ZVA, the country's strong association of optical retailers, predicts that the German optical retail market will drop by at least 20 percent next year as a result of a planned reform of the federal managed health system, which is now in the final stages of preparation for 2004, leading to the closure of some 1,500 stores around the country. ZVA has lobbied strongly against the new system, which would practically eliminate subsidies for eyeglasses, currently running at an average of €40 per pair, except for children, youngsters and people with strong eyesight problems.

Health subsidies for eyewear were already reduced in 1989 and then again in 1997. In both cases, German consumers reduced their purchases, but then went back to a more regular replacement rate for their spectacles. Industry officials assume that many of them will rush to buy glasses toward the end of this year, before the subsidies are cut off, and then stop going to the optician for a while.

Germany's largest eyewear retailer, Fielmann, predicts that it will suffer less than others from the health reform, arguing that consumers will turn to its own low-priced offerings to offset the lack of subsidies. Noting that the 1997 health reform contributed to a 20 percent increase in its market share at the time, Fielmann hopes to raise its own market share in Germany to 50 percent as compared to an estimated 43 percent in 2002. The improvement will be lower because the company is opening few stores now.

The highly publicized report of a German analyst with Sal. Oppenheim anticipates a 53 percent drop in operating profit (Ebit) for Fielmann next year on a 17 percent drop in revenues, coming after predicted gains of 40 percent in Ebit and 14 percent in sales. Fielmann predicts a strong 2nd half for this year, which will allowed the company to ?exceed our targets by quite some distance,? but company officials will not offer any specific guidance for 2004. In any case, observers feel, the health reform and its already high domestic market share will probably accelerate Fielmann's expansion in other European countries sooner or later.