Sunglass Hut International
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Sunglass Hut International is North America's largest retailer of sunglasses. The company was founded in 1971 and acquired by Luxottica in 2001.
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[edit] History
[edit] The Start of SGH
Sunglass Hut was founded in 1971 by Sanford Ziff in Miami, Florida. Ziff, an optometrist at the time, had decided that the people in Miami could benefit from protective eyewear in the Florida sun, while he himself could capitalize on the popularity of sunglasses as a wardrobe accessory. He opened a freestanding kiosk in an aisle of Miami's Dadeland Mall, called it the "Sunglass Hut," and sold his fashionable frames at price points of $20 and more. His idea was an almost immediate success, and he found that, for the most part, customers were willing to give in to impulse shopping when it came to accessories.
The success of his first kiosk prompted Ziff to open other Sunglass Hut locations in the Miami area. His family climbed aboard and began to help him expand his small enterprise. As he opened more kiosks, and later, actual stores, Ziff's wife Helene took on a role as the director of personnel. He continued to handle the purchasing and daily operations of the new company, while she dealt with the employees who were hired to staff the stores. As the business continued to expand, the Ziffs' son, Dean, began to handle business aspects related to the company's growth and expansion into new areas. The Sunglass Hut business continued in that fashion for the next decade, slowly and steadily adding store locations and entering new market areas in a calculated and yet ambitious manner. By the time Sunglass Hut celebrated its 15-year anniversary in 1986, it was composed of more than 100 store units and was achieving sales of more than $24 million a year. At that point, Ziff began formulating an aggressive, five-year expansion plan that would make his business more visible on a national level. His only uncertainty was whether he had the capital actually to finance his idea.
After a great deal of thought regarding his financial situation, both on a personal and a business level, Ziff began to search for an investor to purchase a portion of Sunglass Hut. He decided that he would sell off the majority of his equity in the company, use the proceeds to fund his expansion plan, and give his remaining share of Sunglass Hut to his son. After exploring many different suitors and their offers, Ziff decided to team up with an investment firm from Connecticut called Kidd, Kamm & Co., which had offered more than $35 million for a 75 percent stake in Sunglass Hut. The new investors agreed to Ziff's terms, which dictated that he would retain the company's management team while also shifting part ownership of the company to his son.
[edit] 1988–92: The Rapid Worldwide Expansion of Sunglass Hut
Following the partial acquisition of Sunglass Hut by Kidd, Kamm & Co., the business was incorporated under the name Sunglass Hut International, Inc. Ziff and his new partners then began to execute his plans for growth. For two years, they worked together to increase the number of Sunglass Hut stores in the marketplace, as well as upgrade existing units and add new products to the company's line. Ziff and his management team were actually responsible for taking care of these tasks, while the investors simply offered the financial backing.
Then in 1989, at the age of 64, Ziff left his company in the control of his partners and retired from the business. The Ziff family still held an almost 25 percent stake in Sunglass Hut in Dean's name but was no longer involved in the day-to-day operation of the business. Meanwhile, the company's management continued to push forward with the aggressive expansion and acquisition phase. By 1991, the company's annual sales had quadrupled and soon surpassed the $100 million mark. At that time, the Ziffs sold the portion of Sunglass Hut that remained in their control. It was later estimated that the family received more than $25 million when it sold the company, a figure that included the proceeds from the first sale transaction, all related fees, and the sale of the final 25 percent.
The following year, the Sunglass Hut chain included almost 450 store units, and sales figures were continuing to rise. But, unfortunately, sales for sunglasses retailing at $30 or more declined for the first time in almost a decade, which actually caused a decrease in same-store sales for the year. The company essentially was selling more sunglasses only because it had more stores open; overall, the decline in same-store sales ate away at the company's profits for the year. One highlight that year, however, was the acquisition of competitors Sun Mark, Inc. and Sunglass Marketing, Inc., which included the addition of 134 stores, bringing the Sunglass Hut total to almost 600.
[edit] The 1990s: Success As a Publicly Held Company
The year 1993 marked the entrance of Sunglass Hut International, Inc. into the public domain, as the company's stock was offered for sale in an initial public offering that spring. The sale earned Sunglass Hut $70 million, which was immediately used to rid the company of $41 million in long-term debt and to repurchase $11 million in its preferred stock. The remainder of the proceeds then were used to fund further expansion that was in the works, including the addition of another 200 stores in the United States and Europe. In addition, Wallis Arnold Enterprises, Inc. was purchased at the end of the year.
In 1994, during its first full year as a publicly held company, Sunglass Hut either opened or acquired from competitors more than 225 new store locations. The company also entered a joint venture agreement with Sunglass World, the largest specialty retailer of sunglasses in Australia, to open and operate almost 80 Sunglass Huts there. Meanwhile, the company had been working to strengthen its relatively new direct-mail sunglass sales operation. Some wondered why Sunglass Hut would bother selling its items by mail order, when the practice was often expensive because of the costs related to shipping items and to an increase in returns. But Sunglass Hut's mail-order division averaged $110 per transaction, versus an average of $80 per transaction inside its store units. In that way, the mail-order operation not only paid for itself (and then some), but also enabled the company to reach a wider base of consumers.
Sunglass Hut continued to open new store units rapidly in 1995, everywhere from airport terminals to outlet centers and leased spaces in department stores, in addition to its traditional stores in malls and on city streets. The company also began planning to expand into the sale of prescription sunglasses in selected markets. Testing of the idea began early in the year. Another notable occurrence in 1995 was the acquisition of NFL League MVP Steve Young as the spokesman for the company's new "SunGear" brand private-label items. In addition to the rollout of SunGear, another new member of the Sunglass Hut family included Sunsations Sunglass Company, which was an Indiana-based sunglass retailer, the national chain of which was made up of 350 stores in 44 different states. Sunsations was acquired in June, and in October and November Sunglass Hut also completed the acquisitions of Sunglass World Holdings Pty. Ltd. and of Sun Shades 501 Ltd.
In 1996 the company achieved record sales that broke the half-billion mark, topping off at $527.1 million. At that point, Sunglass Hut International possessed a 30 percent share of the sunglass market in the United States. The company was operating more than 1,700 stores throughout the world, with approximately 1,425 of those being in the United States and the remainder spread throughout Canada, Australia, Europe, Puerto Rico, the U.S. Virgin Islands, and Mexico.
That year, Sunglass Hut committed itself to two major projects for the future. First, the company entered a joint venture agreement with Royal Sporting House Pte. Ltd. of Singapore to open Sunglass Hut stores in Southeast Asia. Under the terms of the agreement, each company would own 50 percent of the venture initially, with Sunglass Hut International possessing the right to purchase Royal Sporting's portion after five years. Another major plan that was set in motion in 1996 was the company's entrance into the business of selling watches through a new enterprise called "Watch Station." With the introduction of Watch Station, Sunglass Hut was looking to revitalize a somewhat inactive watch market that had been dominated by department stores for years. The first Watch Station was opened as a freestanding kiosk in Miami's Dade-land Mall, the same place where Sunglass Hut had begun 25 years earlier.
[edit] Sunglass Hut at the Turn of the 21st Century
The foray into selling watches proved to be a boon to Sunglass Hut's business, giving the company a new avenue of growth at a time when its mainstay business was beginning to suffer financially. As the company entered the late 1990s, profits began to deteriorate, prompting management to implement a program aimed at creating a leaner, more profitable organization. In 1998, the company closed 250 stores, reduced the number of vendors it dealt with by more than 50 percent, and reduced the selection of brands and styles it stocked by 90 percent. The year also marked the end of the company's involvement in the prescription eyewear business. Eye-X, which had developed into a 26-store chain during the previous three years, was shut down, but the loss of one business line was compensated for by the success of Watch Station. In 1998, after registering encouraging results from operating Watch Station units, the company began experimenting with combination stores, stocking some Sunglass Huts with watches. The experiment was successful, fueling expansion in three directions: the addition of Sunglass Hut units, Watch Station units, and stores that stocked merchandise from both concepts. In 2000, management delved deeper into the watch business, acquiring the 118-store Watch World International chain in a $30 million deal. At the time of the purchase, the company's Watch Station chain consisted of 110 stores and the number of its combination stores reached nearly 200. "The watches appeal to roughly the same demographic as the sunglasses, essentially an affluent young person, but the company is getting higher sales volume and improved return on the converted stores," an analyst noted in a March 3, 2000 interview with Daily News Record.
At roughly the same time the Watch World acquisition was completed, interest from an Italian suitor set the stage for a new chapter in Sunglass Hut's history. Luxottica Group S.p.A., the world's largest eyewear company, was determined to increase its retail presence in North America. In 1995, Luxottica acquired the LensCrafters Optical retail chain, following up with the purchase of the eyewear division of Bausch & Lomb, which included brands such as Ray-Ban, Revo, Arnette, and Killer Loop, in 1999. The company's founder and chairman, Leonardo Del Vecchio, perceived Sunglass Hut as an ideal addition to his sprawling retail empire and he began acquiring the company's shares. In the spring of 2000, a firm Del Vecchio controlled acquired a 5.6 percent stake in Sunglass Hut before informing the company of his buyout intentions at the end of April 2000. Sunglass Hut management flew to Luxottica's headquarters in Milan, but the two sides were unable to agree on a price. Several counterproposals were made until the parties agreed in early 2001 to complete the deal. In February, Luxottica paid $653 million for Sunglass Hut, gaining more than 1,300 Sunglass Hut stores, 430 combination stores, and 228 stores that operated under either the Watch Station or Watch World banner. Added to the 864 LensCrafters stores in the United States and Canada, the acquisition gave Luxottica more than 2,500 retail locations in North America.
Under Luxottica's control, Sunglass Hut became part of the eyewear armada assembled by Del Vecchio. The company maintained its lead as the largest retailer of nonprescription sunglasses in North America during the first years of the 21st century, but expansion took a back seat to other issues as the company celebrated its 30th anniversary and prepared for the years ahead. In 2003, Sunglass Hut, at Luxottica's behest, began to reposition its brand identity, emphasizing the fashion element of its market, which was expressed in the 2004 advertising campaign, "Spontaneous Expression." The campaign, which also included the remodeling of stores, coincided with a promotional partnership with Rolling Stone magazine. The collaboration focused on celebrations for the magazine's "50 Years of Rock and Roll," for which Sunglass Hut sponsored a section featuring musicians wearing Luxottica sunglass frames such as Revo and Ray-Ban. The year also marked the arrival of a new member to the Luxottica optical family. In October 2004, Del Vecchio acquired Cole National, the second largest operator of optical retail stores in North America. The acquisition included more than 2,100 stores operating under the names Pearle Vision, Sears Optical, Target Optical, and BJ's Optical, further consolidating Luxottica's stalwart position in North America.
