Eye Care Centers of America, Inc.

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Eye Care Centers of America, Inc.

11103 West Avenue
San Antonio, Texas 78213
Telephone: (210) 340-3531
Toll Free: (800) 669-1183
Fax: (210) 524-6996
Web site: http://www.ecca.com

Private Company
Employees: 4,200
Sales: $369.9 million (2003)
NAIC: 446130 Optical Goods Stores; 621320 Offices of Optometrists

Eye Care Centers of America, Inc. is one of the largest optical retail chains in the United States. It operates or manages more than 375 retail stores in 32 states and the District of Columbia using 11 stores names, including EyeMasters, Visionworks, Vision World, Doctor's VisionWorks, Dr. Bizer's VisionWorld, Dr. Bizer's ValuVision, Doctor's ValuVision, Hour Eyes, Stein Optical, Eye DRx, and Binyon's. Each is a leader in eye care service in its respective market. Stores are located primarily in the Southwest, Midwest, and Southeast, along the Gulf Coast and Atlantic Coasts, and in the Pacific Northwest regions of the United States.

Growing to National Proportions: 198488

In 1984, an investment group headed by Robert Schumacher founded the San Antonio-based Eye Care Centers of America. By 1986, Eye Care Centers of America operated 13 optical department stores in Texas and Louisiana under the name EYE PRO Express, Jack V. Gunion serving as president and chief executive officer. After an initial public offering of 1.1 million shares mid-year, the company began trading as IPRO on the NASDAQ.

Proceeds from the sale of Eye Care Centers' stock went toward acquiring or opening additional stores, and in the early fall of 1986 Eye Care Centers purchased a second chain of stores, 20/20 Eye Care Inc. of Phoenix, Arizona. With the addition of 20/20 and the opening of several new EYE PRO stores, Eye Care Centers became a chain of close to 30 stores. When it acquired EyeMasters of Baton Rouge around the close of the year, the company's properties exceeded 40 stores located in Arizona, California, Louisiana, New Mexico, and Texas.

Then, in a turn of events, Eye Care Centers was itself purchased by Chicago-based Sears, Roebuck & Co. in late 1987 as part of the larger company's strategy of shoring up its mature merchandising operations by buying fast-growing specialty stores. At the time of the purchase, Sears already had optical departments in about 600 of its 813 department stores. Over objections and lawsuits filed by two of Eye Care Centers' stockholders, Sears bought the optical chain for $52.5 million. The company no longer traded publicly after the purchase.

In purchasing Eye Care Centers, Sears opted to take advantage of the move toward growth throughout the 1980s for optical superstores nationwide. In 1974, two rulings had led to significant change in the nation's eye care industry. In the first, the U.S. Supreme Court decided that professionals had the freedom to advertise their practices. In the second, the Federal Trade Commission stated that optometrists had to give patients copies of their eyeglass prescriptions, allowing patients the freedom to shop for frames wherever they chose. Coupled with a variety of new trends, such as advances in eyewear technology, the increased popularity of fashion eyeglass frames, and the fact that baby boomers were beginning to turn 40the age at which many people began requiring glasses for reading and drivingthe optical superstore was born. What once was a quasi-medical enterprise, the prescribing, grinding, and fitting of eyeglasses, became a service and product-oriented business almost overnight. The merchandising phenomenon went from ground zero at the start of the decade to become the fastest growing segment of the $8-billion-plus retail eye care industry by the late 1980s.

By 1988, Eye Care Centers, along with LensCrafters and Pearle Vision, had become one of the largest optical super-chains in the nation. Each of its stores had up to three doctors working at any time, examination rooms, a frame selection area, and a lens grinding laboratory. While optical retail chains accounted for only about 19 percent of the market, which was still dominated by independent optometrists, they were becoming some of the most successful businesses in the country thanks to advertising via television, radio, newspaper, and direct mail; competitive service; and the convenience they offered. Their large selection of eyewear, merchandising specials, and the promise of new glasses without a long wait both shaped and catered to consumer demand.

By the late 1980s, a growing number of new optometrists were opting not to start their own private practice. A 1988 New Orleans City Business article cited Optical Index magazine's national statistics showing that the " 'chain' segment of the eye care industryoptical centers with four or more retail locationsrepresent[ed] about 165 optical companies that operated a total of 6,250 outlets" and that these centers garnered "almost 30 cents out of every dollar spent in the industry." According to Optical Index, the eye care chains brought in a combined total of more than $2 billion in annual revenues.

The growth and convenience of the eye care business meant that people were going for eye exams and buying new glasses more frequently than in the past, predictors of better optical health nationwide. However, critics opined that the big business approach to optical care could mean that people would become less rather than more informed. "The public's concept of an eye examination has become so that it is like buying a pack of cigarettesit's all the same regardless of who does it," voiced the president of the New Orleans Academy of Ophthalmology in the 1988 New Orleans CityBusiness article.

198897: Ongoing Growth Through Acquisitions

The debate about the relative benefits of the optical superchain did nothing to slow the growth of Eye Care Centers. By 1988, it had more than doubled its size since having been purchased by Sears. In 1988, 20/20 Eye Care Centers acquired five Phoenix-area optical stores from Eye Co., Inc. and another 20 stores from Binyon's of Portland, Oregon. This acquisition brought Eye Care Centers' total to 88 stores nationwide doing business under the names Eye Co., EyeMasters, EyePro Express, and 20/20 Eyecare. Late in the year, it decided to rebrand all of its stores under the EyeMasters name. Immediately following this decision, it began expansion plans to build another ten EyeMasters stores in the state of Texas.

Growth continued for the company throughout the 1990s. In 1993, Sears sold Eye Care Centers to Desai Capital Management and a group of the company's executives. By 1996, with stores operating under EyeMasters and Binyon's trade names, Eye Care Centers acquired Visionworks Inc. of Clearwater, Florida, an optical retailer with 60 stores in the southeastern United States. With annual sales of $61 million, Visionworks brought the company's number of stores to 204 and its revenues to about $158 million a year.

A year later, with revenues of $220 million and 243 optical stores in 21 states, the District of Columbia, and Mexico, Eye Care Centers acquired the Hour Eyes chain and relocated its distribution, equipment, repair, and some manufacturing operations to larger quarters to consolidate its facilities scattered around the San Antonio area and to accommodate its ongoing growth.

19982004: Future Growth Plans Based on a Strategic Market Focus

In 1998, Boston-based Thomas H. Lee Co. acquired about 90 percent of Eye Care Centers for $325 million. The money, which the company put toward expansion, provided " the perfect opportunity to bring new capital into the company and position it for future growth, both through new store openings and through acquisitions," according to Bernie Andrews, Eye Care Center's chief executive officer, in a company release. Eye Care Centers used the money obtained through the sale to blanket the market with outlets: five new stores in Utah under the EyeMasters name in the first phase of expansion with more stores to follow. These stores followed the typical EyeMasters format; they were about 3,000 square feet, located in a retail strip center, open seven days a week, and had a complete lab and doctor on site as well as a staff of 15 to 20 people.

Company Perspectives:

We offer our customers high-quality frames, lenses, accessories, and sunglassesincluding designer and private label frames, at competitive prices. All of our stores offer lenses at great prices and the leading technology in vision correction. In addition, most of our stores provide one-hour service on most prescriptions by utilizing on-site laboratories.

Key Dates:

Eye Care Centers of America (ECCA) is founded in San Antonio, Texas.
The company holds an initial public offering (IPO); acquires 20/20 Eye Care Inc. of Phoenix, Arizona, and EyeMasters of Baton Rouge, Louisiana.
Sears, Roebuck & Co. purchases Eye Care Centers.
ECCA purchases Eye Co., Inc.; rebrands its stores under the EyeMasters brand.
Desai Capital Management and ECCA executives buy the company from Sears.
The company acquires Visionworks.
The company acquires Hour Eyes.
The company acquires Dr. Bizer's Vision World; Thomas H. Lee Company buys out Desai.
The company acquires World Vision, Stein Optical, and Eye DRx.
David E. McComas becomes chief executive officer.
The company announces its acquisition by Moulin International Holdings Ltd. and Golden Gate Capital.

More acquisitions followed as Thomas H. Lee Co. moved to revamp Eye Care Centers as a value provider of eyewear. In 1998, the company bought Dr. Bizer's Vision World and in 1999 it purchased 76 VisionWorld, Stein Optical, and Eye DRx stores, most of them in Minnesota, Wisconsin, and New Jersey. These acquisitions brought its total to 351 stores in 32 states. From 2000 to 2003, Eye Care Centers averaged ten new stores each year until in 2004 it had about 375 stores in more than 30 states selling under 11 brand names.

Revenues increased accordingly. In 1998, the company's sales totaled almost $238 million. In 2001, David E. McComas assumed the role of the company's chief executive, and by 2003, that number had reached $370 million. In 2004, it was approaching $400 million. In December 2004, a Hong Kong-based global leader in the manufacture, distribution, and retailing of eyewear, Moulin International Holdings Ltd., along with the San Francisco equity firm Golden Gate Capital, announced plans to purchase Eye Care Centers, and the company recommitted itself to its focus on the eyewear value segment. With nearly 88 percent of people over the age of 55 requiring some form of corrective eyewear and that segment of the population destined to grow, the company seemed well-positioned to maximize future growth.

Principal Competitors

1-800 CONTACTS, Inc.; Costco Wholesale Corporation; Emerging Vision, Inc.; J.C. Penney Company, Inc.; Lens-Crafters, Inc.; National Vision, Inc.; OptiCareHealth Systems, Inc.; Sears, Roebuck and Co.; U.S. Vision, Inc.; Wal-Mart Stores, Inc.

Further Reading

Daly, Brenon, "Eye Care Centers Files $375 Million IPO," TheDeal.com, May 10, 2004, p. 1.

Larroque, Nicole, "Optical Chains See Bright Future in Vision Business," New Orleans CityBusiness, March 14, 1988, p. 14.

MacFadyen, Kenneth, "T. H. Lee Opts for Sale of Eye Care Centers," Buyouts, December 13, 2004, p. 1.

Schwadel, Francine, "Sears to Buy Chain of Stores in Specialty Line," Wall Street Journal, December 16, 1987, p. 1.

Sheron, Don, "Eye Care Centers to Unload 90 Percent Stake," San Antonio Express-News, March 10, 1998, p. 1F.

Talmadge, Candace, "Pearie Frames Future with Optical Adjustments," ADWEEK, February 8, 1988.

Poling, Travis E., "San Antonio-Based Eye Care Centers Sold Again for $450 Million," Knight Ridder Tribune Business News, December 4, 2004, p. 1.

, "San Antonio-Based Eye Care Company to Be Sold for Third Time in 10 Years," Knight Ridder Tribune Business News, November 12, 2004, p. 1.

Carrie Rothburd