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Thread: Sears and K Mart

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    OptiBoard Apprentice eyecare4U's Avatar
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    Idea Sears and K Mart

    Here's an interesting situation we could all ponder. With K Mart buying Sears, OH............. what ever will happen to it's optical with the new owner LUX? WILL K Mart venture back to the Optical business like it had with SIGHT&SAVE . Or will LUX buy K MART or visa versa. INTERESTING stay tune...getting good. LooK out Reschuffling TIME AND lets make a DEAL. WHAT senario do you HAVE?
    rey

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    Underemployed Genius Jacqui's Avatar
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    Don't know what will happen, it could get interesting.

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    Martha Stewart eyewear!

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    Bad address email on file Mikef's Avatar
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    US shoe owned the Kmart optical shops. The first thing Lux did when they bought the company was to close the Kmart opticals.

    I would never say never BUT

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    Bad address email on file Mikef's Avatar
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    Plus:

    Before Lux bought Cole, Cole said they would be closing many of the Target Opticals.

    Makes no sense to try again!!!!!!!

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    Just An Optician jediron1's Avatar
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    Mikef said:

    Before Lux bought Cole, Cole said they would be closing many of the Target Opticals.

    Makes no sense to try again!!!!!!!

    Would make sense if you want market dominence. If you satuate an area enough you can drive out your competition and once you have you can pull back the stores you don't need. Similar to what Wm does when they go into an area, especially a small town area, where they literally drive out all mom and pop stores.:hammer:

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    If a store is not profitable, does it really have a hand in "driving the competition out"? No sense in opening new stores when they are dealing with many that are already no delivering the profits.

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    Bad address email on file Mikef's Avatar
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    Quote Originally Posted by jediron1
    Mikef said:

    Would make sense if you want market dominence. If you satuate an area enough you can drive out your competition and once you have you can pull back the stores you don't need. Similar to what Wm does when they go into an area, especially a small town area, where they literally drive out all mom and pop stores.:hammer:
    Jeniron1

    History: Luxottica has closed more stores than it has opened in the last 10 years!

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    Master OptiBoarder chm2023's Avatar
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    Quote Originally Posted by Mikef
    Jeniron1

    History: Luxottica has closed more stores than it has opened in the last 10 years!
    My guess is that Sears/K-Mart plan to re-define both entities, too much cross over as they now exist. What happens re optical will follow from that.

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    Just An Optician jediron1's Avatar
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    The name is Jediron1. Where did you get your history lesson? At least in our area Lenscrafters has not closed one store. Sunglass Hut, lenscrafters or what ever else they own they have not closed one. Now may be in "No Where land" some place in the outer reaches, but where there are people I have not seen or read of any closings!
    Last edited by jediron1; 11-21-2004 at 05:51 PM.

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    chm2023: <<My guess is that Sears/K-Mart plan to re-define both entities, too much cross over as they now exist. What happens re optical will follow from that.>>

    Well stated.

    Among the possibilities -

    Many Sears stores may shift from malls into Kmart locations. This would help Sears shift their geographical mix away from malls which are losing overall consumer market share. This would help balance LUX's store geography.

    Kmart might get back into optical. Much has happened since their previous effort - especially WalMart and Costco. Both are beating Kmart overall and have done well in optical.

    The nightmare for LUX would be the new Sears-Kmart to totally copy the WalMart business model and do optical in-house. The Sears leases have very short termination notice requirements. The available cash is there to do it.

    It is also possible that they might decide to exit optical totally. This actually might be the best decision. There are too many stores in our industry and it creates dilution and weak margins.

    There is also the possibility that Sears-Kmart may be more valuable as a real estate play than as a retailer. If the retail game plan fails to reinvigorate these two large but weak players over the next few years, we might see them disappear. The financial yield from the real estate might be greater than from continuing the Sears-Kmart decline.

    It will be interesting to watch.

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    Bad address email on file Mikef's Avatar
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    Quote Originally Posted by jediron1
    The name is Jediron1. Where did you get your history lesson? At least in our area Lenscrafters has not closed one store. Sunglass Hut, lenscrafters or what ever else they own they have not closed one. Now may be in "No Where land" some place in the outer reaches, but where there are people I have not seen or read of any closings!
    Luxottica did close all the Kmart stores 10 years ago! (Sight & Save)


    In 1995 there were 31 Lenscrafters in my area.(Boston) They had a comercial that said 31 area locations. Since then they bought Eye World and Vision Corner. They closed stores in Shrewsbury, Newton, Framingham, Marlboro, Saugus, Brockton and Providence RI to name a few. In fact the Vision corner they closed in Providence is now an Independent shop!

    Today there are 29 area Lenscrafters. And I have heard they are closing two more Lenscrafters. As far as Sunglass Hut I really have no Idea. I don't follow them as much. But I have noticed some malls that had 2 Huts now just have one!

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    Just An Optician jediron1's Avatar
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    That maybe in your area, but again in our area (Western N.Y.) the HUTS and LENSCRAFTERS are still going strong.

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    As of the 1995 acqusition of US Shoe, there were around 600 Lenscrafters stores. There have been acqusitions, store closings and new stores since then. Over the past two years store count has been fairly flat:

    12-31-02 882
    12-31-03 877
    9-30-04 887

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    KMart and Sears

    Martha Stewart Eyewear would be a great idea, but I ve never seen a picture of Martha in glasses, which, is unusual at 62...........maybe they can get Ellen to be a spokesperson, she looks great in her glasses

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    What's up? drk's Avatar
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    Not to root against Luxottica , but I DID say that this Cole acquisition could be a liability.

    IMHO, while the "lives" they bought from Cole Vision will be beneficial (at least in the short term), the retail outlets are generally in shabby shape. If they can't operate them profitably, they'll cut their losses, which would be HUGE. If Sears is purchased by K-mart, and they want to do optical on their own, eventually, or want to revamp their business model to exclude concessionaires (more likely), well...so sorry, Luxottica!

    Meanwhile, I'm sure Sears-mart is happy to have all the concessionaire $ they can rake in.

    (PS: IMHO, buying "lives" is like buying old patient records: a bad deal, unless cheap, cheap, cheap.)

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    I can't see them really getting into the optical market at this point. I think they are just trying to expand themselves to fight Walmart. The only thing I can see happening is if Lux sees that there is a potential to expand into K-Mart they can now that they have Cole. Again, not a problem.

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    Just An Optician jediron1's Avatar
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    drk said: IMHO, while the "lives" they bought from Cole Vision will be beneficial (at least in the short term), the retail outlets are generally in shabby shape. If they can't operate them profitably, they'll cut their losses, which would be HUGE. If Sears is purchased by K-mart, and they want to do optical on their own, eventually, or want to revamp their business model to exclude concessionaires (more likely), well...so sorry, Luxottica!

    From what I have found out about Cole I doubt it if Sears would want to sever that relationship. 1. From what I found out Cole gives Sears a fairly healthy check at the end of every year. (this basically is for doing nothing on Sears part.) 2. Cole does have agreements with Sears that would need to be broken then bought out. They are not as cut in dry as someone on one of the other threads tried to say they were. These are contracts and being contracts there are certain clauses that pertaining to closings. Im sure there would be a sizable penalty imposed if Sears tried to break the contract.:hammer:

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    jediron1: <<Cole does have agreements with Sears that would need to be broken then bought out. They are not as cut in dry as someone on one of the other threads tried to say they were. These are contracts and being contracts there are certain clauses that pertaining to closings. Im sure there would be a sizable penalty imposed if Sears tried to break the contract.>>

    No need to break any contracts. Give notice and await for the 90 days (?) to pass. No payout to Cole/LUX would be required.

    I am not predicting that Sears will remove LUX but it is logical that the new owner of Sears will review all operations. WalMart is the key driving force behind the Sears-Kmart deal. Since WalMart operated optical both in-house and with leases and then went in-house as the best, i.e. the most profitable model is not proof that the same would be true for Sears-Kmart but it raises the possibility. It is also possible that they might decide to exit optical and use the floor space for something else.

    Sears was failing. It is reasonable to assume that the status quo will change in many respects. The same is true on the Cole side. As of Jan. 2004, the accumulated deficit and other comprehensive losses totaled $175 million. The company has been losing money for a long time. The business models for both Sears and Cole are not set is stone, they are in mud and it has started raining again in the form of new owners on both sides.

    From a Cole SEC filing: "Cole Vision operates departments in various host stores paying occupancy costs solely as a percentage of sales. The Sears agreement contains a short-term cancellation clause."

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    Just An Optician jediron1's Avatar
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    impact500 said:

    No need to break any contracts. Give notice and await for the 90 days (?) to pass. No payout to Cole/LUX would be required.

    Thats if the contract expires in your short time form. Or as you say give notice and wait, but that assumes that both parties will agree to those notices. Most contracts have clauses that state when notice is given there may also have to be reparations made to said party. Sears may want to wait for each lease to come due and not renew it. That would be the simplest and non cost effective way of ending the relationship. I had heard a while ago that is what Wal-mart did to the vendor that was running there instore optical shops. They waited till the lease was up and would not renew the lease.

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    jediron1, your info on WalMart's agreement with National Vision is basically correct. The phase out process from National Vision to WalMart could take as long as a further 15 to even 20 years to be completed per the contract. The contract between Sears and Cole is a totally different animal. Notice given, the clock ticks (90 days is a frequent rumor but it is clearly "short term") and then it's over.

    <<reparations>>

    Nope.

    Again, I'm not predicting that it will happen, only pointing out that it could. Sears is in total control per the original agreement of many years ago.

    An interesting statement from a 1997 Cole SEC filing:

    " .... the vast majority of Cole Vision locations are operated under the names of their respective host stores under leases or licenses, from such host stores, that are terminable upon 60-90 days' notice. In addition, ColeVision operates its freestanding stores under the name "Sears Optical" pursuant to a license agreement with Sears that is cancelable on 90 days notice. The Company has enjoyed excellent relationships with its major host stores for over 40 years and has never had a lease terminated, other than in connection with a store closing, relocation or major remodeling. However, there can be no assurance that relationships with major host stores will remain stable in the future or that any lease or license agreement between a host store and the Company will not be terminated or adversely changed. There could be a material adverse effect on the Company if the relationship with any major host store were to terminate or change materially."

    Sears has failed. There will soon be a new controlling owner. Some things will remain unchanged but others will be turned upside down. The optical side of Sears is just one of many open questions now. Status quo for some 47 years will not assure celebration of a 50th anniversary.

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    Master OptiBoarder chm2023's Avatar
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    Quote Originally Posted by impact500
    jediron1, your info on WalMart's agreement with National Vision is basically correct. The phase out process from National Vision to WalMart could take as long as a further 15 to even 20 years to be completed per the contract. The contract between Sears and Cole is a totally different animal. Notice given, the clock ticks (90 days is a frequent rumor but it is clearly "short term") and then it's over.

    <<reparations>>

    Nope.

    Again, I'm not predicting that it will happen, only pointing out that it could. Sears is in total control per the original agreement of many years ago.

    An interesting statement from a 1997 Cole SEC filing:

    " .... the vast majority of Cole Vision locations are operated under the names of their respective host stores under leases or licenses, from such host stores, that are terminable upon 60-90 days' notice. In addition, ColeVision operates its freestanding stores under the name "Sears Optical" pursuant to a license agreement with Sears that is cancelable on 90 days notice. The Company has enjoyed excellent relationships with its major host stores for over 40 years and has never had a lease terminated, other than in connection with a store closing, relocation or major remodeling. However, there can be no assurance that relationships with major host stores will remain stable in the future or that any lease or license agreement between a host store and the Company will not be terminated or adversely changed. There could be a material adverse effect on the Company if the relationship with any major host store were to terminate or change materially."

    Sears has failed. There will soon be a new controlling owner. Some things will remain unchanged but others will be turned upside down. The optical side of Sears is just one of many open questions now. Status quo for some 47 years will not assure celebration of a 50th anniversary.
    My memory on this may be a bit weak, but did Sears not enjoy a rebound in the last 15 to 20 years? I want to say Penneys took the road of being more traditional department store (soft goods, expanded cosmetics) and Sears built more on the appliances, hardware, automotive end. I have not really followed this but would guess the emergence of the mega-electronics and mega-home centers hit them really hard.

    This will be interesting to watch. IMO the Walmart model has peaked and it would not make sense for the Sears/K merger to go down that path. The question that intrigues me is: do two weak (or at least weakening) retail brand combine to make one strong one, or do them hasten the demise of both?

    Certainly glad this isn't my problem!!!

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    chm2023: <<My memory on this may be a bit weak, but did Sears not enjoy a rebound in the last 15 to 20 years?>>

    Sears has dropped from being the #1 US retailer to #4.

    Sears US comp store sales:

    2001 down 2.3% from 2000
    2002 down 5.6% from 2001
    2003 down 2.7% from 2002

    Jan/Sept. 2004 down 1.9% from Jan/Sept. 2003
    July/Sept. 2004 down 4.0% from July/Sept. 2003

    The Sears-Kmart deal is a transaction based upon retail weakness not strength. That hints at changes forthcoming.

    chm2023: <<The question that intrigues me is: do two weak (or at least weakening) retail brand combine to make one strong one, or do them hasten the demise of both?>>

    Well stated. May well depend upon the degree to which the new entity is different from the current parts. The smaller the change, the lower the odds.

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    Changes coming for sure.....................

    Quote Originally Posted by impact500

    The Sears-Kmart deal is a transaction based upon retail weakness not strength. That hints at changes forthcoming.

    .
    This is part of a world wide trend of one large corporation absorbing another. We read and see it every other day. The banks are doing it, insurance companies, the automobile industry.

    First thing happening after a mega merger is to make the operation leaner and more efficient, which is usually by consolidating management by cutting staff big time.

    Dont kid yourself, the K-Mart people have proven to be smart and ruthless in a way, they will probably have all the plans for the future ready in a drawer.

    They will either have an even larger efficient corporation or have eliminated another competitor. K-Mart looked like it was disapearing into thin air, pushed out by Wal-Mart. This could be a big time comeback.

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