Ritz Camera Centers Inc. of Beltsville, the nation's largest chain of full-line camera stores, has acquired 44 additional Fotomat Corp. stores in exchange for cash, which will expand the number of its outlets by 40 percent.
By selling the stores--all of which are full-line operations in contrast with the standard Fotomat kiosk--Fotomat will end its involvement in camera retailing.
Neither Ritz nor Fotomat would reveal any sales figures.
Ritz Camera, a family-owned business that eight years ago had only 28 stores, will now operate 155 stores nationwide. The newly acquired Fotomat stores will expand the chain's territory by covering previously unserved markets, said company president David M. Ritz.
At the same time, the sale will provide Fotomat, which has been in earnings difficulties lately, with sorely needed working capital, according to an investment analyst who asked not to be identified.
However, Fotomat President Richard Kernan denied that the purpose of the sale was to acquire cash and said Fotomat is unloading the full-line stores in order to concentrate on the photofinishing business.
The analyst estimated that if approximately $50 worth of merchandise is sold for each square foot of selling space, and if each store sold to Ritz has an average of 1,100 square feet of selling space, the total value of the acquisition would be about $1.21 million. Kernan declined to reveal the volume of sales at the Fotomat stores bought by Ritz Camera.
The acquisition agreement, which was signed June 29 and became effective yesterday, gives Ritz an entry into 35 new markets in Dallas, the Detroit-Ann Arbor area, Cleveland, Boston and other parts of Massachusetts and cities in Illinois, Indiana and Connecticut, the company said.
The remaining nine stores are in Los Angeles and San Diego, where Ritz Camera already has shops.
With the acquisition, Ritz Camera continues a strategy of aggressive expansion, Ritz said, estimating that about 60 percent of new Ritz Camera stores opened in recent years have been added through purchases.
Fotomat got into trouble by expanding into videotape sales as a means of safeguarding itself from competition from self-developing photo products, analysts said.
The videotape market proved more competitive than expected and Fotomat began to lose money, which led to a management shakeup, according to analysts.
Citing public figures, they said Fotomat now has about $8.5 million in working capital. Its 1982 sales were $235 million.
Kernan said Fotomat lost $6.7 million in its 1983 first quarter and that the full-line camera stores have been losing money for the last three years.
"The entry into video perhaps took management off the mark," he said, adding, "We were just the crusaders, if you like, and most crusaders I know end up with a back full of arrows."
He said, however, that Fotomat is no longer in the videotape business.
Kernan said thin profit margins on camera-equipment sales and higher improvement costs necessary for the operation of a full-line store contributed to the failure in camera-store operations.
"What we're saying is we want to spend our time on business we know," he said, referring to the photo-processing business.
And, according to an analyst for First Manhattan Co., the photo-processing industry currently is a healthy one. "The processing business, as the economy recovers, could have significant potential," said Brian R. Fernandez.