RETAIL
Luxottica Group’s retail division includes:
- Ilori, LensCrafters, Pearle Vision (owned and franchise stores), Sears Optical, Target Optical, Sunglass Icon, Oakley Stores and Vaults, The Optical Shop of Aspen and Oliver Peoples shops in North America, where the Group is a leading retailer in optical products;
- OPSM, Laubman & Pank, Bright Eyes and Budget Eyewear stores in Australia and New Zealand, guaranteeing the Group’s leadership in this region with 910 stores;
- Sunglass Hut, the world’s leading and widest reaching specialty premium sun retail chain, has 2,000 stores mostly in North America, Asia-Pacific, the Middle East and the UK; and
- a network of approximately 250 stores in China and Hong Kong.
In 2007, the retail division, excluding Oakley, saw a slight (1.8%) contraction in its revenues to Euro 3.2 million, mainly due to the unfavorable trend in the Euro/Dollar exchange rate. On a comparable exchange rate basis, revenues would have grown 5.6%. Further, on a comparable number of stores, exchange rate and consolidation area basis, and including Oakley, sales increased by 1.2% despite the ups and downs in the North American market. In Australia and China, two major markets for the Group, sales were stable. Sunglass Hut continued to develop in all the countries in which it operates: over the last three years it has recorded 40% growth on comparable stores, exchange rates and consolidation area basis. Operating income in the retail business (excluding Oakley) amounted to Euro 362 million, down 16.2% from the previous year, while its ratio to sales (operating margin) was 11.2%. In 2007, the Group’s retail business benefited from its major investment plan, mainly focused on point of sale, which laid the foundation for future growth. Around 700 stores were totally renovated and 581 new points of sale were added (413 from new openings and 597 from acquisitions, Oakley retail chains included).
The acquisition of Shoppers Optical, one of Canada’s largest optical chains with 74 stores, improved the Group’s presence in this important market, making Luxottica the main player in the Canadian retail prescription market segment as well as the only one with nationwide coverage. The Shoppers Optical stores, located in eight provinces, were converted to Pearle Vision to exploit in Canada the strength and business model of an optical retail brand long established in the United States.
In general, Luxottica Group further improved the balance and organization of its operations in the North American market and continued to innovate. It now controls the two top retail prescription chains (LensCrafters and Pearle Vision), it is the no. 1 operator of optical stores under license (Licensed Brands) and recently launched ILORI, the new label with which the Group officially entered the top end of the luxury market in response to the current trend in North America. This new development began with the opening of the first flagship store in SoHo (NY), followed by openings in San Francisco, Beverly Hills (LA), Chicago and other major US cities in the second half of 2007. Luxottica plans to reach a total of 150 stores in North America in the next three years.
Luxottica Group also has eight central lens finishing labs that are of strategic importance to its North American retail business as well as EyeMed Vision Care, a leading administrator of managed vision care programs for corporations, government agencies and health insurance providers in the United States.In the sun segment, Sunglass Hut is the largest and best known chain in North America with 1,600 stores.
With its organization structure, Luxottica Group is able to quickly respond to market opportunities and especially in the United States, where demand for fashion and luxury has grown out of cities like New York, Miami and Los Angeles to become a nationwide cultural phenomenon.
In Asia-Pacific, the Group continued to strengthen its retail operations and consolidate its
leadership in the region. Luxottica worked on the integration of its direct distribution network in
Australia and New Zealand, which now operates three brands in the prescription segment: OPSM,
Laubman & Pank and Budget Eyewear. At the end of 2007, Luxottica’s retail network in the region
numbered 910 stores (551 for the prescription business and 359 for the sun segment).
In China and Hong Kong, Luxottica Group’s organization is already well structured and fully
operational. The next steps will be to boost the visibility of the distribution network and product
brands, thus consolidating the Group’s presence in the country, which is of long-term strategic
importance. The product offering will gradually be tailored to the evolution of the Chinese middle
classes, who tend to favor well established fashion brands.
PRESCRIPTION
LensCrafters
Twelve years after joining Luxottica Group, LensCrafters now spans two continents with significant presence in the United States, Canada, China and HongKong. It is North America’s leading operator in the fashion eyewear segment, with 951 stores in the United States and Canada, and by the end of 2007, 140 stores were operating under the LensCrafters brand in China and Hong Kong.
Nord America
In 2007, despite the slowdown in the economy in North America and a perceptible shift in the role of managed vision care affecting consumer choices in the North American optical category, the total comparable store sales increased for the year. 2007 was a very positive year due in part to heavy investments enabling LensCrafters to capitalize on favorable trends in the North American market but also on its internal potential, on which future development will focus.
LensCrafters continued in 2007 to roll out the new fashion store design that debuted in 2006. At the year end, there were 140 LensCrafters stores featuring the sleek and inviting new look. Comparable store sales in locations with the new design continue to outpace the rest of the chain by 3% in their first year after re-model. The new format, characterized by refined, exclusive looking interiors and a high degree of product personalization, openly addresses customers with sophisticated tastes who are very demanding in terms of quality of service (a clientele that is becoming increasingly important as a result of LensCrafters advertising campaigns targeting the American consumer). For example, the new store concept was forcefully backed by the “Make an Appearance” campaign.
Very positive performance was also recorded by stores that hadn’t undergone restyling but
continued to benefit from development initiatives undertaken in the past.
While the new store design and positioning make LensCrafters the destination for top eyewear
collections from designers such as Burberry, Dolce & Gabbana, Polo Ralph Lauren, Prada, and
Versace. LensCrafters also broadened its selection of conservative and classic frames and Oakley
products to meet male customer demand.
Sales of prescription frames and sunglasses produced by Luxottica Group, particularly its fashion and luxury brands, accounted for around 57% of total LensCrafters sales in 2007, up 9% over the prior year. In 2008, LensCrafters looks forward to introducing customers tth important new brand Tiffany & Co., and a full line of Oakley prescription and sun products.
Lenses are another important dimension of LensCrafters offering and expertise. Sales of Anti- Reflective lenses continued to grow at 13% in 2007, fueled by an 18% increase in sales of LensCrafters premium AR lenses and FeatherWates Complete? lenses made with Scotchgard? Protector. In 2007, LensCrafters introduced the Advanced View Progressive? lens, a new type of progressive lens that allows a more natural transition between near and far distances. With new, state-of-the-art digital surfacing technology, this lens is providing a very welcome development for customers used to standard progressive lenses.
In addition to its offerings of fashion products and high technology in lenses, LensCrafters launched a pilot program aimed at setting a new standard in the industry and transforming eyeglass shopping into a positive experience for all customers. The program generated significant growth in sales, traffic and conversion of customers notwithstanding the weak economy situation. The program will be extended to many other stores in the network in 2008.
LensCrafters also embarked on a new marketing mission in 2007 to “shatter perceptions” commonly held of optical eyewear and LensCrafters itself. In April 2007, the brand launched a campaign entitled “Open Your Eyes” centering on the concept of never underestimating the importance of having good sight. The long-term objective is to change customers’ attitudes to optical eyewear and the personalized service that LensCrafters provides to ignite their personal style.
Alongside the TV and magazine campaign, the marketing program targeted customers with high profile fashion media. One such initiative was the sponsorship of a special issue of TIME Style & Design magazine, in which LensCrafters was the sole advertiser with more than 20 “Open Your Eyes” ads. In addition, LensCrafters completed its third consecutive sponsorship of Conde Nast Magazine Group’s “Fashion Rocks” during New York’s Fall Fashion Week.
Also in 2007, the new Lenscrafters.com web site complemented the new store concept. The new site now accelerates the path to eyewear purchase, while reflecting a more fashion-oriented look and knowledge of eyewear trends. The site now features the entire product range and puts new emphasis on LensCrafters service and expertise. The site experienced a 27% increase in average monthly site visitors and a 35% increase in time spent on the site. Also very successful is the new feature of booking eye exams on-line, with nearly 100,000 exams booked in its first year.
China and Hong Kong
In China and Hong Kong, 2006 was a year of re-organization and extension of the retail network following the acquisition of the Xueliang Optical, Ming Long Optical and Modern Sight Optics chains (around 270 stores in all). With the opening in September 2007 of LensCrafters’ new flagship store in Beijing’s Oriental Plaza, an icon of fashion and shopping, Luxottica took the first step towards making the LensCrafters brand a synonym for prestige eyewear in China. LensCrafters in fact offers the best of “Made in Italy” eyewear, an extraordinary level of customer service and the most advanced technology in the industry, thus positioning itself as the first real eyewear “boutique” in the Chinese market and serving as a benchmark for premium eyewear products. LensCrafters is the first chain in China to guarantee its products for 30 days from the date of purchase. Further, thanks to specialist personnel, LensCrafters stores are now seen as a valid alternative to hospitals, which used to be the only trusted venue for eye-exams. LensCrafters will be launching a major initiative in 2008 to differentiate itself from all other optical chains.
In 2007, a total of 85 stores were re-branded to LensCrafters bringing the LensCrafters network to 140 stores in China and Hong Kong.
In addition to a 15.7% increase in sales on comparable basis, 2007 saw both a higher average selling price and an increasing number of customers. As a premium optical retailer, LensCrafters’ positioning has become a more attractive option versus traditional optical retailers. High levels of service, eye-care programs, lenses and brands will be key to long-term growth in this region.
The optical segment will continue to grow in step with the offering of fashion brands and products,
introducing brands tailored to the demographic profile of the areas served. The sun segment is
another business opportunity as increasing numbers of Chinese view sunglasses as part of their daily
wardrobe, being increasingly fashion conscious and aware of health issues, especially theyouth.
Store performance was particularly strong in Hong Kong, where all stores have been converted to the
LensCrafters’ brand. The Group’s premium brands, the high profile of its stores and its high level of
service quality have been a great success, as reflected by its growing market share in Hong Kong.
Pearle Vision
Part of the Group since 2004 through the Cole National transaction, 2007 was for Pearle Vision the year of the re-launch. Its network consists of 880 stores (40 up vs. 2006), of which 477 are company owned in the United States, Canada and Puerto Rico, and 403 are franchise stores in the US and the Caribbean.
In North America, Pearle Vision is the number two optical chain after LensCrafters. Although both brands address the mid- to high-end customer bracket, their positioning in practice is complementary. Pearle Vision focuses on the factors that made the brand a success: customers having trust in the medical expertise and quality of service.
The powerful relaunching of the Pearle Vision brand by Luxottica was centered on a return to its original values, which had made Pearle Vision a byword for generations of Americans, their “Home of Trusted Eyecare.”
After a long period of positive comparable store sales results and a significant and structurally solid return to profitability, Pearle Vision is producing the desired results. A product mix increasingly geared to premium, high value added products has helped restore strong customer relationships, as have doctor and optometrist involvement and training initiatives and advertising campaigns (including TV).
At the same time, a drastic reduction in promotions helped improve the positioning of the stores and consumers perception, resulting in improved quality and profitability. Sales of Luxottica products enjoyed strong growth. Ray-Ban, Prada, Brooks Brothers and Versace were some of the better selling brands.
Lastly, to centralize services and achieve economies of scale, all in-store labs were closed and their work transferred to the eight large central lens finishing facilities serving all the Group’s retail business in America.
Canada is also a market with huge retail potential. Here the Group had already acquired Shoppers Optical, a 74 store chainthat, given its good positioning and favorable geographical distribution, was rebranded to Pearle Vision.
A similar operation was carried out in 2005 when Precision Optical was acquired. The total number
of Pearle Vision branded stores in Canada has now reached 98.
Luxottica is increasingly becoming the preferred supplier to the Pearle Vision franchisees, not only
due to the strength of its brands and the quality of its products but also because of the new and
much improved services of the Franchise Advantage Program. This program features marketing
solutions, and savings on selected categories of products (lenses, lab services, contact lenses,
accessories), all with a high level of service and merchandising support.
Licensed Brands
Luxottica Group is the leading operator of licensed brand stores in the United States and Canada,
with a network, at the end of 2007, of 1,338 locations in Sears, Target and BJ’s Wholesale.
Each of these brands offer consumers the convenience of taking care of their optical needs where
they shop and has a precise market positioning. Sears, a department store with a vast and
heterogeneous customer base, has further improved the services that were launched in 2005. Ray-
Ban, in particular, was introduced in all 886 stores. In general, sales growth in Sears Optical stores
was higher than that of Sears’ total sales.
In 2007, Target Optical, which appeals to fashion-minded customers, reported improved sales
performance in its 296 Target stores, which operate in America’s big cities. Efforts were focused on
improving service and consulting by the sales personnel (new “take it and try it” sales method) as
well as strengthening its fashion positioning by offering brands such as Vogue and Ray-Ban.
The license with BJ’s Wholesale terminated effective March 2008 since the brand was no longer in
line with Luxotttica Group’s licensing strategy.
OPSM, Laubman & Pank, Budget Eyewear
In Australia and New Zealand, Luxottica Group operates three specialist prescription brands: OPSM, Australia’s top eyewear brand for luxury and fashion-minded customers, Laubman & Pank, provider of high quality eyecare and services, and Budget Eyewear, focused on price-conscious consumers. The three brands operate in all of Australia’s states, (especially in cities), while OPSM operates in key areas of New Zealand as well. At the end of 2007, Luxottica Group retail prescription stores were 511 in Australia and 40 in New Zealand.
Results in 2007 were very positive (sales up 6.3%) due to a brand positioning strategy, a product assortment geared to the fashion segment, an innovative store format (the Accelerated Fashion program highlighted its fashion positioning) and personnel training. Luxottica Group consolidated its leadership in the Australian market through organic growth and acquisitions, even though the retail market was not particularlystrong.
In the prescription segment, the objective was to differentiate the positioning of the three brands in order to cover complementary market segments with product offerings catering to the needs of different consumer categories. In 2007, consumer communication was stepped up thanks to a Customer Relationship Management program. Improved understanding of customers and initiatives helping consumers perceive eyewear as fashion accessories helped OPSM achieve a significant increase in sales and consolidate its position as the best known brand on the market.
Laubman & Pank’s reputation with Australian customers as an optical fashion brand was further
strengthened as promotional programs clearly positioned the brand as a national chain. Research
showed that the brand was perceived as having a special focus on eye health, thanks to a series
of initiatives, including TV campaigns and the Lauby’s EyeMobile national screening program,
which conducted eye tests for 9,000 kids in 2006. The brand also launched a new channel to
market by launching four concession stores in major Australian department store chains.
Budget Eyewear managed to extend its product offering while remaining the preferred destination
for those wanting quality eyewear at lower prices.
SUN
Sunglass Hut
Sunglass Hut is the world’s largest and most important specialty sun retailer, with 2,003 stores (1,600 in North America, 219 in Australia, New Zealand and Singapore, 87 in Europe. In addition to the 23 stores in Middle East, Sunglass Hut opened in 2007 six stores in Hong Kong, and has now a national presence, thanks acquisitions made, in South Africa, with 67 stores currently being rebranded. In the eyes of consumers, Sunglass Hut increasingly represents fashion and the latest trends. Founded in 1971, initially only inside department stores in the United States, Sunglass Hut has cultivated a young, active and fashion-conscious image. It is now the leader in the high-end sun retail market.
While 2006 saw the completion of the brand repositioning process, 2007 was characterized by the
ongoing conversion of stores to a new format, the aim being to further refine Sunglass Hut’s image for
fashion conscious consumers. Thanks to this gradual move up-market and increasing appeal to
fashion-conscious women, sales have risen 40% over the last three years on a comparable store
basis.
In the United States, Sunglass Hut further expanded with 199 new store openings and a restyling
of another 249, mainly in the key states of California, Florida, Texas and New York. Fashion
products were popular, driven mainly by oversized designer sunglasses and by the launch of new
brands: Dolce & Gabbana in 300 stores and D&G in 1,300 stores.
In Australia and New Zealand, Sunglass Hut strengthened its positioning and secured a number of stores at major airports. Its market presence in the fashion and luxury segment grew, with the largest increase in the luxury brands. Brand awareness improved significantly, especially amongst women in the 25- to- 39 age bracket.
In Europe, Sunglass Hut has nearly 90 stores, mostly in the UK and notably in the country’s major airports. In 2007, it continued with its brand repositioning process by rolling out the new store design, improving product mix, stepping up personnel training and cultivating the image of a truly customer-focused retailer. Such efforts attracted more fashion conscious customers and fueled sales of premium and luxury products of special appeal to women. Further improvements will be made in 2008 with a focus on airports; for example, a new store will open in Heathrow’s Terminal 5. A strong brand campaign to consolidate Sunglass Hut’s focus on the consumer will be launched in 2008.
OTHER ACTIVITIES
LENS LABORATORIES
Luxottica Group manages one of the largest networks of optical manufacturing labs in North
America, with eight central labs and close to 905 lens finishing labs, mainly in LensCrafters stores.
All the labs use state-of-the-art processing technologies to meet growing demand, accommodate
new products and maintain a constant focus on quality and customer service.
Two laboratories with less advanced technology were closed and replaced by one state-of-the-art
lab in Columbus, Ohio. The eight central labs now serve all the Pearle Vision stores, which no
longer have in-store lens-finishing facilities as well as the Licensed Brands and some franchisees.
The labs in LensCrafters stores were upgraded to serve over-flow from both Sears Optical points of
sale and Pearle Vision stores. LensCrafters in-store labs can prepare glasses chosen by the
customer in as little as an hour.
MANAGED VISION CARE - EYEMED VISION CARE
EyeMed Vision Care is the second biggest managed vision care operator in the United States. With a strong surge of new clients in 2007, the renewal of important agreements and the contribution of Cole Managed Vision contracts, it now serves over 23 million subscribers in large and medium size companies, public administrations and insurance programs and has a network of over 17,000 points of sale including opticians, ophthalmologists, optometrists and stores in chains operated by Luxottica Group.
EyeMed Vision Care is also a recognized leader in terms of quality, choice, value for money and service excellence - all priority concerns for managers shopping for vision care programs, especially for large groups.
Clients using such services enjoy a vast choice amongst the numerous stores in the Group’s chains and independent optical retailer network.
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