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).

Here goes, the official release from the company: Luxottica announces the implementation of a new governance structure based on a co-CEO model. Two folks running the business, one for Markets, the other for Corporate Functions and the Chairman and founder will oversee the two. Sounds like the headmaster looking after the two head of their respective departments. There is also another co-CEO that will be appointed in due course.

Del Vecchio and Guerra have not seen eye to eye (excuse the pun) lately, the response from the company following the departure of Guerra is slightly puzzling. The reason why we mention the Italian PM is simple, Guerra may be up for a role in the newish government. No point as Luxottica shareholders crying over any spilt Parmalat. It is what it is. As I suggested, a strange approach for the company, it is not usual to see more than one CEO.

Guerra has done wonderful things for the business, during his tenure some wonderful decisions went the way of all the shareholders, the majority of whom is the 79 year old Del Vecchio. He was basically orphaned (Del Vecchio) when his father died before he was 6 months and his mother had to give him up for adoption, she could not afford to keep him. A sad story, equally a wonderful rags to riches story. I can imagine that he is a control freak, it would be natural, it has worked very well for the shareholders thus far.

Make no mistake, this is a fabulous business, obviously management ructions are not helping currently. Plus the group has most of their exposure to the US, not the worst thing in the world, 60 odd percent of sales come from there. There is room to move, it is both a discretionary and medical (lenses that they make) investment, we continue to see the current weakness as an opportunity.