Luxottica

World leader in the design, production and marketing of sunglasses and spectacle frames for the medium-high segment of the market. The company has been quoted on the New York Stock Exchange since 1990 and in Milan since 2000. It was established in 1961 by Leonardo Del Vecchio who, after a brief experience as a medal engraver and printer, decided to start his own business in the sector of metallic items for the spectacles business. Luxottica’s premises are in Agordo, near Belluno, a district that makes almost all Italian glasses. The small factory (only 10 people) used to specialize in the making of products for third parties. It was in 1967 that the big strategic intuition arrived: though continuing to manufacture semi-worked products for third parties, the company started producing complete glasses, marketing them with the brand Luxottica. This was a highly successful decision and, after only four years, it dropped its work for third parties and devoted itself exclusively to the production and sale of its own brand. It presented its first collection in 1971 at Mido, the International Fair of Optical Items. “We had an innovative product. Basically the company had been founded as a third party supplier, specialized in the manufacture of all components. The day we assembled all of them we were able to sell the finished products at prices lower than anybody else. Thus, we prepared a catalogue with such competitive prices that retailers came to us en masse,” recalls Leonardo Del Vecchio. The small workshop expanded. Production efficiency, research, vertical organization, internationalization, corporate culture, marketing strategies and wise investments: these are the reasons for the company’s success. For Luxottica efficiency and research are essential to gain and maintain an advantage over its competitors. Continuous research into efficiency has led to the centralization of all production steps, thus allowing a quality check on the finished product and the holding onto its customers. This circle also permits lower costs and greater investment in research. At present the company can manufacture 125,000 glasses a day in 6 plants. To keep market leadership, though, management has realized that it is not enough to be good producers: one also has to know the market. This was the cue for the brilliant idea to integrate wholesalers into the final part of the process in order to understand and meet the needs of consumers. The first distribution company, Scarrone, was bought in 1974. Thanks to its efficiency, productive specialization and vertical integration, Luxottica has had the means to conquer world markets since the early 1980s. The management also understands the need to create a commercial structure abroad. Thus, in 1981, with the creation of its first associated company in Germany, the strategy began of expansion abroad, which has been continued sometimes with partners and, in other cases, through joint ventures. At present the company has 29 branch offices and 100 independent distributors in 120 countries. This is the winning formula: centralized production in a few privately owned plants that are capable of meeting the needs of the market rapidly, which are constantly monitored through the distribution network. Finally, the marketing strategy of partnership with world famous designers and the acquisition of famous brands. The first collaboration with the world of fashion dates to 1998, with a license agreement with Giorgio Armani, which was followed by contracts with other international designers. These branded lines have allowed Luxottica to capture the greatest market share and to promote the group’s image. In the 1990s, the company began an acquisition campaign of prestigious brands. In this, the financial market has also played an important role. For a company which produces and sells all over the world, the opinion of financial markets can become an excellent business card. Notwithstanding the fact that the company has excellent economic-financial indicators, in 1990 the group decided to quote itself on Wall Street and in December 2000 on the Milan Stock Exchange. Three more strategic moves have allowed the glasses giant to reach its current size. First, the acquisition in 1995 of the US Shoe Corporation, the owner of Lens Crafters, which, with more than 860 shops, is the largest glasses retail chain in North America. Second, diversification into sunglasses. In the late 1980s, 90% of Luxottica’s output was reading and sight glasses, yet, the market was moving towards sunglasses, an item that follows the whims of fashion and is therefore subject to constant evolution. Luxottica then diversified its strategies through other acquisitions. After acquiring the Italian brands Vogue and Persol in 1990 and 1995, it made the big leap in 1999 when it took over the historic brand RayBan from Bausch & Lomb, which at the time was in a bad financial situation. After heavy investment, RayBan has finally made up lost ground. Finally, in March 2001, the group acquired Sunglass Hut International Inc., the world’s largest sunglasses retail chain, with more than 1,600 sales points in North America and 250 in the rest of the world. The purpose of this operation was twofold: on one hand it has allowed it to consolidate the American market; on the other, it can now promote other lines in the same shops. The ten-year agreement signed in 2003 with Versace allows Luxottica to design, produce and distribute spectacles and sunglasses branded Versace, Versus and Versace Sport. Shortly before, in November 2002, the renewal of the license agreement with the group Armani had been announced. At present Luxottica manufactures about 2,450 models of frames and sunglasses. Production is almost entirely carried out in the six plants of Sedico, Pederobba, Turin, Agordo, Rovereto and Cencenighe. In addition, the company owns a plant in China for the manufacture of metal frames. The models are commercialized with its own name and licensed brands: RayBan, Vogue, Persol, Arnette, Killer Loop, Revo, Sferoflex, and T3 (owned); Chanel, Versace, Versus, Ferragamo, Bulgari, Byblos, Genny, Ungaro, Tacchini, Moschino, Web, Anne Klein, and Brooks Brothers (licensed). Luxottica products are sold in 120 countries and on all 5 continents. It has a commercial network of 1,000 agents, 29 branch companies, and 100 independent distributors, who reach 200,000 sales points all over the world. In 2002 the turnover was 3.13 billion euros (+2.2%), with operating profits of 601.5 millions (+18.1%) and a net profit of 372.1 million euros (+17.6%). The net turnover of the group in the first quarter of 2003 amounted to 704.5 million euros, the operating profit 111.4 millions, and net profit 65.6 millions.
&Quad;2003, June. Leonardo Del Vecchio joined the board of directors of Gianni Versace Spa.
&Quad;2003, June. Giorgio Armani, a group shareholder with 5.02% of the capital, quit the Luxottica board.
&Quad;2003, August. The group acquired 74% of the capital and therefore control of the Australian optical chain OPSM, which has 481 sales points.
&Quad;2003, December. The group registered a turnover of 3 billion euros, profits of 370 millions and has branch offices in 30 countries.
&Quad;2003, December. Leonardo Del Vecchio planned his succession: “The company will pass on to the management and the family will play only the role of shareholder. We are working on this. I have five children, three adults and two little ones… But Luxottica has a good management, and the company counts on it.”
&Quad;2004, January. Fortified by the strength of the euro, Luxottica signed an agreement to buy Cole National, the second largest glasses distributor in the American market, for 401 million dollars. The operation has a strategic importance because it allows the group to widen its offer in the American market with products complementary to those distributed by Lens Crafters and Sunglass Hut, which are also owned by Luxottica.
&Quad;2004, February. The license contract with Chanel was renewed until 2008.
&Quad;2004, May. The partnership between Versace and Luxottica was a success. In the first year, a turnover of 90 million euros was achieved.
&Quad;2004, June. A five-year agreement with Donna Karan was signed to design, produce and distribute Donna Karan and DKNY sunglasses throughout the world.
&Quad;2004, July. Cole National Corporation approved the merger with Luxottica (price per share 27.50 dollars).
&Quad;2004, September. The new board of Luxottica directors was under preparation. At the shareholders’ meeting, the number of directors was increased from 9 to 12, and a new general manager, Andrea Guerra, was appointed.
&Quad;2004, October. A new five-year agreement with Dolce & Gabbana was signed to design, produce and distribute Dolce & Gabbana and D&G Dolce & Gabbana sunglasses worldwide.
&Quad;2004, December. Excellent economic results for the group: turnover (3.2 billion euros) grew 14.1%; and profits (286.9 millions) by 7.3%.
&Quad;2005, January. Luxottica sold its shareholding of 21% in Pearle Europe to Hal Investments.
&Quad;2005, March. The first quarter of 2005 closed with a turnover of 1.037 billion euros (+34.8%), an operating profit of 136.4 millions (+13.6%), and a net profit of 76.3 millions (+7.3%).
&Quad;2005, July. The group’s acquisitions continued with the purchase of Chinese Xueling Optical. (Dario Golizia)