Oakley Suffers as Luxottica Takes Advantage of House Brands

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Oakley Suffers as Luxottica Takes Advantage of House Brands
Shares of sunglasses maker Oakley ( OO) plummeted on news that sales and earnings would suffer from an unexpected drop in orders from Luxottica Group ( LUX), the company's largest customer.cheap Oakleys
Oakley tumbled $6.46,or 36.9%, to $11.03. As a result of the order shortfall, Oakley expects third-quarter sales of $114 million to $118 million, with earnings of 21 cents to 23 cents a share. Wall Street was anticipating earnings of 32 cents a share, a nickel ahead of the 27 cents Oakley brought in a year ago.
The company projected sales of $95 million to $100 million in the fourth quarter, with earnings of 13 cents to 16 cents a share. Oakley previously forecast earnings of 21 cents a share in the period. Sales totaled $93.3 million and earnings were 14 a share in the year-ago quarter.
Luxottica purchased the Sunglass Hut retail chain earlier this year. "Since the acquisition, we have made every reasonable effort to establish a mutually beneficial business partnership with Luxottica, but it is clear from this week's surprising actions that our efforts have been ignored," Oakley said in a statement.
"Decisions communicated to us just this week by Luxottica management make it clear that they do not intend to continue participating in our brand's success at the same level as we understood from them as recently as our meeting together three weeks ago, opting instead to favor their own in-house brands."
Luxottica's acquisition of Sunglass Hut worried some Oakley followers when the deal was announced. Apparently, some of those concerns had merit. At the time, Oakley said it believed that its products would continue to be carried in Sunglass Hut stores.
"Based on preliminary discussions we have held with Sunglass Hut management within the past 24 hours, we have every reason to believe they will continue to support Oakley as a leading brand with a powerful consumer following within their worldwide store base," Oakley said in February.