Lenscrafters Inc. Business Information, Profile, and History

Company Perspectives:

The L Guidance--We will help you navigate through the vast styles and sizes; Honesty--We will listen to what you want, tell you what works and even what doesn't; Knowledge--We know eyewear and can help you f ind what works best with your face, coloring and personality; Respect for your busy schedule. We know you're busy so we will help you find the glasses you love, quickly and without rushing you.

History of Lens Crafters Inc.

A subsidiary of Italy's Luxottica SpA's Retail group, U.S.-based Lens Crafters Inc. is North America's leading retailer of eyewear. The com pany was a pioneer of the "superoptical" segment during the 1980s and has grown to more than 880 stores in the United States, Canada, and Puerto Rico. Most of the company's stores are found in shopping malls and offer one-hour service, eye exams, contact lenses, and sunglasse s. The company experienced significant growth under United States Sho e Corporation during the 1980s and early 1990s. Luxottica bought the company in 1995 and since that time has been building an optical empi re by purchasing Sunglass Hut International Inc., OPSM Group, and Col e National Corporation.

Company's Founding in 1983

LensCrafters was founded in 1983 by Dean Butler, a 38-year-old who ha d previously worked at Procter & Gamble (P&G). A knowledgeabl e marketer, Butler had managed the Ivory liquid, Cheer laundry deterg ent, and Folger's instant coffee brands for the venerable Cincinnati consumer goods company.

At that time, the eyewear industry was on the cusp of radical change, a shift spurred by two vital legal decisions passed down in the late 1970s. The Federal Trade Commission freed patient choice by compelli ng vision professionals to give patients their prescriptions. A separ ate legal decision allowing advertising in this segment set the stage for the "superoptical" movement.

Butler was not the first to perceive this opportunity. New Jersey-bas ed Eyelab gets credit for pioneering the concept, which featured mall -based stores, extended hours, onsite lens-grinding labs, thousands o f frames, and rapid turnaround. Butler left P&G and launched his first 7,500-square-foot Precision LensCrafters (later simply LensCraf ters) store just across the Ohio River from Cincinnati in Florence, K entucky, in 1983. He was soon joined by another P&G colleague, Da niel Hogues.

Butler's version of the superoptical concept promised "glasses in abo ut an hour." Since his stores were located in malls, customers could while away that hour shopping with other retailers. Guarantees helped instill confidence in customers who were accustomed to dealing with doctors. The "no risk sales guarantee" gave clients a full refund on glasses returned within 30 days of purchase. LensCrafters also offere d to match competitors' prices as well as free lifetime maintenance. In a 1986 interview with Forbes magazine, Butler noted, "Marke ting eyewear isn't much different from selling coffee. Retailing is w hat you do when customers walk into the store. But with a new idea, m arketing comes first. Marketing is how you inspire customers to come to your door."

Notwithstanding naysayers who were convinced that the concept would f ail, LensCrafters' first-year sales totaled $2 million. With supp ort from a cadre of investors, the partners expanded to three outlets by early 1984, when their success drew the attention of a powerful b acker: United States Shoe Corporation.

Acquired by U.S. Shoe in 1984

Also based in Cincinnati, U.S. Shoe was a billion-dollar company. Ove r the course of its more than 100 years in business, U.S. Shoe had di versified from its core footwear into retail apparel. Chains included Casual Corner and Petite Sophisticate. U.S. Shoe used its strong cas h flow to fund a rapid expansion of LensCrafters.

With this backing, LensCrafters came not only to dominate its own ind ustry, but also to take precedence over its own parent company's foot wear and apparel businesses. From 1984 to 1987, LensCrafters' sales m ultiplied from $13.6 million or 1 percent of U.S. Shoe's annual r evenues to 241 units and $305 million in sales. In 1986 alone, th e company opened new stores at the rate of almost two per week. In 19 87 Bannus B. Hudson, an 18-year alumnus of Procter & Gamble who h ad come to work for LensCrafters in 1985, took the helm. (Founder Dea n Butler had by this time resigned from the business. Following the e xpiration of a noncompete contract, he opened a rival chain dubbed Le ns Lab.) By the end of 1989 Hudson had increased the number of stores to more than 350 and boosted sales to $532 million or more than one-fifth of U.S. Shoe's total revenues. Perhaps more important, Lens Crafters' $30 million net income constituted nearly 40 percent of its parent's operating earnings by that time. That year U.S. Shoe tr ied to divest its lagging footwear business, but could not find any t akers.

LensCrafters and other eyewear retailers were not content merely to w ait for market growth in the form of aging baby boomers with deterior ating eyesight. Instead, they promoted the concept of eyeglasses as f ashionable accessories in the same category as shoes or jewelry. This concept not only encouraged sales of designer eyeglasses, but also o wnership of multiple pairs of glasses. As Butler told Forbes i n 1986, "Right now, most people buy a single pair of glasses every tw o or three years. But what if we can sell eyewear as fashion, a torto iseshell pair for work and some wire rims for play? We could double p er capita sales of glasses."

LensCrafters also focused strongly on maintaining a positive corporat e culture. This ideal was embodied in a list of nine Core Values enum erated in 1986. They included: nurturing individuals; building on peo ple's strengths; accepting and learning from mistakes; focusing on wi nning, not individual scoring; pushing breakthrough ideas; thinking a nd acting like a long-term owner; demanding highest possible quality; constantly, measurably improving; and acting with uncompromising int egrity. A tenth value, having fun, was added in 1990.

New Decade, New Leadership, New Strategies

By 1990, LensCrafters had grown to become U.S. Shoe's "crown jewel." That spring, Bannus Hudson succeeded Philip Barach as CEO of the pare nt company, and 30-year-old David M. Browne advanced to president and chief executive officer of LensCrafters. Browne, a five-year veteran of Procter & Gamble, joined LensCrafters in 1986 as the vice-pre sident of the recently acquired Optica chain of upscale eyewear shops . He inherited a company that, while still successful, was faced with a number of challenges. The new CEO had hoped to launch 100 new stor es in 1990, but was forced to scale back that aggressive growth strat egy when LensCrafters suffered its first-ever sales decline. The comb ination of the Gulf War and recession eroded consumer confidence whil e heavy competition squeezed prices and profits. Instead of pursuing growth, Browne was forced to restructure. He held job cuts to less th an 100 of the company's 10,000 positions by relocating hundreds of em ployees. In spite of its difficulties, LensCrafters surpassed Pearle Vision Centers to become America's largest chain of eyeglass retailer s in 1992, with an estimated $660 million or 4.5 percent of marke twide sales volume.

The company's new strategy targeted the bargain-minded customer via a joint venture with Kmart Corporation. In 1993, LensCrafters launched Sight & Save leased departments within existing Kmart stores. Th is new retail venture allowed LensCrafters to enter the discount segm ent without devaluing its namesake stores' focus on value and conveni ence.

LensCrafters' charitable activities started in 1988 as an extension o f its optical services. In cooperation with Lions Clubs International , the company recycled used eyeglasses through its "Give the Gift of Sight" programs. Among other activities, this charity fashioned more than three million pairs of eyeglasses for disadvantaged people--espe cially children--in the United States and abroad from 1988 through 19 96. In 1993, the company launched its Hometown Day project, wherein e mployees of each of the company's stores donated their time and exper tise to needy recipients in their own communities. That same year CEO Browne committed the company to providing free eyecare to one millio n people by LensCrafters' 20th anniversary in 2003. It was almost hal fway there by the end of 1997. The company's charitable activities ea rned it a Volunteer Action Award from President Bill Clinton in 1994.

International expansion proved a mixed bag for LensCrafters. The comp any became the first U.S. Shoe affiliate to establish an overseas pre sence in 1988 with the launch of nine Canadian superstores. In 1993, it became Canada's largest optical retailer with the acquisition of t he 22-store Eye Masters Ltd. chain. The company fared well on its hom e continent. By the end of 1994, it had nearly five dozen Canadian lo cations. A foray across the Atlantic Ocean did not go as well. In 199 0, LensCrafters opened stores in the United Kingdom. But by the fall of 1993, the company was ready to close all its U.K. stores, includin g locations under the LensCrafters and Sight & Save names.

LensCrafters also grew through domestic acquisitions during this peri od. It purchased Hourglass Inc. in 1990 and acquired Tuckerman Optica l, a midwestern chain, in 1994. LensCrafters spent an estimated $ 45 million to $50 million on 12-year-old Opti-World Inc., a 59-st ore Atlanta-based chain, in March 1995.

Acquired by Luxottica in 1995

Italian eyewear manufacturer Luxottica SpA brought a $1.4 billion hostile takeover bid for U.S. Shoe in 1995. Owned by the Del Vecchio clan, Luxottica was not interested in U.S. Shoe's footwear or appare l, it was looking to round out its vertically integrated eyewear comp any to include retailing. Prior to its own acquisition, U.S. Shoe sol d its footwear interests to Nine West Group Inc. for $600 million . Unable to find a buyer for U.S. Shoe's 1,300 money-losing apparel r etailers, Luxottica transferred this division to a separate Del Vecch io interest.

The LensCrafters acquisition was a high-stakes gamble for Luxottica. The Italian company risked wholesale defection of its core customers- -independent opticians and competing eyewear chains. Although many in these two groups did drop the Italian firm from their roster of supp liers, Luxottica was able to increase its sell-through at LensCrafter s stores from 5 percent of frame revenues in 1995 to 43 percent by th e end of 1996. In fact, the addition of LensCrafters more than double d Luxottica's annual revenues from ITL 812.7 billion in 1994 to ITL 1 .8 trillion in 1995.

In its first year under Luxottica, LensCrafters added 70 stores and 1 ,000 employees. In its zeal to focus on designer and high-end eyewear , however, Luxottica pushed LensCrafters to shutter its Sight & S ave chain in 1996 and invest the proceeds in store refurbishings. Len sCrafters also was testing new retail concepts, including Specttica i n-store areas and SunCrafters sunglass kiosks. These outlets speciali zed in prescription and nonprescription sunglasses in airports and ot her high-traffic venues.

Despite the spinoff of both the U.K. and the Sight & Save operati ons in 1995 and 1996, LensCrafters' sales continued to grow rapidly u nder Luxottica. Revenues advanced slightly more than 5 percent from 1 995 to 1996 to total $903.5 million, and the subsidiary was expec ted to contribute $1 billion to its parent company's top line in 1997.

On the occasion of LensCrafters' tenth anniversary in 1993, CEO Dave Browne said, "Looking to the future, I'm sure of only one thing--the inevitability of constant change and our readiness to face it. It wil l be harder to stay on top than it was to get there. We will have to recreate ourselves continuously in order to maintain our leadership p osition in an ever-changing category." That statement continued to ho ld true as the company faced the turn of the 21st century.

Lenscrafters in the Late 1990s and Beyond

Indeed, to remain competitive in the late 1990s and early years of th e new millennium, Lenscrafters worked to create new strategies that w ould keep it one step ahead of its peers in the industry. In 1997, th e company launched a Lenscrafters kiosk at the Cincinnati/Northern Ke ntucky International Airport. Management was optimistic that airport kiosks would become profitable and planned to add additional kiosks i n airports throughout the United States. During that year, approximat ely 100 new stores opened their doors and sales surpassed $1 bill ion for the first time.

Along with new retailing formats, Lenscrafters also continued to offe r cutting-edge products. In 1998, the company began outfitting its st ores with equipment to make its Invisibles line of lenses available t o customers in one hour. According to Lenscrafters, the Invisibles li ne reduced light reflections and glare off lenses by up to 90 percent when compared with traditional lenses. The company secured $1.3 billion in sales during 1999, which accounted for 63 percent of Luxot tica's total revenue in 1999.

Lenscrafters entered the new millennium on solid ground with more tha n 858 locations in the United States, Canada, and Puerto Rico. The co mpany launched a new marketing campaign in 2000 designed to promote L enscrafters as the best choice for vision care, eyeglasses, and conta ct lenses. With the tagline, "My Personal Vision Place," the campaign proved successful as profits rose significantly during the campaign. At this time, more than 70 percent of the frames sold at a Lenscraft ers outlet were manufactured by Luxottica.

As a Luxottica subsidiary, Lenscrafters held an enviable position in the eyewear industry. Often referred to as the 800-pound gorilla by i ndependent eyewear retailers, Luxottica topped off its optical empire when it acquired Cole National Corporation in 2004. Cole National op erated as the second largest optical retailer in North America and op erated stores under the Pearle Vision, Sears Optical, Target Optical, and BJ's Optical monikers. Luxottica also had acquired Sunglass Hut and OPSM Group in 2001 and 2003, respectively, and had become the lea ding distributor of optical and sun products in North America and Asi a Pacific as a result of its strategic purchases.

Meanwhile, Lenscrafters launched a new store design in 2003. The prot otype opened in Tippecanoe Mall in Lafayette, Indiana and featured so ft lighting and modern new fixtures, resembling an upscale apparel sh op. A company spokesman commented on the new look in an April 2003 Chain Store Age article claiming, "We want people to feel good a bout buying eyewear and to think of the product not just as a medical requirement, but as something that can enhance their look."

With a strong focus on fashion and high-end brands, Lenscrafters aggr essively moved into the Manhattan market during 2004 and 2005. The co mpany planned to expand further, while offering the latest in eyewear . As a member of Luxottica's burgeoning Retail group, Lenscrafters ha d experienced marked success over the past ten years. With a solid st rategy in place, the company appeared to be on track for continued gr owth in the years to come.

Principal Competitors: Eye Care Centers of America Inc.; Natio nal Vision Inc.; U.S. Vision Inc.

Chronology

• Key Dates:
• 1983: Lenscrafters is established by Dean Butler.
• 1984: U.S. Shoe Corporation buys the company.
• 1989: By now, there are 350 stores in operation.
• 1992: LensCrafters surpasses Pearle Vision Centers to become A merica's largest chain of eyeglass retailers.
• 1993: The company becomes Canada's largest optical retailer wi th the acquisition of the 22-store Eye Masters Ltd.
• 1995: Luxottica SpA acquires Lenscrafters.
• 1997: Sales surpass $1 billion.
• 2003: A new store design is launched.