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.

I've hacked a couple of tables from the presentation which shows divisional breakdowns between the retail and wholesale divisions.





As you can see, the business is extremely well diversified geographically. It is also benefiting from a weaker Euro to the Dollar which is what Draghi and his team want for businesses in Europe who are big exporters. It's nice to have central banks on your side. Unfortunately though we are slightly hedged against those benefits because our holding is in dollars. Regardless, if the underlying business is doing well then the long term sustainability will benefit.

The more I analyse these retail type businesses the more I realise how important brand power is. I am no brand expert and I know there is plenty research and theories about consumer preferences but the way the world is going, (in my opinion) old established brands are going to outperform. Especially in developing markets where these brands had a previous untouchable aura about them. It's no secret that people with new found wealth, coming from poor back grounds will splurge on luxury brands to announce their arrival. That happens all over the world, regardless of culture, religion or background.

Take a look at the Luxottica list of brands and tell me who you think will dominate sunglass sales worldwide for the foreseeable future. It's actually ridiculous how much market share they own and the amount of branding power they have at their disposal. I also feel that Sunglasses as a consumer good will outperform. They are a huge fashion statement but also preform a practical function. This includes eyewear for many sporting activities.

The medical side of the story is also exciting. Millions of people who have bad eye sight are entering a wealth bracket where they can afford lenses. Eyesight is probably our most important sense, people will always prioritise one of the most sensitive and crucial parts of our body.

The board seems to have a found a solution for the corporate governance issues they had last year. They have gone with a joint CEO structure, Adil Mehboob-Khan is the head of Markets while Massimo Vian (previously suspended by the board during the fall out) is head of Product and Operations. My guess is that they are both "Yes Men" to Chairman and majority shareholder Leonardo Del Vecchio. It is not ideal but his interests are aligned with you as a shareholder. And to have built the business to where it is today, he is certainly no muppet.

The release only covered the sales numbers, we will get earnings data at the beginning of Feb. We will cover the fundamentals when those come out. We continue to buy the stock.