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U.S. Demand Bolsters Luxottica’s Outlook

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Police by MARR InternationalMilan—Reporting a strong surge in demand from both the United States and Asia, Luxottica, the world’s biggest premium eyewear group, said it expects 2011 sales to be strong even coming off its 2010 sales record.

Luxottica, which counts Ray-Ban, Oakley, Chanel and Burberry sunglasses among its licenses, said this week that its 2010 net sales would hit a record 5.80 billion euros ($7.9 billion). Analyst’s average estimates had forecast sales of 5.72 billion euros.

“If we are good at seizing occasions, planning carefully and executing with precision, then I think our growth in 2011 will be like that in 2010,” Andrea Guerra, ceo, told Dow Jones.

The company cited two key elements for the sales: increased demand in Asia, where its expanding, and in the United States, its most mature market that accounts for about 60% of total sales. Indeed, Luxottica confirmed its 2010 net profit target of more than 400 million euros, around 35% higher than 2009.

Its fourth quarter sales rose 16.4% to 1.35 billion euros ($1.82 billion), driven by strong retail sales at Luxottica’s Sunglass Hut stores and an almost 20% jump in wholesale sales in North America, where consumer demand appears to have returned following declines during the recession.

Learning Curve in Chinese Growth

Guerra reported that he was “particularly satisfied” with business this year, pointing out Luxottica’s order books showed double-digit percentage growth in January. Although the company probably won’t make any major acquisitions this year, Guerra said Luxottica has a new expansion plan for China after having reduced the number of its retail outlets there last year.

“We were much earlier than others in investing directly in a retail presence (in China), and we committed some errors,” Guerra said, referring store openings and closings. “I think we’ve closed that learning chapter.” Despite that learning curve, Luxottica still had a 20% sales growth in China, and plans to expand its presence by adding 50 new stores. Smaller acquisitions of retail networks are also possible.

“Investing in China requires cultural knowledge,” Guerra added. “When you go to faraway emerging markets, you have to have a big desire and aim to become local there—it’s not enough to sell via distributors and come home, you have to install yourself there with long-term plans, and that can mean adjusting business plans.”

Unlike many Western countries, sunglasses aren’t yet a stand-alone product in Asia, so introducing Luxottica’s Sunglass Huts–which posted an 18% sales increase in the fourth quarter–is not likely in the short-term, Guerra said.

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