The retail industry has been dealt another blow this morning after Luxottica Group announced it would shut more than 100 stores in Australia and New Zealand over the next two years as it attempts to restructure and consolidate its brands to focus on its OPSM label.
The move comes not only as the overall retail market is continuing to struggle, but also as designer eyewear and optical products are coming under pressure from new discount entrants.
Luxottica, the largest eyewear retailer in the world, has announced it will close 10% of its Australian and New Zealand stores in order to focus on OPSM.
However, more than 50 stores will be added to that network, with an extra $40 million in capital expenditure assigned to the chain. Luxotica expects to build a footprint of about 470 stores.
An extra $5 million will be used to promote OPSM.
But there will be closures in the Budget Eyewear and Just Specs brands as some of these locations are transferred to the OPSM brand, while the Laubman and Pank brand will focus on South Australia, Wester Australia and Queensland.
“Some lower-performing stores will relocate or close,” the company said in a statement.
City Index chief market analyst Peter Esho says eyewear companies are coming under more pressure.
“There are two issues here. The first is that Big W is coming in and competing aggressively in that budget end of the optical space, and the second are these proposed changes to private health insurance.”
“Premiums are going up, and that might mean people are less willing to pay the gaps. Buyers are opting for eyewear that is perhaps without a gap. This is combined with overall cost of tenancies.”
Esho says the decision to consolidate the business is a good strategy – so far.
“The company has probably figured out here there are a bunch of stores that aren’t profitable, aren’t stacking up, and with all these changes coming in it’ll be probably wise to just revisit this all in the next few years.”
“It makes a lot of sense on paper, but they just need to make sure it stacks up in practice.”
Asia-Pacific chief executive Chris Beer said in a statement rationalising the brands will help the company move forward.
“We are recalibrating our business with a more focused approach that will allow us to play to our strengths. This will ensure our market-leading OPSM brand is able to reach its full potential,” he said.
Luxottica bought OPSM back in 2003, when it had about 460 stores across all brands. Since then, it has expanded to nearly 900 stores in both Australia and New Zealand, including the Sunglass Hut brand.
However, pressure is mounting from new entrants, including Specsavers, and the new Big W “vision” category.