Cole National Corp. has added a News Release to its Investor Relations web site.
Title: Luxottica Group to Acquire Cole National for $22.50 per share
Date: 1/26/2004 7:01:00 AM
For a complete listing of our News Releases visit:
http://ir.ccbn.com/ir.zhtml?t=CNJ&s=400
Chris Ryser
________________________________________
DLO. NA.IC.I.T.PO
http://optochemicals.com............................. http://arcoatings.com
This is why I am against carrying any Luxottica products. They have Lenscrafters, Pearle Vision, Sears, and Sunglass Hut. I don't think we should carry any of their products including Ray Bans. They will just open a location close to you are try to put you out of business.
Actually they have been since 1995.
I thought everyone knew, it was in all the papers.
What exactly is new about Sears, Target and Pearle other than a new owner?
rep
Last edited by rep; 01-26-2004 at 01:20 PM.
Rep has a point. To the consumer, this is likely to be a non-issue. Realistically speaking, I think frame brand is a relative non-issue as well. Other than Oakley, there really aren't many frame brand names out there with really strong consumer awareness. Patients don't know a Safilo from a Luxottica from a Marchon from a Charmant.
Therefore, it all comes down to value for the money. Now, I'm not a Luxottica rep or anything, but when I managed an Optometric practice I felt that Luxottica was a pretty good frame for the money. I've never noticed LensCrafters deliberately trying to drastically undercut pricing on Lux product (which would hurt them more financially than anyone)- so I never had any compunction about carrying the product.
Retail optical accounts for over 51% of the eyeglasses sold in the United States. Larger frame companies are going to sell product to retail chains. If they don't, they won't be very large companies for very long. If you are offering a unique service to your patients, then LC, WM, and the others aren't competing with you- they are merely competing amongst themselves. By consolidating, the retailers gain economy of scale. This doesn't mean they will be pulling the bottom out of the retail ophthalmic market, however. The investors or owners in these companies demand profitability, and that doesn't occur by slashing prices.
OK, before you all push the panic button:
1) It ain't happened yet. Cole still has to fly it by their shareholders.
2) Cole and Luxottica have to sell the Feds on Eyemed buying Cole Managed Vision, and that will noy be easy.
3) They may not have a problem with Sears, J.C. Pennys and Target, but Pearle is another story. Pearle's main thrust for the last four years has been franchises, not corporate stores. This will make a very interesting problem for the talking heads at Luxottica/Lenscrafters.
4) Pete is right. In the end, the only difference this will make is to the people at Cole who get fired, I can think of one VP who I won't miss. The average consumer will not even notice. Don't forget, Pearle and Lenscrafter's marketing points are pretty much the same.
5) Maybe we will finally get reps that will last for more than a month!
"Coimhéad fearg fhear na foighde" :finger:
Will the Pearle franchise stores go up in price?
Will they get Lux product for 80% off?
Will they eventualy have all the third party insurances?
How big of the Lens Manufacturing Company can Lux afford to buy next?
Pete!?
Last edited by LENNY; 01-26-2004 at 10:36 PM.
The sky is falling, the sky is falling!!!!
I don't have a problemn with Lux owning it all. I think it will make independent retailers such as myself look even more unique.
Big Deal. LC has decent prices, but can't keep good help, Sears is a third party clearinghouse, and Pearl has decent products, but charges a ton more than I do. Who can't compete against THAT!?
Pete Hanlin said:
Rep has a point. To the consumer, this is likely to be a non-issue. Realistically speaking, I think frame brand is a relative non-issue as well. Other than Oakley, there really aren't many frame brand names out there with really strong consumer awareness. Patients don't know a Safilo from a Luxottica from a Marchon from a Charmant.
Therefore, it all comes down to value for the money. Now, I'm not a Luxottica rep or anything, but when I managed an Optometric practice I felt that Luxottica was a pretty good frame for the money. I've never noticed LensCrafters deliberately trying to drastically undercut pricing on Lux product (which would hurt them more financially than anyone)- so I never had any compunction about carrying the product.
Retail optical accounts for over 51% of the eyeglasses sold in the United States. Larger frame companies are going to sell product to retail chains. If they don't, they won't be very large companies for very long. If you are offering a unique service to your patients, then LC, WM, and the others aren't competing with you- they are merely competing amongst themselves. By consolidating, the retailers gain economy of scale. This doesn't mean they will be pulling the bottom out of the retail ophthalmic market, however. The investors or owners in these companies demand profitability, and that doesn't occur by slashing prices.
Lux has a good product, but I don't think you guys hear what I am saying. I am saying that every time you buy a Luxottica product you are supporting your competition. Every time bring an Anne Klein frame into your store, you are give Luxottica more money so they can build up their stores. You might not compete with Lenscrafters, Sears, Pearle Vision, or Sunglass Hut, but they are still competition. Would you walk into Lenscrafters and buy glasses for yourself there? Of course not. Well when we buy Lux frame, we are doing the same thing. I am not against the frame companies who have product in retail stores, but I am against frame companies who own my competition. There are many frame companies out there, so why would I buy from a company who I compete against. It is the same with Walmart. I will not shop at Walmart. I am shocked how much independent business owners, who compete with Walmart, shop at Walmart. I not only talking about our industry, but anyone who competes with them. I hear all of these opticians cry the blues that Walmart did this and Lenscrafters did that, yet they go to Walmart regularly and Lux is their biggest supplier.
Personally, we do not have a Lenscrafters, Pearle Vision, or Sunglass Hut here, and we don't compete with Sears. However, I am not going to sit here and line the pockets of my competition.
Well Said, I agreeFor-Life said:
Lux has a good product, but I don't think you guys hear what I am saying. I am saying that every time you buy a Luxottica product you are supporting your competition.
I agree too, but as I said in another thread, while the increased number of retail outlets will may be nice for Lux and a concern for us, the real "threat" will come from Eyemed. All those Cole Vision discount plans will become poorly paying Eyemed plans. Don't know whether it's worse to be on Eyemed, or not on Eyemed.
Will the Pearle franchise stores go up in price?
Will they get Lux product for 80% off?
Will they eventualy have all the third party insurances?
How big of the Lens Manufacturing Company can Lux afford to buy next?
Pete!?
Actually, each month I read a report that is compiled from all the optical publications out there (saves a lot of reading time). Anyway, I was surprised to read in one that the Essilor International board of directors had taken into consideration the potential for a hostile takeover bid by Luxottica's owners!
Now, as it turns out, it was decided that Luxottica would probably have absolutely no interest in acquiring a lens company like Essilor- however, it is telling to note that- did Luxottica have such aspirations- Essilor may be within their financial abilities. The Del Vecchio's have a LOT of money...
Back to the impact of the latest merger of Cole National and Luxottica-LensCrafters... Let's say you and I both run lemonade stands. However, you have the advantage of having a lemon tree in your back yard. You then purchase the field next to your house, which just happens to contain a sugar cane plantation. You now exercise a lot of control over your lemonade sales (btw, you also increase your exposure if lemonade sales drop, since lemon and sugar sales will also decline).
Now, let's say you want to sell me lemons. In fact, the lemons you want to sell me have competitive quality and price when compared to the lemons at the local supermarket. I can choose one of two courses- either I negotiate a good price for your lemons, or I decide to not support my competition and purchase the lemons from the grocer. Either way, you really aren't going to care very much, because you have a huge worldwide market for your lemons. We've been partners in the past, so naturally you would like to keep my business, but at the end of the day, my lemon purchases are not going to make or break you.
Therefore, it comes right back down to this- do I like your lemons, and can I make money with them? If the answer is yes, I buy the lemons.
Now, I'm not here to make a case for Luxottica- but understand that purchasing or not purchasing Luxottica frames is not going to affect LensCrafters/Luxottica business one bit. About the only person it will hurt is your local Luxottica representative! If it were me, I would consider the Luxottica frames- if the quality is good for the price and you can make money on them, fine. If you decide you can make more money on another line, fine. Just base the decision on sound business logic- not upon emotive responses to the fact that they own optical shops. The same holds true for WalMart and others...
Just my personal opinions...
1) You mean the cost of the franchise or the cost of the product?LENNY said:
Will the Pearle franchise stores go up in price?
Will they get Lux product for 80% off?
Will they eventualy have all the third party insurances?
How big of the Lens Manufacturing Company can Lux afford to buy next?
Pete!?
2) LOl....you do understand that how franchising works?
3) I take CMV and Eyemed. Quite frankly, CMV patients get a better deal.
4) AO/ SOLA
"Coimhéad fearg fhear na foighde" :finger:
I've always thought that AO/SOLA was the more attractive target.
Proud OptiBoarder since 1995!
I could be wrong but:
I don't think Luxottica has an interest in any lens company!
They bought Lenscrafters to sell more frames!
They bought Sunglass Hut to sell more frames!
They started Eyemed to sell more frames!
They are buying Cole to sell more frames!
Buying a lens company won't help sell frames!
Last edited by fletch; 01-27-2004 at 01:46 PM.
I could be wrong but:
I don't think Luxottica has an interest in any lens company!
They bought Lenscrafters to sell more frames!
They bought Sunglass Hut to sell more frames!
They started Eyemed to sell more frames!
They are buying Cole to sell more frames!
Buying a lens company won't help sell frames!
Good summary... the only rationale for purchasing a lens manufacturer would be to further vertically integrate the LensCrafters division- which is only a portion of the larger Luxottica picture. One point that seems to always get lost is diversification also leads to exposure. The more aspects of a single business you invest in, the more sensitive your financial picture is to that particular market. If all you own is a retail chain, and sales go down for a year, you take a hit. If you also own a frame and lens company and sales tank for a year or two, all your businesses take a hit. There's plusses and negatives in everything, but bigger isn't always better...
I don't think AO/SOLA would be the target... I think it would be someone like VisionEase (just opinion, no reason for the thought).
How can you say that purchasing the frames or not purchasing the frames is not going to have an effect. If you look at the Luxottica Income Statement and Cash Flow Analysis, you will see one final form of each. Luxottica is one company, not Luxottica Lenscrafters and Luxottica Frames. The profits that they make from the frames and the profits that they make from the dispenseries will go back into the company to support both. They do not seperate that. If the majority of independent dispenseries decided to not work with Lux, then it will have an effect on them. It probably will not put their dispenseries out of business, as they can support themselves, but they will not use their frame profits to help support or improve their dispenseries. We are in good company nowadays, as we have a lot of competition throughout the frame industry; therefore, the quality and prices of frames are continually getting better. Therefore, there are a lot of companies that I can deal with that will give me just as good of a line as Lux does, or even better.Now, I'm not here to make a case for Luxottica- but understand that purchasing or not purchasing Luxottica frames is not going to affect LensCrafters/Luxottica business one bit. About the only person it will hurt is your local Luxottica representative! If it were me, I would consider the Luxottica frames- if the quality is good for the price and you can make money on them, fine. If you decide you can make more money on another line, fine. Just base the decision on sound business logic- not upon emotive responses to the fact that they own optical shops. The same holds true for WalMart and others...
My top reasons for not buying luxottica product:
1. Why buy product from a company that does not help your overall position in the market when there are plenty of companies that do most of their business with private practices then with chain stores.
2. Buying their products puts them in better position to sell their insurance plans to your smaller local businesses(exspecially if there is no lenscrafters or pearles in your region).
3. Why not separate yourself from a competitor by selling different product then they have in their stores. This includes lenses. By the way lenscrafters uses alot of essilor lens products currently.
4. Any sale they make to you increases their gross profits which they use as a guideline to determine their advertizing budget. The more you buy the more they have in their advertizing budget. I wonder if I can get any of my competitors to give me a % of their sales?
I also would look at this merger as an advantage for us private practices, because it is easier to position yourself competively against one company than multiple companies. Be smarter and more versatile than your compitition and you will always come out ahead.
I don't believe you are going to find a large frame manufacturer who does not sell frames in the retail environment (for the same reason I listed earlier- retail is 51% of the business, and it is difficult to be a large company when you only sell to 49% of the market).
The argument about differentiating yourself from your competition is valid. If you carry the exact same merchandize as your competitors, you aren't offering anything new to entice customers to choose you (of course, your service will probably be better- but our society- for the large part- seems to be putting less value on service these days).
Regarding LensCrafters' use of Essilor product, you are correct- LensCrafters has dispensed a lot of Natural and Ovation product. The major chains also use a LOT of lenses from SOLA, VisionEase, etc. Again, retail represents over half the market for eyeglass lenses.
What LensCrafters does not purchase is Varilux product. They may purchase a few pair from a laboratory every once in a while, but Essilor does not sell them Varilux product. Varilux product is sold only to independent practitioners and is the only major progressive brand which is advertised heavily to the public (Essilor doesn't advertise their non-Varilux brands to the public). So, using the same argument that has been applied to Luxottica frames (i.e., differentiate by using something different than the chains), Varilux would seem to be the way to go.
The question is:Pete Hanlin said:
What LensCrafters does not purchase is Varilux product. They may purchase a few pair from a laboratory every once in a while, but Essilor does not sell them Varilux product. Varilux product is sold only to independent practitioners and is the only major progressive brand which is advertised heavily to the public (Essilor doesn't advertise their non-Varilux brands to the public).
Does Essilor sell Varilux products also under another name, as non brand name, in another differently marked or named box or envelope?
Chris Ryser
________________________________________
DLO. NA.IC.I.T.PO
http://optochemicals.com............................. http://arcoatings.com
Pete, first a general thanks for you consistently thoughtful posts. You make a great contribution here.
I liked your lemonade example but would propose that the views are different at the micro and the macro level. For a single customer deciding if they should or should not buy from LUX, I fully agree with you: There will be cases where it logical to do so. However if a growing percentage of customers make that same decision, the big picture begins to change in a way that has potential longer term risks for each of the small decision makers.
I also agree that Vision Ease might be a more logical potential lens acquisition target for LUX than Sola. There certainly were rumors about Sola-LUX over the past several years but it might be too late. Sola's financial and Wall Street performance has improved dramatically. As an example, the total market capitalization 3 years ago was around $150 million, 1 year ago it was $300 million and today it is nearly $650 million.
In contrast, VE is in serious financial trouble and the banks appear to be looking for a buyer. However there are two factors that might make a LUX buyout unlikely. VE's prime production base is Indonesia. The geopolitical risks there may be unattractive. And perhaps more important, the acquisition of Cole is a giant endeavor. It is likely to be a greater challenge than LC, RayBan, the Hut or OPSM. LUX just might be too busy for a year or so.
It is noted however that a major brokerage firm a month ago not only mentioned Cole as a target for LUX, but also ECCA. It was unclear if they believed both to be targets or if ECCA was a back-up.
A question, Pete - am I correct that the reported 1% sales gain for Essilor in 2003 in North America is a combination of three factors - organic growth, foreign exchange (which hurt reported results), and acquisitions (which helped)?
Last edited by impact500; 01-28-2004 at 01:08 PM.
Owning a lens manufacturing company would make ultimate sense to Luxottica, as it could now control the entire means of production and distribution for it's Lenscrafters stores.
Say they bought Essilor (now ther's a scary thought). Lencrafters could now market Varilux. Independants would say that this would cut them off from the Varilux market. Why? We know, for example that Luxottica markets frames that are for Lenscrafters only and still keeps it's regular lines available to independants.
Lenscrafters would sell Varilux for less that everybody else......
Hey, we're talking Lenscrafters, not Wal-Mart! Lenscrafters is many things, but cheap is not one of them!
A couple other points:
Eyemed as a tool for selling more Luxottica frames: 95% of the frames I sell to Eyemed/ECPA patients are NON Luxottica frames. Unless you have one of the original Premier plus plans, there are no longer any incentives to buying a Luxottica frame. Ask all those poor people that now have ECPA Access how great their plans are!
Luxottica does't help your over all position in the marketplace: got news for ya, neither does Marchon, Safilo, Revolution, Viva or any other major frame manufacturer. They want to sell frame, period! And if they don't sell them to you, they will sell them to somebody else!
We should be different than the other guys: Hum, seems I have been saying that on this Board for the last 3 1/2 years. The best way to compete is not to compete.
"Coimhéad fearg fhear na foighde" :finger:
Does Essilor sell Varilux products also under another name, as non brand name, in another differently marked or named box or envelope?
No.
A question, Pete - am I correct that the reported 1% sales gain for Essilor in 2003 in North America is a combination of three factors - organic growth, foreign exchange (which hurt reported results), and acquisitions (which helped)?
Correct... the 1% growth was actual real growth including all factors- positive and negative. Considering the US market this year, not too shabby! The Euro is just going absolutely bonkers right now, and- as a European based company- that's the currency under which our figures are reported. I'm not positive, but I believe the stats in dollars would have given us 17% growth.
Sola's financial and Wall Street performance has improved dramatically. As an example, the total market capitalization 3 years ago was around $150 million, 1 year ago it was $300 million and today it is nearly $650 million.
Precisely and well stated... SOLA has improved its financial standing- if not through sales- through financial maneuvering. Not that the Del Vecchio's wouldn't be able to purchase SOLA, but it is unlikely- since SOLA was a much more attractive acquisition target a couple years back.
All,
If I've come across a bit hard here, please accept that this has not been my intention. Understand that most of my experience is as a Practice Manager, so I understand your frustrations with the trends of our market. Here is what I'm really trying to point out...
Is the independent practitioner in a tough market right now? Absolutely! Not too many years back, you could set up shop in a town and be either the "only game in town" or at least one of a few choices. Then 20 years ago, the "one hour" shops appeared and the whole ballgame changed. More recently, wholesalers and discounters have entered the market, not to mention the rise of managed care. Life is definitely not as easy as it used to be- and it never will be again.
That's the real point. The Luxottica/LensCrafter purchase of Cole National is not going to put you out of business. EyeMed is not going to put you out of business. WalMart is not going to put you out of business. The only thing that can put you out of business is failing to adapt to the way the market is going. If you continue to focus on things you cannot alter (the merger of retail chains, or the rise of managed care) you will waste energy and time that should be spent redefining your own business strategies.
Refusing to purchase frames from Luxottica is not going to really affect your business. Now, looking at your frame board management system and getting frame ordering under control (tell me you don't have a drawer full of overstock right now) will affect your business. Investigating opportunities like VisionWeb (electronic ordering of inventory and Rx) can give you options that can affect your business. Committing to staff training and selling premium products can positively affect your business. Looking at new forms of automated patient recall can positively affect your business. Perhaps looking into grouping your practice into an organization like Vision Source could provide a benefit.
There are simply too many good things you can do to help your business to waste time harping and worrying about the things you cannot change. Wow, I know that looks preachy (hopefully not condescending), but I KNOW that there is a place for the independent practitioner- there is a market, there are ways to INCREASE your revenues this year but you're going to have to adapt to the times to realize these opportunities.
You guys and gals have to succeed, because as a consumer I want to still have a choice of going to a private practice or a retail chain. Yes, if I have insurance I expect you to honor it. Yes, I am WILLING to pay more for higher levels of service- but I have news... the chains are focusing on higher levels of service too, so you'll have to give me something for my extra dollars if I'm going to come to your office. That something can be consistancy of staff, a reminder card when its time for my exam, or just a free cleaning cloth- but its gotta be something.
I'll stop now... sorry.
I am a Lux rep (10 years)
I think I'm also a nice guy! Unless you read the Football posts! (Sorry Pete)!
I moved to mass when Luxottica bought LC. At that time they had an ad that said they had 31 area locations. Since then they bought out 2 local chains one in R.I. (3 stores) and one in Mass 13 or 15 stores. I got a Lenscrafters ad out of the Boston Globe this week and counted how many area stores they have now! Answer 27!
I hope they go in the same direction with Cole. Until the sale is final we will have no Idea!
I make all of my income off the Independent O's. So I am on your side!
Mikef, I don't think you think that we are taking this against you, but I do want to clarify that what I am saying is not directed at you. I do not even have a problem with Lux's acquasitions, and if it is a good business decision for them that is great for them. I am just saying that it does not make sense that we would buy from our competition. If it has no effect on Lux, great, doesn't make it any more right or wrong.
Now Pete Hanlin, I know you say that one dispensery will not have an effect, and that the Lux rep will just go to another store. Maybe, maybe not, but again that is not the point. The point is that you do not buy from your competition. If two dispenseries realize that, then maybe two more will then see their opinion, then maybe two more. It can build up until it has a huge effect on Lux. It is all about doing your due dilligence, and the ones who do that will not be affected by Lux, but they will also further protect themselves from Lux.
What I want to know is will other companies like U.S. vision loose their contract with CMV? When LC bought Eyemed U.S. Vision was dumped almost the next day. It would only make sense on Luxoticas part to be the exclusive CMV provider and toss out the competitors, if it can be done legally of course. What will they buy next? Microsoft? :)
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