Luxottica sees growth on the horizon as epic merger looms
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Luxottica sees growth on the horizon as epic merger looms

By the middle of 2018, we should have witnessed an industry-defining merger between Luxottica, a spectacle-making powerhouse that creates frames for brands like Chanel, and Essilor, a specialist lens maker. Between them, they will create a €48 billion industry leader that has “closed the circle” between manufacture and retail. At present, the companies are still awaiting regulatory clearance in Europe, the U.S. and China.

Luxottica said was looking towards sales growth between 2% and 4% this year, after seeing a 2.2% increase in 2017 to €9.16 billion. When it comes to profit, the company expects operating profit to keep pace with sales, while adjusted net profit could be as much as double that figure, due to lower taxes and interest payments.

The eyewear industry is set to grow, as the world’s population gets larger, older, and richer. More people entering middle age means that the number of people with presbyopia (the age-related degeneration that requires reading glasses to correct) is set to rise. Add in the fact that the global middle class continues to expand, and these new presbyopia sufferers have enough discretionary income to do something about it.

For 2017, Luxottica saw a 12% increase in adjusted net profit from the previous year, at constant currencies. That translates to €970 million, a clear beat against analysts’ expectations of €952 million. Partially, this is down to a tax relief accord the company signed with Italian authorities.

Leonardo Del Vecchio, the group’s executive chairman and majority shareholder, who retook control of the company in 2014, said: “the new Luxottica we have created over the last three years… is beginning to remind me of the group I had left.”

Disclosure

Dominion holds Luxottica in its Global Trends Luxury Fund.


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