Luxottica Earmarks More Than $1.6 Billion to Speed Expansion

  • Mergers & acquisitions team is ``hyperactive,'' CEO Vian says
  • Ray-Ban maker reports record sales and earnings for 2015

Luxottica Group SpA will seek to accelerate growth by investing more than 1.5 billion euros ($1.63 billion) over the next three years after the Ray-Ban maker’s sales and earnings reached record levels in 2015.

The spending on digital, product development and expansion into new markets will help boost currency-neutral revenue by 5 percent to 6 percent this year and at a “mid-to-high single-digit” rate in 2017 and 2018, the company said Tuesday. Net income will grow at least 1.5 times the pace of sales, Luxottica said, adding it plans to buy back as much as 2.1% of its shares.

Demand for eyewear is expanding in emerging markets with more than 2.3 billion people in Asia, Africa and Latin America needing optical frames, according to Exane BNP Paribas. The scale of the opportunity and changes such as Gucci-owner Kering SA building its own eyewear operations had led to calls for Milan-based Luxottica to make its own prescription lenses, with Exane’s Luca Solca saying a merger with Essilor International SA would make sense.

The company’s mergers & acquisitions team is “hyperactive” and Luxottica is “always in a buying mood,” Massimo Vian, chief executive officer for product and operations, said in an interview. “We continue to review options, mostly on the distribution side.”

Carl Zeiss

Carl Zeiss AG, a German maker of optical instruments, is among possible takeover targets, Il Sole 24 Ore reported last month. Talks aren’t taking place with Carl Zeiss, though “we have a close relation with them,” Vian said, adding that in the future he expects the worlds of frames and lenses to converge.

Luxottica’s sales in the first two months of 2016 were “positive, in line with our guidance, in a economic context that conversely is showing signs of volatility,” Vian said.

Adjusted 2015 sales reached 9.01 billion euros, climbing 5.5 percent excluding currency shifts, Luxottica said in the statement after European markets closed. Adjusted net income rose 24 percent to 854 million euros.

The share buyback and disposal of treasury stock will be proposed to shareholders at the annual meeting on April 29. Luxottica will withdraw as much as 750 million euros from its extraordinary reserves to fund the repurchases. The stock closed up 1.9 percent at 53.75 euros in Milan, giving the company a market value of about 26 billion euros.

The company also named Francesco Milleri as a director to assist founder and Executive Chairman Leonardo Del Vecchio, who is 80. His appointment comes a month after Adil Mehboob-Khan resigned as co-CEO and was replaced by Del Vecchio.

“Luxottica’s corporate governance is very clear and today isn’t being changed,” Del Vecchio said in a statement after the earnings release. “Milleri isn’t a new CEO” but will report to Del Vecchio in his role as executive chairman, according to the statement.

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