watches.

Oakley plans to fill the gap by shopping its products to other stores and introducing a “premium dealer″ program that will reward top retailers.

Despite the rivalry between Luxottica and Oakley, analysts said they were surprised by the timing of the move.

“I don’t think anyone expected to have it happen this fast,″ said Eric Beder of Ladenburg Thalmann & Co. of New York. “Oakley was just as surprised as we were.″

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