Luxottica

Luxottica Group S.p.A.
Listed società per azioni
Traded as BIT: LUX
FTSE MIB Component
Industry Eyewear manufacturing, luxury, eyewear manufacturing and wholesale distribution, eyewear retailing
Founded 1961 (1961)
(Agordo, Italy)
Headquarters Milan, Italy
Area served
 Worldwide
Key people
Products Sunglasses, spectacle frames, prescription frames
Services Opticians, optical retail, sun retail
Revenue € 9.157 billion (2017)[2]
€ 1.301 billion (2017)[2]
Total assets € 10.042 billion (2017)[2]
Total equity € 5.801 billion (2017)[2]
Number of employees
 85,150 (2017)[2]
Divisions Ray-Ban, Persol, Oakley, LensCrafters, OPSM, Sunglass Hut, Apex by Sunglasshut, Eyemed, Pearle Vision, Sears Optical, Glasses.com, Onesight
Website luxottica.com

Luxottica Group S.p.A. is an Italian eyewear company and the world's largest company in the eyewear industry.[3][4] It is based in Milan, Italy.[5]

As a vertically integrated company, Luxottica designs, manufactures, distributes and retails its eyewear brands, including LensCrafters, Sunglass Hut, Apex by Sunglass Hut, Pearle Vision, Sears Optical, Target Optical, Eyemed vision care plan, and Glasses.com. Its best known brands are Ray-Ban, Persol, and Oakley.

Luxottica also makes sunglasses and prescription frames for designer brands such as Chanel, Prada, Giorgio Armani, Burberry, Versace, Dolce and Gabbana, Miu Miu, DKNY, and Tory Burch.[6][7][8][5]

In January 2017, Luxottica announced a merger with Essilor[9] The combined entity will command more than one quarter of global value sales of eyewear.[10][5] In March 2018, the European Commission unconditionally approved the merger of Essilor and Luxottica.[11] On October 1st 2018 the new holding company EssilorLuxottica was born, resulting in combined market capitalization of approximately €57 billion.

History

Leonardo Del Vecchio started the company in 1961,[12] in Agordo north of Belluno, Italy; today the company is headquartered in Milan.[5]

Del Vecchio began his career as the apprentice to a tool and die maker in Milan, but decided to turn his metalworking skills to making spectacle parts. So in 1961, he moved to Agordo in the province of Belluno, which is home to most of the Italian eyewear industry.[13] The new company was Luxottica s.a.s., a limited partnership with Del Vecchio as one of the founding partners.[13] In 1967, he started selling complete eyeglass frames under the Luxottica brand, which proved successful enough that by 1971 he ended the contract manufacturing business.[14]

Convinced of the need for vertical integration, in 1974, he acquired Scarrone, a distribution company.[13] In 1981, the company set up its first international subsidiary, in Germany, the first in a rapid period of international expansion.[13] The first of many licensing deals with a designer was struck with Armani, in 1988.[15]

The company listed in New York in 1990,[16] and in Milan in December 2000,[17] joining the MIB-30 (now FTSE MIB) index in September 2003.[18] The listing raised money for the company and allowed it to use its shares to acquire other brands, starting with Italian brand Vogue Eyewear in 1990, Persol and the United States Shoe Corporation (LensCrafters) in 1995, Ray-Ban in 1999 and Sunglass Hut, Inc. in 2001.[13] Luxottica later increased its presence in the retail sector by acquiring Sydney-based OPSM in 2003, Pearle Vision and Cole National in 2004.[19] Luxottica acquired Oakley in November 2007 for US$2.1 billion. Oakley had tried to dispute their prices because of Luxottica's large marketshare, and Luxottica responded by dropping Oakley from their stores, causing their stock price to drop, followed by Luxottica's hostile take over of the company.[20] In August 2011, Luxottica acquired Erroca for €20 million.[21]

In March 2014, it was announced that Luxottica would partner with Google on the development of Google Glass and its integration into Luxottica's eyewear.[22]

On 1 September 2014, a new organizational structure was announced, composed of two co-CEOs, one focusing on market development and the other overseeing corporate functions. After the exit of former CEO Andrea Guerra, Enrico Cavatorta was appointed CEO of Corporate Function and Interim CEO of Market (until new and permanent appointment to this role).[23][24][25]

Enrico Cavatorta left the company 40 days after being appointed CEO. In 2016, it was reported that Luxottica had lost its third chief executive in a year and a half as Adil Mehboob-Khan stepped down a year after he replaced Cavatorta. [26]

In January 2017, the company agreed on a merger with Essilor.[27] The deal will also help to offer a succession plan for Leonardo Del Vecchio, the company's founder.[28] On October 1st 2018 the new holding company EssilorLuxottica is born, resulting in combined market capitalization of approximately €57 billion.

In August 2018, Luxottica restored Accademia Bridge in Venice.[29]

Eyewear Brands

Persol sunglasses
Ray-Ban sunglasses

Luxottica's two main product offerings are sunglasses and prescription frames. The company operates in two sectors: manufacturing & wholesale distribution, and retail distribution.[30]

The house brands include the following:[31][32]

The company also makes eyewear under license for the following designer labels:[31][32]

These brands are sold in the company's own shops, as well as to independent distributors such as department stores, duty-free shops, and opticians.[5]

Retail

Luxottica Retail has approximately 9,000 retail locations[2] in the United States, Latin America, Canada, China, Australia, New Zealand, South Africa, the United Kingdom, and United Arab Emirates.[19] The headquarters of the retail division is in Mason, Ohio, United States (North America).[19] Their retail banners include the following:[34]

Luxottica is the largest optical retailer in the United States, with 7.3% of US retail sales in 2015.[36]

Medical managed care

Luxottica also owns EyeMed Vision Care, a managed vision care organization in the United States.[37] As of 2014, it is the second largest vision benefits company in the United States.[38][39][40]

Criticism

Monopolistic pricing practices

The company has been criticised for the high price of its brand-name glasses, such as Ray-Ban, Oakley, and several others. A 2012 60 Minutes segment focused on whether the company's extensive holdings in the industry were used to keep prices high. Luxottica owns not only a large portfolio of brands (over a dozen[41]) such as Ray-Ban and Oakley but also retailers such as Sunglass Hut and Oliver Peoples, the optical departments at Target and Sears, as well as key eye insurance groups including the second largest glasses insurance firm in the US. It has been accused of operating a complete monopoly on the optical industry and overcharging for its products — for example, temporarily dropping competitor Oakley from its frame design list, then, when the company stock crashed, purchasing the company, then increasing the prices of its Ray-Ban sunglasses. In addition, it has been argued that, by owning the vision insurance company EyeMed, it also controls part of the buyers' market as well.[39]

The company says that the market is highly competitive, and their frames account for ~10% of sales worldwide and ~20% in the United States.[42][41] Euromonitor International estimates that Luxottica's market share is 14% worldwide, and the second-largest company in the industry, Essilor, has a 13% market share. The third-largest player is Johnson & Johnson, with a 3.9% market share. Luxottica and Esslisor are currently (end of 2017[43][44][45]) in the process of merging, subject to regulatory permission and possibly competition conditions.[46][47][48]

The HBO series Last Week Tonight with John Oliver has also criticized the company in the show’s feature on corporate consolidation.[49]

Financial performance

Year Net sales (€ /000) Operating income (€ /000) Net income (€ /000) – Net Income attributable to Luxottica Group Stockholders
2017 [2] 9,157,000 1,301,000 1,038,000
2016 [2] 9,085,707 1,345,267 850,524
2015 [50] 8,836,578 1,376,445 804,119
2014 [51] 7,652,317 1,157,613 642,596
2013 7,313,000 1,056,000 545,000
2012 7,086,142 982,049 541,700
2011 6,222,483 807,140 452,343
2010 5,798,035 712,158 402,187
2009 5,094,318 571,085 299,122
2008 5,201,611 731,639 390,167
2007 4,966,054 833,264 489,850

Transfer pricing issues

In December 2013, Luxottica Group paid €33 million to the Italian Agency of Revenue to settle transfer pricing issues that arose in 2007.[52]

Major shareholders

The list of Luxottica shareholders with more than 2% of holdings, represented by voting shares at 23 December 2014.[53]

In September 2012, Delfin S.a.r.l. reduced its share of Luxottica from 66% to 62.1%,[54] but later increased its share to 66% again.

See also

References

  1. ↑ "Francesco Milleri replaces Massimo Vian as the new CEO of Luxottica". Retrieved 23 January 2018.
  2. 1 2 3 4 5 6 7 8 "Annual Report 2017" (PDF). Retrieved 19 April 2018.
  3. ↑ "Luxottica to Buy a U.S. Sunglasses Maker". The New York Times/Reuters. 21 June 2007.
  4. ↑ Editorial, Reuters. "${Instrument_CompanyName} ${Instrument_Ric} Company Profile | Reuters.com". Reuters. Retrieved 25 May 2017.
  5. 1 2 3 4 5 Knight, Sam (10 May 2018). "The spectacular power of Big Lens". The Guardian. Retrieved 3 June 2018.
  6. ↑ Brett Arends, "Are Designer Sunglasses Worth the Price?", Wall Street Journal, July 22, 2010.
  7. ↑ Eyewear brands, May 1, 2015.
  8. ↑ Touryalai, Halah. "Ray-Ban, Oakley, Chanel Or Prada Sunglasses? They're All Made By This Obscure $9B Company". Forbes. Retrieved 25 May 2017.
  9. ↑ Chad Bray and Elizabeth Paton, Luxottica, Owner of Ray-Ban, in $49 Billion Merger With Essilor The New York Times 2017/01/16
  10. ↑ http://blog.euromonitor.com/2017/07/eyewear-2018-edition-key-research-highlights.html
  11. ↑ Editorial, Reuters. "EU clears merger of Essilor, Luxottica without conditions".
  12. ↑ "World's Billionaires Leonardo Del Vecchio". Forbes March 2011.
  13. 1 2 3 4 5 "Luxottica Past and Present". Luxottica Group S.p.A. Retrieved 2 November 2009.
  14. ↑ "Santander research" (PDF). Borsa Italiana 2003.
  15. ↑ "The Armani Group and the Luxottica Group announce expiration of licence agreement". in Pambianco News November 21, 2002.
  16. ↑ "Luxottica Group S.p.A." NYSE, New York Stock Exchange. Archived from the original on 26 December 2013.
  17. ↑ "Luxottica". Borsa Italiana.
  18. ↑ "Luxottica Group Added to MIB 30 Index". Syndication Teleborsa 22, 2003.
  19. 1 2 3 "Luxottica Facts and Figures". Luxottica Group S.p.A. Retrieved 10 August 2011.
  20. ↑ "Luxottica Group and Oakley complete merger". Syndication Teleborsa, 2007.
  21. ↑ "Luxottica buys Erroca sunglasses chain for €20m". in Globes September 13, 2011.
  22. ↑ Google to De-Dorkify Glass in Partnership With Ray-Ban Maker Luxottica, Businessweek, 25 March 2014
  23. ↑ "Luxottica sets new co-CEO model, Guerra to leave, Cavatorta named CEO Corporate, interim CEO Markets". Vision Monday.
  24. ↑ "A management shake-up at Luxottica, Ray-Ban maker". The New York Times.
  25. ↑ "Luxottica announces the implementation of a new governance structure based on a co-CEO model". Luxottica.
  26. ↑ "Loss of another Luxottica chief is a concern for Italy Inc". The Financial Times.
  27. ↑ Ray-Ban Maker Luxottica to Merge With Lens Company Essilor, Creating $49 Billion Eyewear Giant, Wall Street Journal, 16 January 2017, retrieved 17 January 2017
  28. ↑ "Ray-Ban maker Luxottica agrees €46bn merger with Essilor". BBC News. 16 January 2017.
  29. ↑ FashionNetwork.com. "Luxottica completa il restauro del Ponte dell'Accademia a Venezia". FashionNetwork.com (in Italian). Retrieved 2018-09-11.
  30. ↑ "Luxottica S.p.A". Bloomberg Businessweek. Retrieved 10 August 2011.
  31. 1 2 "Luxottica Group S.p.A". in Reuters. Retrieved 10 August 2011.
  32. 1 2 "Brands". Luxottica Group S.p.A. Retrieved 29 April 2016.
  33. ↑ "WWD: Valentino and Luxottica Sign Licensing Agreement". Retrieved 28 April 2017.
  34. ↑ "Annual Review 2014". Retrieved 12 June 2015.
  35. ↑ "Reuters: Luxottica buys remaining 63.2 pct of Salmoiraghi & Vigano". Retrieved 28 April 2017.
  36. ↑ http://mobile.visionmonday.com/CMSDocuments/2017/05/coverstory_VM051616.pdf
  37. ↑ "Our Position in the Industry". EyeMed Vision Care. Retrieved 10 August 2011.
  38. ↑ "Activities: Managed Vision Care", Luxottica website
  39. 1 2 "Sticker shock: Why are glasses so expensive?". 60 Minutes. CBS News. 7 October 2012. Retrieved 19 October 2012.
  40. ↑ "Forbes: There's More To Ray-Ban And Oakley Than Meets The Eye". Retrieved 31 March 2015.
  41. 1 2 Swanson, Ana. "Meet the Four-Eyed, Eight-Tentacled Monopoly That is Making Your Glasses So Expensive".
  42. ↑ "FACT CHECK: Does Luxottica Own 80% of the Eyeglass Industry?".
  43. ↑ Blamont, Matthias. "Essilor confident on Luxottica deal despite EU probe".
  44. ↑ "Proposed combination between Essilor and Luxottica approved in Canada - Essilor Group".
  45. ↑ Staff, Motley Fool. "Luxottica and Essilor Play the Waiting Game With Regulators".
  46. ↑ "Luxottica, Owner of Ray-Ban, in $49 Billion Merger With Essilor".
  47. ↑ "Essilor to Buy Ray-Ban Maker Luxottica for About $24 Billion". 15 January 2017 – via www.bloomberg.com.
  48. ↑ "Five Things You Need To Know About The Essilor-Luxottica Merger". 27 January 2017.
  49. ↑ "Corporate Consolidation: Last Week Tonight with John Oliver (HBO)". 24 September 2017.
  50. ↑ "Annual Report 2015" (PDF). Luxottica. Retrieved 29 April 2016.
  51. ↑ "Annual Report 2014" (PDF). Luxottica. Retrieved 12 June 2015.
  52. ↑ Turra, Alessandra (10 December 2013). "Luxottica Group to Settle Up With Italian Revenue Agency". WWD. Retrieved 10 December 2013.
  53. ↑ "Azionisti rilevanti di LUXOTTICA GROUP SPA". Commissione Nazionale per le Società e la Borsa. Archived from the original on 27 December 2014. Retrieved 27 December 2014.
  54. ↑ Mesco, Manuela, "Delfin cuts Luxottica stake to 62.1% from 66%", MarketWatch, 6 September 2012
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