Coastal........Gross profit was $22.6 million, or 43% of sales ......................

[Chris Ryser]

Coastal.com Announces First Quarter 2014 Financial Results ..................Total sales in the first quarter were $52.1 million compared to $54.9 million in the same year-ago quarter. Gross profit was $22.6 million, or 43% of sales, compared to $22.7 million, or 41% of sales, in the same period in 2013. The financial information is qualified in its entirety by, and should be read in conjunction with, our audited consolidated financial statements for the fiscal year ended October 31, 2013 and accompanying notes and Management's Discussion and Analysis which may be viewed on SEDAR at www.sedar.com and EDGAR athttp://www.sec.gov/edgar/searchedgar/webusers.htm. see all of it -------> http://investors.coastalcontacts.com/Press-Room/News-Releases/Press-Release-Details/2014/Coastalcom-Announces-First-Quarter-2014-Financial-Results/default.aspx ............one could asssume that E will be the major supplier in lenses as well as frames from now on. Therefore they will not loose anything on that deal.

[Chris Ryser]

Other cut price corporations gross profit ...........................................


Wal-Mart Stores Gross Profit Margin (Quarterly):

24.47% for Jan. 31, 2014

Costco Wholesale	12.40%
Target	26.94%
Kroger See at ---------> http://ycharts.com/companies/WMT/gross_profit_margin	20.77%

[eyemannh]

and why do opticians want to know this?....seeing big chains and online corporates taking the $$ from the small companies that actually employ opticians, and not frame stylists or order-takers over-seas....at least the lens- crappers near me make my job sooo easy....because the are always screwing it up, and the Patient always come back to us.

[Chris Ryser]

and why do opticians want to know this?....seeing big chains and online corporates taking the $$ from the small companies that actually employ opticians, and not frame stylists or order-takers over-seask t....at least the lens- crappers near me make my job sooo easy....because the are always screwing it up, and the Patiient always come baco us.
Pat

That is good and just dont worry about anything.

[optimensch]

if you are correct and GROSS Sales have decreased from the same quarter a year ago, that is a very clear sign that essilor has MASSIVELY overpaid for this huge turkey.
watch essilor find a way to back out of this deal.....would not surprise me at all.
either way, they have lost my business. now if other independent ECPs would follow suit and buy from non=essilor suppliers, the optical world will be better off for it.

[optimensch]

really - a pure online business selling for HUGE multiples of LOSSES (!!!) should have a very high rate of sales growth.
CLEARLY sales growth has stalled, and even gone NEGATIVE.
This era of cheap money and stock market bubble valuations will come to an end one day soon - and these inflated turkey money losing companies valuations will turn to dust. Essilor will look back one day and realize this thing was about 90% overvalued.
Bigger companies than Essilor have made bigger mistakes than this purchase, but this is still one huge egg they have laid.

[edKENdance]

One small thing I've noticed is that the constant stream of CC sponsored advertising on Facebook has stopped completely.

[Chris Ryser]

CLEARLY sales growth has stalled, and even gone NEGATIVE.

This era of cheap money and stock market bubble valuations will come to an end one day soon - and these inflated turkey money losing companies valuations will turn to dust. Essilor will look back one day and realize this thing was about 90% overvalued.
Bigger companies than Essilor have made bigger mistakes than this purchase, but this is still one huge egg they have laid.

When we multiply the $ 55 million of quaterly sales by 4x, we should get an approximate figure for the years sales, that would result in $ 220 millions for the year.

The gross profit in this case would be $ 90.4 millions with a staff of only around 400, representing
43% of their total sales, while WalMart is successful at 24.47%, Costco at 12.40, Target at 26.94 and Kroger at 20.77% of their gross sales.

They have literally moved mountains in the optical retail trade, as single handedly deregulated the optical retail trade in British Columbia into a free for all area and none of the other regulators in Canada have said "bah" so far. The same goes for the USA and other countries. There seems to be a green light for their new way of doing business.

Coastal has had a plan of heavy advertising which very probably was their costliest venture for the last 7 years. However volume went up drastically. We will see how the new owners will proceed with that business.

[Chris Ryser]

One small thing I've noticed is that the constant stream of CC sponsored advertising on Facebook has stopped completely.

That makes sense, they probably have achieved their goal in that area and the new owners also reduced the heavy advertising at this stage.

[m0002a]

Gross profit margin is the difference between sales, and the cost of goods sold divided by revenue. It does not include things like advertising, selling and administrative expenses, capital expenditures (or depreciation on them), etc.

One cannot compare gross profit margin on a grocery store with a general goods store, since groceries typically have a very high turnover of inventory. They don't need high gross margins to make the same return on equity as most other stores. Online companies may have to do considerable advertising to boost sales, which does not factor into gross margins, since it is a selling expense and not a cost of goods sold. GEICO insurance spends over $1 billion dollars a year on advertising. Online travel sites like Priceline, Orbitz, etc typically spend about $300 million per year in advertising, which is about 25-30% of their revenue, and these advertising costs are not included in calculating gross profit margins.

[optimensch]

Gross Profit of 43% alone is not a very valuable metric (sales-cogs). There are many other costs to account for of course in evaluating a business' worth.
The fact that a sexy internet "disruptive" company has already gone to negative sales growth despite the super heavy advertising is very notable.
Essilor will NOT turn this into a money maker simply by bringing in a lower cogs - Clearly already sources cheap china lenses and has very automated labs etc...Essilorr could perhaps turn this profitable by raising prices - but this will drastically LOWER total sales - ie. this will be a profitable, but much smaller company.
Once they (inevitably?) raise prices, more web stores will open to fill the price gap below - knowing that it DOES NOT MATTER whether they are profitable. The exit strategy for any web eyewear has now been laid out publicly --- lose as much money as you can and make as much noise as you can because a huge turkey will come to gobble you up for insane $$$.

[optimensch]

IMHO - Essilor has created a zero sum at best here in canada land.
I believe the risk of alienation by ECPs here could easily cost them as much EBITDA as they will ever gain from CC -
If 10% of their canadian accounts chop them down the way I have it would be enough to wipe out whatever profits could stem from CC.
Of course I've calculated this on the back of a coffee stained napkin with my black sharpie as I contemplate jumping in the shower to go to my actual job.

[Chris Ryser]

Essilor will NOT turn this into a money maker simply by bringing in a lower cogs - Clearly already sources cheap china lenses and has very automated labs etc...Essilorr could perhaps turn this profitable by raising prices - but this will drastically LOWER total sales - ie. this will be a profitable, but much smaller company.

Where are our lenses made these days:

Did you know that percentage wise China produces the least lenses besides South America and North America ?

Whether you buy your new glasses in Thailand and elsewhere, there is a fair chance that the optical lesses you wear, have been manufactured in Thailand. Thailand produces more than 20 % of the close to a billion optical lenses made each year. Besides local independent manufacturers, many foreign countries have factories located in Thailand. These include : Hoya Lens (Japan), Essilor Manufacturing (France), Rodenstock (Germany), Solarlens (Italy), Indo (Spain) and Transitions (U.S.A.). Local total production capacity is 200 million optical lenses.
A known local enterprise is Thai Optical Group, which produces optical lenses under its own brand names, and as an original-equipment-manufacturere (OEM) for other companies and brands. Thai Optical Group has an annual capacity at present of 27 million lenses.
Most of the raw material needed to produce optical lenses, has to be imported into the country, and has to be transported in refrigerated containers. The larger orders the country generates, creates lower costs per unit of production.

Our beloved high class lenses are made mostly in Thailand even for less, than they would be if made in China. However the geographical area defines the cost of making them and not the quality.

So all of us are using cheap lenses. Only that the manufacturers are making tons of money selling them while we still believe that if something is cheap, it comes from China.

So if Essilor supplies the lenses to Coastal, they already make plenty of profit, even if Coastal will not have to raise prices, do not worry about E. The have the brains...............and they have and do make the money.

[optimensch]

"So if Essilor supplies the lenses to Coastal, they already make plenty of profit, even if Coastal will not have to raise prices, do not worry about E. The have the brains...............and they have and do make the money."

Chris - in 2013 CC had sales of 218$million, of which $58million were glasses and the rest, contact lenses. I don't believe Essilor paid this ransom to CC in order to sell acuvues. Sales growth is now negative, as we've seen.
Of the $58 million in eyewear sales the GROSS profit was $26 million. so COGS $32 million. Lets say 60% of that is FRAMES.
That leaves about $12-$13 million for lens purchases, which is the sweet fruit which essilor is making so much money on.
Essilor gross profit (sales - COGS) is about 58%.
AT the very best right now essilor makes $7.5 million /year in GROSS profit off of Coastal's optical lens purchases. This is not NET profit.
Essilor does let's say $200 million (could be more for sure) in sales in canada by selling to ECPs. Again that is $116 million in GROSS profit.

The point here is even if a very small % of ECPs in Canada were to stop or drastically reduce their E purchases, this is a terrible deal for E.
I believe the blow back is coming for them and they will regret this decision.

[optimensch]

Now, if independent USA ECPs start to take note that E is selling into the American market through Coastal - will they too begin to drop E...

Our lens buying has shifted to Zeiss and Hoya, as well as to direct Asian factories. What a message we ECPs would send if just 10% followed suit.....

This is NOT a boycott. This is about NOT spending money with a company that is attacking us - why provide them the ammo to shoot us in the head? It is simply a survival tactic.

No customer EVER walks in asking for Essilor lenses. Their brands are simply not that well-known to consumers. Luxottica however sells consumer brands which people do ask for. It is rather easy to NOT give Essilor business compared to the case with L.

[Chris Ryser]

Now, if independent USA ECPs start to take note that E is selling into the American market through Coastal - will they too begin to drop E...

Our lens buying has shifted to Zeiss and Hoya, as well as to direct Asian factories. What a message we ECPs would send if just 10% followed suit.....

Optimensch.................. In the USA Essilor owns already two of the the largest online optical http://www.framesdirect.com/ for over 2 yearsand http://glasses.com since last year.

That means Coastal is not a new venture for them, they know what they are doing. They also own GKB in India http://www.gkboptical.com/ which is the largest optical company in a country populated by 15 billion
people.

Do you really think that they would purchase one after the other online company, if there would be no money in it ?

Independent's in the USA have known for several years that Essilor has bought into the retail market as well as Luxottica, and nobody has taken any action, neither in Canada.

[Golfnorth]

Optimensch.................. In the USA Essilor owns already two of the the largest online optical http://www.framesdirect.com/ for over 2 yearsand http://glasses.com since last year.

That means Coastal is not a new venture for them, they know what they are doing. They also own GKB in India http://www.gkboptical.com/ which is the largest optical company in a country populated by 15 billion
people.

Do you really think that they would purchase one after the other online company, if there would be no money in it ?

Independent's in the USA have known for several years that Essilor has bought into the retail market as well as Luxottica, and nobody has taken any action, neither in Canada.

I have Chris!

[Joe Zewe]

Coastal.com Announces First Quarter 2014 Financial Results ..................Total sales in the first quarter were $52.1 million compared to $54.9 million in the same year-ago quarter.

I was recently looking at industry data that shows that combined frame and lens sales by independent optical retailers grew approximately 5% in 2013.

In its most recent quarter, it looks like Coastal contracted by a little over 5%.

Are independents steeling away online customers?

[Chris Ryser]

I was recently looking at industry data that shows that combined frame and lens sales by independent optical retailers grew approximately 5% in 2013.

In its most recent quarter, it looks like Coastal contracted by a little over 5%.

Are independents steeling away online customers?

I do not believe so. I think that fierce competition, mainly from Warby-Parker might make the difference. Their website rating has increased dramatically in ratings over the last year, and they are presently number 1.

There are many poeple that still do not know of the existence of on-line opticals. They are mainly in an older age group that is not to familiar with the internet outside their e-mail.

With the OK of Coastals shareholders 2 days ago the Essilor deal will be completed within the next 2 weeks and the independants will have one their most important suppliers also as a direct competitor.