ASHFORD’S TIME COMMITMENT
Byline: Vicki M. Young
NEW YORK — Looking to expand its presence in the watch business with synergistic marketing and sourcing efficiencies, Ashford.com is acquiring online retailer Watchnetwork.com.
The company said Thursday that shareholders of EST Inc., which does business as The Watch Network, will receive at least two million shares of Ashford stock when the deal closes. EST shareholders could possibly receive up to an additional 5.5 million shares of Ashford stock if certain contingencies are met. Ashford said it expects to close on the acquisition later this month.
Kenny Kurtzman, chief executive officer of Ashford.com, said in a statement, “This acquisition will be a key element in our drive to build our relationships with the Swiss watch community, and will support our focus on both excellent retail execution and growth in the corporate business.”
While Ashford sells a variety of fine personal and home decor accessories at its site, watches remain its largest retail category. The company sells direct to consumers online, but is also building its corporate business. The acquisition of Watchnetwork.com, in part, is expected to help Ashford build on the growth of its emerging corporate clientele.
The acquisition is the latest in the consolidation of the watch business in terms of retail concepts. Just last year, Sunglass Hut International, the owner of the Sunglass Hut & Watch Station stores, consolidated two of the largest retailers in the specialty watch arena when it bought Watch World International.
Ashford said the acquisition will enable it to add more direct brands to its already extensive selection of watches, as well as improve the economics of the category with better sourcing, more advantageous buying terms and marketing support. In addition, the acquisition is expected to allow Ashford to expand its presence in some of the higher-margin growth areas, such as high-end collector watch sales and the watch strap and watch service businesses.
Scott Hockler, president and ceo of Watchnetwork.com, said in a statement, “We believe that the combined company strengthens Ashford’s position as the number-one destination for watch buyers worldwide.”
To be sure, Ashford has been in an acquisition mode, as well as on a marketing spree. Right after the start of 2001, Ashford said it would acquire Guild.com, an online source of original, contemporary art. Guild.com, which will receive 8.7 million shares of Ashford stock, is expected to become cash positive for Ashford within six months of closing. A spokeswoman for Ashford said she expects the Guild.com deal to close “in a month.”
In addition to acquisitions, the company has recently announced marketing initiatives, such as tie-ins with Amazon.com and Northwest Airlines.
In the third quarter ended Dec. 31, Ashford widened its losses to $40 million, or 87 cents a diluted share, compared with a $19 million loss, or 51 cents a share, in the comparable year-ago period. Sales were up 38 percent to $27.8 million from $20.1 million. Ashford said cumulative customer accounts grew to 205,023, a 210 percent increase from comparable year-ago figures, and a 42 percent sequential increase from the prior quarter that ended Sept. 30. The company also said its sales and marketing expense declined to 30 percent of sales from a high of 79 percent for the same quarter a year ago. The company also reduced customer acquisition costs by 74 percent from the comparable year-ago quarter.
In the nine months, the loss was $119.7 million, or $2.63 a diluted share, versus $30.8 million, or 97 cents, in the the comparable year-ago period. Sales rose 88 percent to $52.9 million from $28.1 million.
Ashford carries more than 20,000 new and vintage watches, diamonds, designer jewelry and other personal accessories and home decor items. The selection includes more than 400 brands, including well-known brands such as TAG Heuer, Oakley and Calvin Klein. The site also includes product from new designers such as Lambertson Truex, Jeanine Payer and Technomarine.