Lagging Economy Gives Sales Boost To Mass Merchants, Warehouse Clubs

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NEW YORK--With discretionary spending tight for many U.S. consumers during much of 2007, the nation’s lagging economy may have helped the seven largest U.S. mass merchants and warehouse clubs with in-store optical departments increase their eyewear/eyecare revenues again last year. These everyday-low-price optical retail players may have been helped by economic pressures that are increasingly causing consumers to look for lower-cost alternatives for their discretionary purchases.

Whatever the reason, during calendar 2007 these national and regional retail players increased their U.S. optical revenues by an estimated combined total of about $135.5 million. Their overall unit count grew last year as well, despite a reduction in leased-optical-departments inside Wal-Mart stores operated by National Vision, as that company’s lease agreements with Wal-Mart continue to expire.

Overall, this group of mass merchants and warehouse clubs generated combined optical revenues that totaled an estimated $2,116.5 million for calendar 2007, nearly 7 percent over their estimated $1,981 million in optical sales and services in 2006 (and a slightly lower growth rate than the prior year’s 8 percent increase over 2005). That aggregate 2007 volume took these giant retailers’ share of the total VM Top 50 U.S. Optical Retailers’ combined sales volume to 30 percent, versus a 29.2 percent share of the Top 50 total in the prior year.

During 2007, these powerful retail players together added an estimated 222 more optical locations--a slightly smaller unit increase than in 2006--moving their combined year-end count above the 4,000-unit mark for the first time, for a combined estimated total of 4,160 in-store vision centers.

As usual, retailing giant Wal-Mart showed the strongest growth in new store locations, adding an estimated 172 new company-owned vision centers in its supercenters and discount stores during 2007; Wal-Mart also expanded its Sam’s Club optical departments by about 15 locations last year.

Wal-Mart’s growth in optical--as well as its overall store growth--slowed a bit during 2007, however; during its latest fiscal year, which ended Jan. 31, Wal-Mart opened 191 supercenters (including 109 conversions or renovations of traditional discount stores into supercenters), seven discount stores and 12 Sam’s Clubs in the U.S.; in the previous year, the company added 279 U.S. supercenters, 15 discount stores and 15 Sam’s locations.

Costco also has continued steady growth in sales and vision-center count, adding 12 more U.S. optical locations during 2007; the warehouse-club operator has already opened three new units since mid-January, and expects to add 14 to 15 more by the time its current fiscal year closes at the end of August, according to company executives.

Aided by financing from owner Sun Capital Partners, Shopko Stores is looking to expand this year as well. The company has already opened one new location in late March, using a new store prototype that puts the optical department right up front; two others are scheduled to open during the rest of this year, as well as three more locations in the Shopko Express Rx format, one of those with optical.

One major shakeup in the mass merchant/warehouse club segment of optical retailing came in March when Refac Optical Group’s U.S. Vision chain, which specializes in leased optical departments in department stores, took over the operation of the leased vision centers in BJ’s Wholesale clubs from Luxottica Retail.

Luxottica executives had announced a month earlier that the company would let its license agreement with BJ’s lapse. (Luxottica had inherited the BJ’s Wholesale lease agreement when it acquired Cole Vision and Cole’s Licensed Brands operation in late 2004.)

Luxottica retains its licensing agreements with Target Stores, however, and continues to expand that business as Target adds more Super Target locations. Luxottica Retail opened 50 new Target Optical locations during calendar 2007; by the end of the first quarter of 2008, its Licensed Brands operation had already added another eight leased optical departments within Target stores.
--Cathy Ciccolella