At Final Meeting, Luxottica Board Highlights Company’s ‘Renewal’ and Strong Period of Performance Under Del Vecchio


MILAN—The board of directors of Luxottica Group S.p.A., meeting here Wednesday for the last session before the company delists from the Italian stock exchange on March 5, used the occasion to acknowledge the company’s strong performance over the 2015-2018 period and to identify the significant strategic initiatives it has executed and which have helped the company attain its leading market position. The stock delisting and final board meeting follow the formation of the new EssilorLuxottica company on Oct. 1, 2018, as VMAIL reported.

In its announcement, the Luxottica board noted that “under the leadership of the visionary entrepreneur Leonardo Del Vecchio,” Luxottica shares went public for the first time on the New York Stock Exchange at less than $1 per share in 1990 and will leave Borsa Italiana valued at more than €50 per share, having multiplied its value by over 50 times in almost 30 years.

Leonardo Del Vecchio.

The board noted that since his return to the helm of Luxottica in 2015, “Del Vecchio achieved a profound strategic, operational, technological and managerial renewal.” Among the changes highlighted by the board on Wednesday are the organizational simplification, management renewal, company-wide digitization, the “complete-pair” revolution, and the high quality of the company’s financial results.

Del Vecchio issued his thanks to the board for its full support of all the group's managers over the past four years, as well as “sustaining their decisions” and providing valuable advice. “The results, when looked at cumulatively, reward the great work we have done even if not always immediately recognized externally,” Del Vecchio said in the announcement.

He added, “At this moment my thoughts go to deputy chairman Luigi Francavilla, the companion of a whole working life. To his abilities and his passion we owe a lot of what we have built together. A special thanks goes also to our chief executive officer, Francesco Milleri, whose contributions these last four years have made a lasting impact on the company.

“I achieved every goal that I have set to improve any single area of the group, making it strong, full of ideas, technology and passion and, at the same time, able to bring back the net margin above the threshold of 10 percent. This is the company that we bring to EssilorLuxottica, the new adventure to which I am pleased to give my full contribution.

“In these four years, we have completed a strong renewal of our top management and, never like today, Luxottica can count on strong leaders at every level, experienced but moreover fresh eyes, talented and ready to grab opportunities of growth in the market. To all of them and to our 80,000 employees around the world, I renew my special thanks for their trust, passion and loyalty to this wonderful company.”

In terms of organizational simplification, Luxottica noted its “return to simplicity in managing processes and relationships within the company,” which has made the group more cohesive. “The centralization of global business and product strategies has allowed Luxottica as a corporation to think centrally and perform rigorously at the regional and country level,” the announcement noted. “The company has increased control and efficiency on key variables such as pricing, assortment, logistics and services to the end customer.”

Luxottica also noted that it has “pursued with determination” a management renewal, which it has led to a new structure of governance, which it built through sequential phases, and the strongest managerial team ever. “Bright, capable leaders with a fresh perspective have embraced new digital technologies in full harmony with the dynamics of markets,” the announcement noted.

In another area the company said “is most dear to Leonardo Del Vecchio,” Luxottica said it has achieved company-wide digitization “from the ground up after years of delay.” Luxottica said it now utilizes millions of data points to make decisions in real time and to plan and execute its strategies.

“Today, technology is the backbone of every corporate function: production, distribution and sales in all markets and in all channels—wholesale, retail and online,” the announcement noted. “Luxottica has changed the way it speaks with millions of consumers around the world, being today one of the largest private digital broadcasters globally, with over 15,000 digital windows installed in its stores and customers’ shops.”

In 2019, Luxottica plans to introduce new ways of interacting with its products, including bringing an entire digital catalog of Luxottica eyewear into optical stores around the world, the announcement noted. The group also has invested heavily in the development of its industrial infrastructure, innovating in production technologies and automation.

On a merchandising and product level, the “complete pair” concept represents an “historical first for the eyewear sector,” the company noted. “The group can bring a complete solution of lenses and frames to retail stores through a single service channel. Two components that have always been complementary are now designed and produced together.”

In addition, Luxottica noted that “the extension of the value of the brands in the portfolio to the prescription lenses prepares the entire industry to respond in a new way to the growing demand for customized products.” To support this vision, Luxottica said it completed the construction of three new state-of-the-art hubs, located in Italy, the U.S. and China, each of which is capable of integrating the production and distribution of lenses and frames.

Overall, the implementation of these strategies has proven to be the “foundation for good results,” the Luxottica announcement noted. “While the full impact of the return on recent initiatives carried out by the group will be fully visible in the coming years, today the numbers confirm the solidity of strategic choices undertaken.”

The board has developed a summary of the financial performance, based on “extremely clear indicators,” that compares the cumulative results of the latest four years to the period 2010-2013. The comparison shows that:

• Cumulative sales increased by around 40 percent from €26 billion to €36 billion.

• Adjusted operating income increased by approximately 60 percent.

• Adjusted net income increased by approximately 80 percent.

• Adjusted net margin rose from around 7.5 percent to more than 10 percent.

Additionally, the net debt/EBITDA ratio shrunk from 2.0x in 2010 to an estimated figure in the range of 0.2x–0.3x in 2018, as a result of strong free cash flow generation, the announcement noted.

“In particular, the board expressed satisfaction in noting that in the period between 2015-2018, the adjusted operating and net profitability data per unit sold were approximately 20 percent and 35 percent higher, respectively, compared to the previous 10 years,” the announcement noted. "This resulted in strong value creation for all shareholders, with a cumulative dividend in the last four years that nearly doubled its value compared to the period 2010-13.”

The company also noted that its results for the financial year 2018 will be published on March 8 following the approval of the board of directors of EssilorLuxottica. This also will mark the first financial results report issued by the new EssilorLuxottica company.

On April 30, the new company will hold a shareholders’ meeting and approve the final statutory financial statements for the fiscal year.