EssilorLuxottica To Buy GrandVision


One of the European stocks that I like is EssilorLuxottica, the dominant global manufacturer and retailer of eye and sunglasses. This group resulted from the merger in October 2018 of the French lens-manufacturer Essilor and the Italian luxury frame maker Luxottica (it owns the Ray-Ban, Oakley Oliver Peoples and Persol brands, and manufactures most luxury brand sunglasses).


Opportunity in China for EssilorLuxottica


The recently merged EssilorLuxottica (OTC:ESLOY) is a company that I like and own. The French-Italian-American conglomerate is the world's dominant eyeglass manufacturer and retailer.


Luxottica numbers - slow growth, merger still on


Luxottica, the eyewear manufacturer, designer and distributor reported results last week. The business is made up of a few parts, the retail outlets you would know well as a customer, the Sunglass Hut, you would also be familiar with their brands if you bought online or at another outlet, Ray-Ban and Oakley, as well as Persol and a couple of others. You might also have worn one of the many licensed eyewear products that they manufacture for many luxury brands, here is a list of some of the brands you can buy at their outlets: Giorgio Armani, Burberry, Bulgari, Chanel, Dolce&Gabbana, Michael Kors, Prada, Ralph Lauren, Tiffany & Co., Versace and Valentino.


Essilor & Luxottica to merge


The headline reads: Essilor and Delfin to create a global integrated player in the eyewear industry with the combination of Essilor and Luxottica. This is going to be very big. The two businesses are likely to create a giant in eyewear, sunglasses and lenses. Essilor has a market cap of 22.3 billion Euros, trades on a 28 multiple (historic) and Luxottica has a 24 billion Euro market cap, and trades on a 30 multiple. The all scrip merger (accepted by the Del Vecchio family, through their entity Delfin) is done at the following ratio: 0.461 Essilor share for 1 Luxottica share.


Luxottica's tough first half


Luxottica is one of the largest sellers of sunglasses on the planet, particularly in the luxury, fashion and sportswear arenas. They own Ray-Ban and Oakley's, as well as manufacture many different brands across the globe for all of the fashion houses. If you have a brand, old or new, the chances are that they are made in their 6 factories in Italy, three in China, one in Brazil, as well as a single facility in the USA and according to the company, a small plant in India. Pretty narrow focus. I am guessing then that you can be pretty sure that your last set of sunnies bought from their retail outlet (where you are most likely to have bought them) the Sunglass Hut was made in Italy or China. Be they Bvlgari, Chanel, Coach, DKNY, Giorgio Armani, Persol, Ralph Lauren, Michael Kors, or even more recent brands such as Tory Burch.


Luxottica review - still a hold


Luxottica is one of our non-core holdings which requires an extra look after some wild share price swings. To put things into perspective they hit $71.60 a share in October last year after a good run only to close at $54.37 last night. The price in Euros hit 65 Euros in October last year and closed at 49 Euros yesterday. This is not just a currency issue, the share price has been under pressure.


Luxottica 4Q and full year numbers


Luxottica is a company founded by an orphan, not that it matters too much right now. Although technically not , his guardians were too poor to look after him. He redesigned the world of sunglasses (sunnies, shades), as well as the way people look at these semi luxury items. A good pair is not cheap, it is almost technically a durable good in terms of the duration of the life of the product. We should recycle them more often, those old out of fashion scratched Oakley's should find a home somewhere, or be sent to sunglasses heaven. Or sunglasses hell, no doubt when you are being recycled, it hardly seems like a good outcome for the piece. Luxottica, the company is a manufacturer and seller of their own brands, as well as manufacturing brands for lifestyle brands across the globe.


Luxottica Q3 numbers


We had numbers from Luxoticca on Wednesday. If you need reminding they are the guys that make sunglass brands Ray Ban, Prada, Oakley and a whole host of other brands. Over the past few months, most of the companies that we have written about talk about strong dollar head winds, Luxoticca is a European company which results in strong dollar tail winds instead. Group sales are up 15.4% compared to the same quarter last year but if we strip out the strong dollar tail wind, sales are only up 5.5%. If we look at EPS, in Euros it is up 19.8% but in US Dollars it is only up 0.5%.


H2 Results well received


Luxottica is a business that is interested in looking after your eyes, with sunglasses, yet they also have a very significant normal eyewear (glasses) business, you may be familiar with LensCrafters. Glasses manufacturing used to take a week or two, nowadays you can have them in no time, an hour! Their North American business is 56 percent of their total business, Europe is 20 percent of their business. Asia is only 14 percent of their business, that is all.


Luxottica full year results


Last week we received full year results from Luxottica, one of our favoured consumer stocks based in Italy but with a listing in New York. In case you forgot Luxottica, according to their website, is the leader in design, manufacture, distribution and sales of premium, luxury and sports eyewear. Trademarks include Ray-Ban, Oakley, Vogue Eyewear, Persol, Oliver Peoples, Alain Mikli and Arnette. Licensed brands include Giorgio Armani, Bulgari, Burberry, Chanel, Coach, Dolce & Gabbana, Donna Karan, Michael Kors, Paul Smith, Polo Ralph Lauren, Prada, Starck Eyes, Tiffany, Tory Burch and Versace. You get the picture. The company wholesales these products in more than 130 countries across 5 continents. Along with all of that they operate over 7000 retail stores under the Sunglass Hut brand.


Luxottica full year sales


Luxottica reported sales that absolutely smashed expectations. Perhaps sunglasses sold like crazy in the last quarter as a result of being the hottest year on record. 2014 that was. Remember that this company has a strong retail presence selling sunglasses through their Lenscrafters and more well known locally that is, Sunglass Hut. You can download the Q4 results here -> Strong acceleration of Group adjusted net sales in the fourth quarter 2014: +15%. Nice. The fourth quarter was particularly strong when compared to the rest of the year, sales increased 9.3 percent at constant exchange rates. Ray-Ban, an in-house brand recorded double digit growth. Regionally North America was the best performing region, showing 19 percent growth in the wholesale division, emerging markets recorded 14% growth for the period.


Check me, check you


Last week Luxottica released their 3Q results. You will remember that the company has been in a bit of turmoil lately with the ex-CEO, failing out with the founder and Chairman Leonardo Del Vecchio. Since then Del Vecchio took over executive roles until he recently appointed co-CEOs. Due to the "management crisis" so to speak the stock dropped around 10% at the start of October, it has recovered most of that lost ground over the last week though.


Corporate governance issues


No! What happened at Luxottica? Another management disagreement with the founder and major shareholder no doubt, Leonardo Del Vecchio, taking the co-CEO role from Enrico Cavatorta, who quit. Another company director, Roger Abravanel also quit. The board is revolting against Del Vecchio. Del Vecchio has not filled some key positions, some independent board members are threatening to quit unless the roles of co-CEO's are filled. For the time being, the other co-CEO who was set to be beside Enrico Cavatorta in the sharing role, Massimo Vian, he has been suspended by the board. There seems to be a corporate governance breakdown, that is what the two independent directors are alluding to. Perhaps the founder and main shareholder, Leonardo Del Vecchio, who owns more than 60 percent of the company is flexing his muscles a little too much.


Out with the old in with two new


Oh dear, Luxottica share price is down around 2 percent this morning on the news that the CEO, Andrea Guerra, is leaving the company after nearly 10 years at the helm. Why? Well, it turns out that his mate is Matteo Renzi. And Renzi is the current Prime Minister of Italy. Guerra is the first non family member to run the Luxottica business, a company founded by Leonardo Del Vecchio. Del Vecchio is the second richest man in Italy and founder of the business, more importantly the 66 percent shareholder of Luxottica, the company that sells sunglasses through the Sunglass Hut. Luxottica also owns Ray-Ban and Oakley. The company, by revenue, is the biggest seller of eyewear on the planet, both sunnies, shades, cheaters (sun cheaters).


Lifting the shades on eyewear


As you may know, having access to the New York Stock Exchange gives you the ability to invest in many exciting companies around the world. One of those companies which we have initiated coverage of over the last couple of months is the Italian sunglass manufacturer, Luxottica.


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