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Ray-Ban and Oakley eyewear maker EssilorLuxottica is a stock that I like. It's not widely owned in our customer base, but it could be.
In 2017, leading French lens maker Essilor merged with Italian frame producer Luxottica. The share code of the New York-listed ADR is ESLOY and the group has a market cap of $87 billion.
In May 2021, the two businesses were finally unified, ending a difficult co-leadership agreement. The Luxottica camp won, with Francesco Milleri taking the CEO title, and Luxottica founder Leonardo Del Vecchio appointed chairman. The market seems to like this outcome because the stock has rallied up to $100 a share, an increase of 50% over the last 12 months.
EssilorLuxottica also has the licence to make frames for Armani, Bulgari, Chanel, and Prada, and owns retailer Sunglass Hut. They employ over 180 000 people.
In late June, they decided to proceed with another transaction, an $8.7 billion merger with GrandVision that gives EssilorLuxottica a network of 7 000 retail stores that offer eye-care services, sunglasses, and prescription eyeglasses.
The optical prescription operation (previously Essilor) accounts for two-thirds of revenue, and is reliable repeat business. Sunglass sales are more of an impulse purchase, heavily impacted by the weather.
According to the management team, merger cost savings could amount to as much as $700 million by the end of 2023. Online sales are still only 10% of revenue, but growing fast. China contributes just 6% of revenue, but that's expected to climb as the middle classes there expand. As mentioned yesterday, they also have an active collaboration with Facebook to make augmented reality glasses.
There's a lot to like with this one. It's partly a healthcare company, and partly a luxury-goods maker. Nice combination!
