Oakley Inc.'s shares tumbled to a new low on Thursday after the sunglass manufacturer warned that continued weak demand from its single largest retail customer would push fourth-quarter earnings far below analysts' expectations.
The decline, Oakley's third significant daily drop in recent months, sparked renewed speculation on the company's ability to continually produce cutting-edge designs--and whether the market for stylish-but-expensive eye wear is getting saturated.
Oakley fell to a new low of $10.625 in New York Stock Exchange trading Thursday before closing at $11.625, down $3.625 per share, or nearly 24%, in heavy trading.
Oakley executives blamed the fourth-quarter results, which are expected to fall below analysts' estimates of 16 cents per share, on slack demand at Sunglass Hut International, the powerful retailer that typically drives a third or more of Oakley's overall sales.
Oakley said it halted further shipments to Sunglass Hut for the remainder of the fourth quarter--which includes the critical holiday shopping season--after the chain requested that shipments be delayed.
Oakley remains profitable, but its fortunes--like those of many sunglass companies--are tied to the success of Coral Gables, Fla.-based Sunglass Hut, which fell 87.5 cents to $7.375. The stock hit a high of $35.94 in March.
In October, Oakley stock fell 20% one day after Sunglass Hut announced that its third quarter results would be lower than expected. Days later, Oakley fell another 14% as nervous investors digested the company's disappointing third-quarter results.
A fifth of Oakley's 10,000 retail locations are Sunglass Hut stores, and each time the chain reports bad news, analysts said, sunglass company stocks get hammered.
"The industry is clearly lagging, and justifiably so, as investors had bought these as growth companies," said Thomas A. Filandro, an analyst at Gerard Klauer Mattison.
Wall Street also frowned Thursday on Gargoyles, a Kent, Wash.-based sunglass company. The stock, which had reached an all-time high of $23.50 just months ago, fell $1 to $8.625.