Luxottica
2013 Annual Review

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the 2013 Annual Review
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2013 Overview

Profile

Founded in 1961 by Leonardo Del Vecchio, the Group is a vertically integrated organization whose manufacturing of sun and prescription eyewear is backed by a wide-reaching wholesale network and a retail network located mostly in North America, Asia-Pacific, China and Latin America.

Worldwide production 77.3 million units

Product design, development and manufacturing take place in Luxottica’s six production facilities in Italy, three factories in China, one in Brazil and one sport sunglasses production facility in the United States. Luxottica also has a small plant in India serving the local market. In 2013, the Group’s worldwide production reached approximately 77.3 million units.

The design and quality of Luxottica’s products and strong and well-balanced brand portfolio are known around the world.

Proprietary brands include Ray-Ban, one of the world’s best known brands for eyewear, Oakley, Vogue Eyewear, Persol, Oliver Peoples, Alain Mikli and Arnette.

Licensed brands include Armani, Bulgari, Burberry, Chanel, Coach, Dolce & Gabbana, Donna Karan, Paul Smith, Polo Ralph Lauren, Prada, Stella McCartney, Starck Eyes, Tiffany, Tory Burch and Versace.

Nearly 50 direct wholesale subsidiaries and over 7,000 stores worldwide

The Group’s wholesale distribution network covers more than 130 countries across five continents and has nearly 50 commercial subsidiaries providing direct operations in key markets.

Direct wholesale operations are complemented by an extensive retail network comprising over 7,000 stores worldwide as of December 31, 13.

Luxottica is a leader in the prescription business in North America with its LensCrafters and Pearle Vision retail brands, in Asia-Pacific with the OPSM and Laubman & Pank brands, in China with the LensCrafters brand and in South America with the GMO brand.

In North America, Luxottica operates points of sale for its retail licensed brands under the Sears Optical and Target Optical brands. In addition, Luxottica is one of the largest managed vision care operators in the United States through EyeMed and the second largest lens finisher, having a network of four central laboratories in North America, over 900 on-site labs at LensCrafters stores, a fully dedicated Oakley lab plus an additional facility based in China dedicated to North American optical retail.

Luxottica has a global sun and luxury retail organization to support and reinforce its global retail brands dedicated to sun and luxury eyewear: the Sunglass Hut, ILORI and The Optical Shop of Aspen brands.

The Sunglass Hut brand, in particular, has a global presence, namely in North America, Asia-Pacific, South Africa, Europe, Latin America and the Middle East.

The Oakley brand provides a powerful wholesale and retail (“O stores”) presence in both the performance optics and the sport channels. In its O store locations, the Group offers a variety of Oakley-branded products in addition to Oakley eyewear styles. Oakley-branded products include apparel, footwear, backpacks and accessories designed for surf, snow, golf, outdoor, motor sport, mountain bike and other athletic lifestyles.

Luxottica’s distribution channels are complemented by an e-commerce component, including the Oakley, Ray-Ban, Sunglass Hut and Target Optical websites.

Group trends in 2013

In 2013, Luxottica set a new net sales record of more than Euro 7.3 billion, an increase of +7.5% at constant exchange rates2 and +3.2% at current exchange rates compared to 2012. This result is attributable to both the Wholesale and Retail Divisions’ performance and is evidence of the Group’s determination in pursuing growth in each and every quarter.

Adjusted net income3, 5 for the full year 2013 amounted to Euro 617 million, up +10.3% from Euro 560 million for 2012, corresponding to adjusted Earnings per Share (EPS)3, 5 of Euro 1.31.

In addition, in 2013 disciplined working capital management allowed Luxottica to generate adjusted free cash flow3, 5 of Euro 648 million. Consequently, net debt at December 31, 2013 decreased to Euro 1,461 million (Euro 1,662 million at fiscal year-end 2012), with a net debt/adjusted EBITDA3, 5 ratio of 1.0x compared to 1.2x at fiscal year-end 2012.

Key financials1
(millions of Euro)
FY13 at current exchange rates FY12 at current exchange rates Change at constant exchange rates2 Change at current exchange rates
Net sales 7,312.6 7,086.1 +7.5% +3.2%
         
Operating income adjusted3, 5 1,064.7 991.8   +7.3%
Operating income 1,055.7 970.1   +8.8%
         
Net income attributable to Luxottica Group Stockholders adjusted3, 5 617.3 559.6   +10.3%
Net income attributable to Luxottica Group Stockholders 544.7 534.4   +1.9%
         
Earnings per share adjusted3, 5 1.31 1.20   +8.6%
Earnings per share 1.15 1.15   +0.3%
         
Earnings per share in US $ adjusted3, 5 1.74 1.55   +12.2%
Earnings per share in US $ 1.53 1.48   +3.7%

Wholesale Division

The Wholesale Division grew constantly each quarter throughout 2013, with total results for the year at Euro 2,991 million, up +12.0% at constant exchange rates2 (up +7.9% at current exchange rates) compared to 2012.

Adjusted operating income3, 5 for 2013 rose to Euro 658 million, reflecting an increase of +8.9% from 2012, with an adjusted operating margin3,5 of 22.0%, up +80 bps at constant exchange rates2 (up +2 bps at current exchange rates).

Retail Division

For the full year 2013, the Retail Division reported net sales of Euro 4,321 million, which were on par with the full year 2012 (up +4.7% at constant exchange rates2, 6).

In particular, Sunglass Hut reported an increase of +11.2% in total net sales over 2012 results, at constant exchange rates2, 6.The Optical segment also continued to post solid results in emerging markets, with comparable store sales4 showing double-digit growth in China and Hong Kong, and in Australia OPSM saw its comparable store sales4 rise by +4.9%. With regard to North America, 2013 was a year of transition for LensCrafters, which delivered an increase of +1.0% in comparable store sales4 and a progressive increase in profitability.

The Retail Division’s adjusted operating income3, 5 for 2013 rose to Euro 586 million, from Euro 574 million for 2012 (up +1.9%). As a result, adjusted operating margin3, 5 for 2013 settled at 13.5% (13.3% in 2012), up +60 bps at constant exchange rates2 (+20 bps at current exchange rates).

Net sales (Mn Euro)

Graph

(1) All comparisons, including percentage changes, refer to the twelve-month period ended December 31, 2013 and December 31, 2012, respectively. Starting January 1, 2013, the Group adopted the revised IAS 19 “Employee Benefits” standard and the Group’s results for previous periods have been restated in accordance with the new standard. As a result of an increase in employee benefits related expenses, the Group’s operating income and net income for fiscal year 2012 declined by Euro 11.9 million and Euro 7.3 million, respectively.

(2) Figures given at constant exchange rates have been calculated using the average exchange rate of the respective comparative period in the previous year. For further information, please refer to tables from page 151 of the 2013 Annual Report.

(3) EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted operating income/profit, adjusted operating margin, free cash flow, net debt, net debt/adjusted EBITDA ratio, adjusted net income and adjusted EPS are not measures in accordance with IAS/IFRS. For further information on non-IAS/IFRS measures, please refer to the section “Non-IFRS measures”, from page 34 of the 2013 Annual Report.

(4) Comparable store sales reflect the change in sales from one period to another that, for comparison purposes, includes in the calculation only stores open in the more recent period that also were open during the comparable prior period, and applies to both periods the average exchange rate for the prior period and the same geographic area.

(5) The adjusted data for 2013 excludes the following items: (i) non-recurring costs relating to reorganization of Alain Mikli International acquired in January 2013 amounting to an approximately Euro 9 million adjustment to Group operating income (approximately Euro 6 million net of tax effect); (ii) a non recurring expense relating to a tax audit for the 2007 tax year in the amount of Euro 26.7 million; and (iii) a non-recurring accrual relating to a tax audit in Luxottica S.r.l. for the 2007 tax year in the amount of Euro 10 million.

(6) At current exchange rates, (i) Luxottica Group’s net sales in emerging countries rose by +14.0%; (ii) Luxottica Group’s net sales in Europe increased by +9.7%; (iii) the Wholesale Division’s net sales in Europe for 2013 rose by +7.7%; (iv) the Retail Division’s net sales for 2013 increased +0.2%; and (v) Sunglass Hut’s net sales rose by +6.3%.

A long way to grow

 

Delivering sustainable sales growth & margin expansion by leveraging the industry’s strong secular drivers

The Group operates in an industry with significant opportunities for growth. The groundwork laid in the last few years is the foundation upon which the Group expects to continue increasing its net sales performance and improving profitability.

Looking forward, the Group’s main drivers include its strong brand portfolio, continuing investments in the optical business (supporting growth in mature markets), global expansion of new sales channels and the continuous penetration of emerging markets.

New channel to win millions of new customers

2014: focusing on the top 20 mega and gateway cities

Targeting 50 cities by 2016, to generate additional €500 million sales per year

Today, urbanization is quick and massive. The Group is looking at so-called “megacities” as a great opportunity for future growth. The Group has also identified 50 “getaways cities” which are scattered throughout the five continents for expansion of our retail and wholesale channels.

E-commerce, innovating the online customer experience

Sales expected to reach US$190 million in 2014, driven by North America

New sales channels continue to represent an important driver for the Group’s growth. The department stores, travel retail and the e-commerce, defined as a few of the fastest growing channels, are enhancing their presence throughout markets.

Graph

Combining developed and emerging markets growth

An increase in disposable income of the mid-upper class, an increased number of luxury stores and brand recognition represent Group opportunities in the emerging markets.

The Group is particularly focused on markets in Southeast Asia where the eyewear market is still new. Once a wholesale subsidiary in Thailand is established, the Group will increase its presence in the region, in particular, in Indonesia and Malaysia.

Roadmap by geography

Graphs

* Figures at constant exchange rates are calculated using the average exchange rates in effect during the corresponding period of the previous year. Please refer to the “Major currencies” table in the press release titled “Luxottica completes 2013 with record results” dated results February 27, 2014 available at the www.luxottica.com website under the Investors tab.

** Comparable store sales reflect the change in sales from one period to another that for comparison that, purposes, includes in the calculation only stores open in the more recent period that also were open during the comparable prior period, and applies to both periods the average exchange rate for the prior period and the same geographic area. Commencing 2Q12, retail comparable store sales exclude Pearle Vision results.

History
Over 50 years of excellence

Luxottica’s DNA

Mission and Strategy

Being a global leader in the design, manufacture and distribution of sun and prescription eyewear of high technical and stylistic quality, Luxottica’s mission is multifold: to improve the well-being and satisfaction of its customers while simultaneously creating value for its employees and the communities in which the Group operates. Every collection and every pair of eyewear is the result of an ongoing process of research and development aimed at anticipating and interpreting the needs, desires and aspirations of consumers all over the world as sun and prescription eyewear are increasingly perceived as a desirable and expressive accessory to complete one’s personal look.

Luxottica delivers on its mission through its vertically integrated business model, manufacturing excellence, focus on service and geographically diversified footprint, which in turn have led to greater efficiency, flexibility and speed in product design, engineering, supply chain, manufacturing and logistics, whilst being uncompromising in quality.

Over 50 years of experience

The achievement of high standards of quality reflects the Group’s strong technical and manufacturing know-how - the fruit of over 50 years of experience - and its constant commitment to technological innovation, style and design and the study of changing lifestyles and interpretation of fashion trends.

The Company’s long-term strategy is to continue to expand in the eyewear and eyecare sector by growing its various businesses, whether through acquisitions or organically, primarily by focusing on the drivers discussed below.

Vertical integration

Vertically integrated business model that Luxottica has built over the decades

One of the competitive advantages underpinning the Group’s past and future successes is the vertically integrated business model that Luxottica has built over the decades.

The Group’s present structure, covering the entire value chain, is the result of a far-sighted choice made by the Company’s founder and current Chairman, Leonardo Del Vecchio, who understood the potential of the vertical strategy ever since deciding to make entire frames rather than just components.

Vertical integration of manufacturing was gradually accompanied by the expansion of distribution, first wholesale and, from 1995, retail and by the creation of a key presence in the high value-added business of lens finishing.

Over the decades, the Company has vertically integrated all the phases of the production process to attain a level of efficiency in line with the quality of products and services it offers.

Direct control of the entire production platform makes it possible to verify the quality of the products and processes, introduce innovations, discover synergies and new operating methods, and optimize time and costs.

Direct distribution enables Luxottica to offer its products in the major developed and emerging markets and achieve a unique understanding of end users’ needs and tastes. Control over distribution is viewed as a strength by stylists and fashion houses who come to Luxottica to produce their eyewear collections and access the Group’s global and widespread distribution network.

Development of a vertically integrated business model

• INCORPORATION: Luxottica was founded by Leonardo Del Vecchio in 1961. The Company started out as a small workshop and operated until the end of the 1960s as a contract producer of dyes, metal components and semi-finished goods for the optical industry. It gradually widened the range of processes offered until it had an integrated manufacturing structure capable of producing a finished pair of glasses. In 1971, Luxottica’s first collection of prescription eyewear was presented at Milan’s MIDO (an international optics trade fair), marking Luxottica’s definitive transition from contract manufacturer to independent producer.
Luxottica’s international expansion began in the 1980s with the acquisition of independent distributors and the formation of subsidiaries and joint ventures in key markets.
Luxottica’s wholesale distribution expansion has focused on customer differentiation, customized service and new sales channels, such as large department stores, travel retail and e-commerce, as well as penetration in the emerging markets.

• EXPANSION IN WHOLESALE DISTRIBUTION: in the early 1970s, the Company sold its frames exclusively through independent distributors. In 1974, after five years of sustained development of its manufacturing capacity, it started to pursue a strategy of vertical integration, with the goal of distributing frames directly to the market. The first step was the acquisition of Scarrone S.p.A., which had marketed the Company’s products since 1971 bringing with it a vital knowledge of the Italian eyewear market.
Luxottica’s international expansion began in the 1980s with the acquisition of independent distributors and the formation of subsidiaries and joint ventures in key markets.
Luxottica’s wholesale distribution expansion has focused on customer differentiation, customized service and new sales channels, such as large department stores, travel retail and e-commerce, as well as penetration in the emerging markets.

• EYEWEAR, A NEW FRONTIER OF FASHION: the acquisition of La Meccanoptica Leonardo in 1981, the owner of the Sferoflex brand and of an important flexible hinge patent, enabled the Company to enhance the image and quality of its products and increase its market share.
From the late 1980s, eyeglasses, previously perceived as mere sight-correcting instruments, began to evolve into “eyewear.” Continual aesthetic focus on everyday objects and designers’ interest in the emerging accessories industry led Luxottica to embark on its first collaboration with the fashion industry in 1988 by entering into a licensing agreement with Giorgio Armani. The Company followed up that initial collaboration with numerous others and with the acquisition of new brands, gradually building the current world-class brand portfolio and thereby increasing its commitment to research, innovation, product quality and manufacturing excellence.
Over the years Luxottica has launched collections from names like Bulgari (1997), Chanel (1999), Prada (2003), Versace (2003), Donna Karan (2005), Dolce & Gabbana (2006), Burberry (2006), Polo Ralph Lauren (2007), Paul Smith (2007), Tiffany (2008), Stella McCartney (2009), Tory Burch (2009), Coach (2012), Starck Eyes (2013) and Armani (2013).
In addition, in 1999 Luxottica acquired Ray-Ban, one of the world’s best-known sunglasses brands.
In addition, in 1999 Luxottica acquired Ray-Ban, one of the world’s best-known sunglasses brands.
Through this acquisition the Company obtained crystal sun lens technology.
In 2007, Luxottica acquired California-based Oakley, a leading sport and performance brand, which owned the Oliver Peoples brand and a license to manufacture and distribute eyewear under the Paul Smith name. At the time of the acquisition, Oakley had its own retail network of over 160 stores.
In 2013, Luxottica acquired Alain Mikli International, a French luxury and contemporary eyewear company, which owns the Alain Mikli brand and the Starck Eyes license. As a result of the acquisition, Luxottica strengthened both its luxury brand portfolio and prescription offerings, which now include Alain Mikli’s distinctive designs.

• EXPANSION IN RETAIL DISTRIBUTION: in 1995, Luxottica acquired the United States Shoe Corporation, which owned LensCrafters, one of North America’s largest optical retail chains. As a result, Luxottica became the world’s first significant eyewear manufacturer to enter the retail market, thereby maximizing synergies with its production and wholesale distribution and increasing penetration of its products through LensCrafters stores.
Since 2000, Luxottica has strengthened its retail business by acquiring a number of chains, including Sunglass Hut (2001), a leading retailer of premium sunglasses, OPSM Group (2003), a leading optical retailer in Australia and New Zealand and Cole National (2004), which brought with it another important optical retail chain in North America, Pearle Vision, and an extensive retail licensed brands store business (Target Optical and Sears Optical). In 2005, the Company began its retail expansion into China, where LensCrafters has become a leading brand in the country’s high-end market. In the same year, the Group also started to expand Sunglass Hut globally in high-potential markets like the Middle East, South Africa, Thailand, India, the Philippines, Mexico, Brazil and Mediterranean Europe.
In 2011, Luxottica started its optical retail expansion in Latin America by completing the acquisition of Multiópticas Internacional, a leading retailer in Chile, Peru, Ecuador and Colombia.

Brand Portfolio Management

Building strong brands that create enduring relationships with consumers is key to how Luxottica plans to sustain its business in the future. The Company has a strong and well-balanced brand portfolio that includes a number of proprietary and licensed brands. Its composition is gradually modified by the acquisition of new brands and the addition of new licensing agreements along with the withdrawal of brands no longer deemed strategic. These actions are taken in order to continually attract a wide range of consumers with different tastes and lifestyles. Furthermore, Luxottica’s long-term objectives remain consistent: to focus on leading brands, balance proprietary and licensed brands, avoid brand dilution, lengthen the average term of licensing agreements and fuel Asian friendly styles.

Design and technological innovation

Luxottica is committed to staying current with changing lifestyles and emerging fashion trends, which it interprets in the design and style of products to address the needs and tastes of consumers. Emphasis on product design and the continuous development of new styles is the Group’s distinctive feature.

The Company differentiates its products not only through innovation in style and design but also through a commitment to technological innovation.

Luxotticans

Highly qualified, motivated and committed employees are critical to the long-term success of the Company. Luxottica carefully manages the hiring and training process with a view to employing and retaining outstanding professionals.

Market expansion

Luxottica is committed to maintaining and strengthening its leading position in the markets in which it operates. It is also focused on evaluating opportunities to further penetrate emerging markets, a key driver of its long-term growth strategy. Market expansion is also sought through increasing retail distribution while consolidating Luxottica’s wholesale network.

Financial discipline

The Company has a strong focus on operating profitability and cash generation to deliver sustainable growth. Close monitoring of working capital management and a continued focus on debt reduction help to further strengthen the Company’s financial position.

Structural growth drivers

The eyewear industry is driven by solid long-term structural growth drivers such as demographics and premiumization.

An Industry driven by solid long-term structural growth drivers

Demographic catalysts: by 2020, approximately 500 million additional individuals will be characterized as vision correction wearers. According to current industry’s estimates, this is due to growing and aging of population and a change of lifestyle (higher TV and pc exposure).

Premiumization: Eyewear is undergoing a structural perception change from medical device to fashion accessory; as a result increasing the potential of premium eyewear segment.

Moreover accessories eyewear have been outperforming the rest of the luxury sector in terms of growth and this trend is forecasted to continue in the medium term. Within luxury accessories, eyewear is still the smallest category and, arguably, the fastest growing one, hence boasting the most potential in the coming years. Such shift towards fashion accessories should translate into a shorter replacement cycle as well as driving multiple purchases.

People

Group headcount

73,415 employees, of which 64.0% were dedicated to retail segment

As of December 31, 2013, Luxottica Group had 73,415 employees, of which 64.0% were dedicated to the retail segment, 10.7% were in the wholesale segment and 24.8% were in manufacturing activities and logistics.

Corporate central services represent 0.5% of the Group’s staff.

In terms of geographic distribution, 57.8% of Luxottica’s employees work in North America, 13.1% in Europe, 21.3% in Asia-Pacific and 6.6% in Latin America.

No. Employees by business area
64% Retail 46,966
10% Wholesale 7,835
25% Operations 18,215
<1% Corporate 339
Total 73,415
Graph
No. Employees by geographic area
13% Europe 9,600
58% North America 42,455
21% Asia-Pacific 15,623
7% Latin America 4,814
<1% Middle East & South Africa 524
<1% Corporate 399
Total 73,415
Graph

Planning and professional development

2013 saw the complete implementation of the Corporate Planning of Professional Requirements and Development of Technical and Managerial Careers Process.

Promoted by the Human Resources Committee and directly coordinated by the CEO, the Process seeks to satisfy the growing need for leadership by promptly identifying and promoting those who, in the results they have achieved, the learning ability they have demonstrated and their conduct, have shown the necessary potential to take on increasing levels of responsibility within the organization.

Thanks to advanced assessment tools and an IT platform that makes it possible to share organizational databases, the Process now allows for the integrated management of the succession plan for 500 key roles in the Group and the definition of professional development plans for a growing number of employees whose technical or managerial potential has been acknowledged.

72% of key roles are entrusted to managers promoted from within

• 35% of key roles are currently entrusted to female leaders

• 76% of key roles are entrusted to international managers

• 72% of key roles are entrusted to managers promoted from within

“Your Voice”: internal satisfaction survey

In 2013 Luxottica carried out its second internal satisfaction survey.

Thanks to the participation of the 88% of the 73,415 employees, Luxottica measured the level of engagement, loyalty and confidence of those that work for the organization, wherever they are based in the world and at all operating levels.

The survey confirmed that Luxottica is regarded as a top-level organization by its employees, with values that confirm the positive data that emerged from the 2011 survey and highlight growing strengths compared with benchmark global organizations.

Luxottica survey

Luxottica survey

• 1 Key Performance Indicator (Engagement)

• 11 themes

• 45 items

88%
Luxottica employees participation index

Financial Highlights

Net sales

€7,313mn

+3.2%
vs 2012

2013 Retail net sale

€4,321mn

+0.2%
vs 2012

Net sales comprising our proprietary brand names and our licensed brands represented approx. 89% of the total net sales of frames by the retail division.

Wholesale

€2,991mn

+7.9%
vs 2012

Principal markets by division

Geographic market % 2013 total sales % 2012 total sales
Net sales 2% 2%
European Wholesale 17% 17%
Total Europe 19% 19%
North America Retail 46% 48%
North America Wholesale 10% 10%
Total North America 56% 58%
Asia-Pacific Retail 8% 9%
Asia-Pacific Wholesale 5% 4%
Total Asia-Pacific 13% 13%
Rest of the world Retail 3% 2%
Rest of the world Wholesale 9% 8%
Total Rest of the world 12% 10%
TOTAL 100% 100%

Net sales

(millions of Euro)

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Gross profit

(millions of Euro)

Graph

Retail net sales by geographic area

Graph
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Wholesale net sales by geographic area

Graph
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Operating income

(millions of Euro)

Graph

Net income, Group

(millions of Euro)

Graph

* Starting January 1, 2013, the Group adopted the revised IAS 19 “Employee Benefits” standard and the Group’s results for previous periods have been restated in accordance with the new standard. As a result of an increase in employee benefits related expenses, the Group’s operating income and net income for fiscal year 2012 declined by Euro 11.9 million and Euro 7.3 million, respectively.

Geography

Retail Map

4,742
stores

NORTH AMERICA 4,742 stores
Prescription
LensCrafters 958
Pearle Vision 596
(of which 375 are franchises)
Sears Optical 726
Target Optical 335
Prescription/Sun
Oliver Peoples 8
(of which 1 is franchise)
Alain Mikli 5
The Optical Shop of Aspen 17
ILORI 18
Sun
Sunglass Hut, Sunglass Icon 1,916
(of which 19 are franchises)
Sun/Clothing
Oakley Stores and Vaults 163

679
stores

CENTRAL & SOUTH AMERICA 679 stores
Prescription
GMO (including Econópticas) 475
Sun
Sunglass Hut 197
Sun/Clothing
Oakley Stores and Vaults 7
(all franchised)

384
stores

EUROPE 384 stores
Prescription
David Clulow 40
(of which 3 are franchises)
Alain Mikli 5
(of which 3 are franchises)
Sun
Sunglass Hut 265
David Clulow 59
Sun/Clothing
Oakley Stores and Vaults 15
(of which 3 are franchises)

37
stores

AFRICA & MIDDLE EAST 159 stores
Sun
Sunglass Hut 157
(of which 35 are franchises)
Sun/Clothing
Oakley Stores and Vaults 2
(all franchises)

243
stores

GREATER CHINA 243 stores
Prescription
LensCrafters 228
Alain Mikli 6
Sun
Sunglass Hut 9

844
stores

ASIA-PACIFIC 844 stores
Prescription
OPSM 395
(of which 32 are franchises)
Laubman & Pank 48
(of which 4 are franchises)
Budget Eyewear 10
(all franchised)
Prescription/Sun
Oliver Peoples 3
(all franchises)
Alain Mikli 9
Sun
Sunglass Hut 349
(of which 75 are franchises)
Sun/Clothing
Oakley Stores and Vaults 30
(of which 7 are franchises)

7051 stores
(of which 579 franchised)

With a strong portfolio of retail brands, Luxottica is well positioned to reach different segments of the market. The retail portfolio offers a variety of differentiation points for consumers, including the latest designer and high-performance sun frames, advanced lens options, advanced eyecare, everyday value and high-quality vision care health benefits. As of December 31, 2013, Luxottica’s retail business consisted of 6,472 stores and 579 franchised or licensed locations.

Luxottica’s retail stores sell not only prescription frames and sunglasses that the Group manufactures but also a wide range of prescription frames, lenses and other ophthalmic products manufactured by other companies. In 2013, net sales comprising Luxottica’s proprietary and licensed brands represented approximately 89% of the total net sales of frames by the retail division.

Wholesale Map

More than
130
countries

Direct Wholesale Subsidiaries

Nearly 50 countries
Europe
Italy Austria
Belgium Croatia
Finland France
Germany Greece
Hungary Ireland
Norway Poland
Portugal Russian Federation
Spain Sweden
Switzerland The Netherlands
Turkey United Kingdom
Americas
United States Argentina
Brazil Canada
Mexico  
Asia-Pacific
Australia China
India Japan
Singapore South Korea
Taiwan Thailand
Middle East and Africa
Israel South Africa

The wholesale distribution structure covers more than 130 countries, with nearly 50 directly controlled or majority owned operations in the major markets and approximately 100 independent distributors in other markets. Each wholesale subsidiary operates its own network of sales representatives who are normally retained on a commission basis. Relationships with large international, national and regional accounts are generally managed by the employees.

Customers of the wholesale business are mostly retailers of mid to premium-priced eyewear, such as independent opticians, optical retail chains, specialty sun retailers, department stores and duty-free shops. The Group is currently seeking to further penetrate emerging markets and further exploit new channels of distribution, such as department stores, travel retail and e-commerce. Certain brands, including Oakley, are also distributed to sporting goods stores and specialty sport stores, including bike, surf, snow, skate, golf and motor sport stores.

In addition to offering to wholesale customers some of the most popular brands, with a broad array of models tailored to the needs of each market, Luxottica also seeks to provide them with pre- and postsale services to enhance their business. These services are designed to provide customers with the best products and in a time frame and manner that best serve the Group’s customers’ needs.

Luxottica maintains close contact with its distributors in order to monitor sales and the quality of the points of sale that display its products.

In 2002, Luxottica introduced within the wholesale division the STARS program (Superior Turn Automatic Replenishment System), originally under the name “Retail Service”, to provide third-party customers with an enhanced partnership service that leverages Luxottica’s knowledge of local markets and brands to deliver fresh, high-turnover products and maintain optimal inventory levels at each point of sale. This business unit directly manages product selection activities and assortment planning and automatic replenishment of Luxottica’s products in the store on behalf of the third party customer, utilizing ad hoc systems, tools and state-of-the-art planning techniques.

By the end of 2013, STARS served a total of approximately 3,000 stores in the major European markets and emerging markets.

Plants and Main Distributions centers Map

Manufacturing

Luxottica’s primary manufacturing facilities are located in Italy, China, the United States and Brazil.

Luxottica has six manufacturing facilities in Italy: five in Northeastern Italy, the area in which most of the country’s eyewear industry is based, and one near Turin. Over the years, the Group has consolidated its manufacturing processes by utilizing a consistent production technology in each of the Italian facilities. This consolidation has enabled Luxottica to improve both the productivity and quality of its manufacturing operations.

Plastic frames are made in the Agordo, Sedico, Pederobba and Lauriano facilities, while metal frames are produced in Agordo and Rovereto. Certain metal frame parts are produced in the Cencenighe plant. The Lauriano facility also makes crystal and polycarbonate lenses for sunglasses.

From 1998 to 2001, Luxottica operated the Dongguan plant in China’s Guangdong province through a 50%-owned joint venture (Tristar Optical Company Ltd.) with a Japanese partner. In 2001, Luxottica acquired the remaining 50% interest in this Chinese manufacturer and in 2006, it increased its manufacturing capacity in China through the construction of a new manufacturing facility to produce both metal and plastic frames. After the construction of this new facility, the annual average daily production in China increased by approximately 80% in 2006 compared to 2005. Since then, Luxottica has further expanded its manufacturing capacity in China. During 2010, Tristar started producing plastic sun lenses which are paired with frames manufactured in the same Chinese facility. In 2013, Luxottica integrated into its manufacturing processes a newly developed state-of-the-art decoration plant utilizing tecniques adapted from other industries.

The Foothill Ranch facility in California manufactures high-performance sunglasses, prescription frames and lenses and assembles most of Oakley’s eyewear products. The production of Oakley apparel, footwear, watches and certain goggles is outsourced to third-party manufacturers.

The manufacturing facility in Campinas (Brazil) produces both plastic and metal frames for the Brazilian market. In September 2012, Luxottica launched the first locally designed and produced Vogue Eyewear collection for this market. During 2013, the Company added the production of select Ray-Ban and Arnette collections.

Luxottica also operates a small plant in India serving the local market.

In 2013, the Group’s manufacturing facilities produced a combined total of approximately 77.3 million prescription frames and sunglasses.

Three main manufacturing technologies are involved: metal, acetate slabs and plastic (injection molding).

In 2013 approximately 33% of the frames were metal-based, and the remaining frames were plastic.

The manufacturing process for both metal and plastic frames begins with the fabrication of precision matooling and molds based on prototypes developed by in-house designers and engineering staff.

Logistics

The Group’s distribution system is globally integrated and supplied by a centralized manufacturing programming platform. The network linking the logistics and sales centers to the production facilities in Italy, China, the United States and Brazil also provides daily monitoring of global sales performance and inventory levels so that manufacturing resources can be programmed and warehouse stocks re-al25 located to meet local market demand. This integrated system serves both the retail and wholesale businesses and is one of the most efficient and advanced logistics system in the industry with 20 distribution centers worldwide, of which 12 are in the Americas, six are in the Asia-Pacific region and two are in Europe.

There are four main distribution centers (hubs) in strategic locations serving the Group’s major markets: Sedico (Italy), Atlanta (US), Ontario (US) and Dongguan (China). They operate as centralized facilities, offering customers a highly automated order management system that reduces delivery times and keeps stock levels low.

The Sedico hub was opened in 2001 and is state-of-the-art in the sector. In 2013, it managed over 19,000 orders per day, including eyeglasses and spare parts. Sedico ships over 200,000 units daily to customers in Europe, North America, the Middle East, Africa and to the Group’s distribution centers in the rest of the world, from which they are then shipped to local customers. The Sedico hub enabled Luxottica to close local warehouses throughout Europe that served the previous distribution system, improving the speed and efficiency of distribution.

The Atlanta facility, opened in 1996, has consolidated several North America-based facilities into a single state-of-the-art distribution center located close to one of the major airport hubs of the United States. This facility has a highly advanced cross-belt sorting system that can move up to 150,000 units per day. In late 2009, the facility, which was originally a retail-only distribution center, started serving both Luxottica’s retail and wholesale businesses in the North American market.

The Dongguan hub was opened in 2006 and manages an average of 170,000 units per day. The growth in the region has resulted in this hub becoming a strategic part of the Group’s distribution network. Luxottica continues to invest in ways to improve services and increase capacity in order to create even greater efficiencies in the region.

OneSight

Giving back through OneSight

Since 1988, OneSight has helped more than 8.5 million people in 40 countries

OneSight is an independent nonprofit committed to working together to eradicate the global vision care crisis for the more than half a billion people who could have their sight restored with an eye exam and glasses. Since 1988, OneSight has partnered with local health organizations, governments, school districts, industry leaders, doctors and volunteers to help more than 8.5 million people in 40 countries.

OneSight receives support from individuals, foundations, community partners and corporations, including Luxottica. As OneSight’s founding global sponsor, Luxottica provides annual operating support, frames and engagement across 75,000 doctors and employees who volunteer their expertise to help staff OneSight Clinics so public donations directly support programming to help millions more in need.

2013 highligts

Last year, OneSight hosted 75 projects in 10 countries across six continents, and volunteers helped 240,000 patients through the following programs:

OneSight projects map

75
PROJECTS

240,000
PEOPLE HELPED IN THE WORLD,
CHANGING THEIR LIVES

10
countries across
six continents

Charitable Programs

OneSight hosted charitable Vision Clinics in Australia, China, India, Mexico, Nicaragua, South Africa, Thailand and the United States providing quality vision care and eyewear to more than 70,000 patients in need. In addition, 30 Regional and Vision Van Clinics provided access to vision care for students in underserved communities across North America.

Manufacturing

OneSight believes in giving its very best to those who need it most. Last year, OneSight launched Manufacturing Clinics, where Luxottica volunteers produced complete pairs of eyewear in prescription ranges most commonly needed for Global Clinics. During the four Manufacturing Events, volunteers produced eyewear to support Vision Clinics hosted in Chile and Mexico.

Research and education

Significant investments are granted each year for research and education through the OneSight Research Foundation in North America. Last year, the foundation granted 250,000 USD toward pediatric and diabetic eye diseases and awarded 40,000 USD in scholarships to 20 students pursuing a degree in optometry.

2014 Goals

In 2014, 50 programs across 14 countries

In 2014, more than 1,100 Luxottica employees representing 44 countries, doctors and partners wil come together to serve more than 250,000 people through 50 programs across 14 countries.

Expanding charitable Vision Clinics to new countries

OneSight will return to China, India, Mexico, Nicaragua, Peru, South Africa and Thailand and will expand programming to Brazil, Indonesia and Vietnam. OneSight will also continue regional vision care programs in Australia, Canada, China, South Africa and the United States.

Across North America, OneSight will host 30 Regional and Vision Van Clinics focused on providing students with much needed vision care in 18 states.

Expanding sustainable Vision Care models in Africa and North America

OneSight will also expand its community and school-based Sustainable Vision Care Programs. Based on the success of its 2013 pilot program in Farafenni, OneSight will open three more permanent Vision Centers and a central manufacturing lab in The Gambia.

OneSight will also expand on the success of the OneSight Vision Center at Oyler School in Cincinnati, Ohio. Working with school districts and other local partners, OneSight will replicate the model in underserved communities across the United States, including New York and California.