Eckerd bows out of optical care; aggressive expansion predicted

Drug Store News, Jan 17, 1994 by Mike Troy

CLEARWATER, Fla. -- Eckerd Corp. has received a financial shot in the arm with the recent sale of its eye care business, a move analysts predict will allow the 1,710-unit retailer to expand its store base more aggressively.

Involved in the deal were Eckerd's 47 Visionworks optical superstores and 29 Eckerd Optical Centers. An investment group led by Richard Roberson, president of Eckerd's Vision Group since 1988, is expected to complete the acquisition within 60 days. The purchase price and terms of the deal were not disclosed.

"This transaction offers us the opportunity to redeploy assets into our core businesses while furthering the ability of Visionworks management and associates to grow the optical company," said Stewart Turley, Eckerd chairman and chief executive officer, in a prepared statement. He added that "the company does not expect to recognize any significant gain or loss on the sale of the assets."

In fact, financial analysts -- who had recently issued buy recommendations on Eckerd stock -- viewed the pending sale as a strategic move that helps position the chain for expansion and/or acquisitions.

In Eckerd's backyard, at St. Petersburg, Fla. -based Raymond James & Associates, analyst Don Hultgren commented: "I think it is a good move from the standpoint that they are focusing on their core business and intend to use the proceeds for eventual expansion rather than debt reduction."

"I think it is a positive move for them since the eye care business was never a core strategic focus for them," agreed Debra Levin of Morgan Stanley. "By selling it, they will free up capital that in the short term they can use to pay down debt. But, longer term, I would expect them to redeploy the proceeds to finance expansion."

Eckerd's eye care business was profitable and well-regarded within the eye care industry. The Vision Group accounted for about $57 million in sales in Eckerd's fiscal 1992, or roughly 1.5 percent of the retailer's $3.8 billion sales.

While those sales represented only a small fraction of Eckerd's revenues, Eckerd's optical business would have ranked 11th among the nation's highest-volume optical retailers in 1992.

The majority of the Visionworks and Optical Centers are concentrated in Eckerd's home state of Florida. The Vision Group employs nearly 1,000 people, who will retain their positions under new ownership.