Luxottica

Luxottica Group S.p.A. is an Italian eyewear multinational corporation headquartered in Milan. As a vertically integrated company, Luxottica designs, manufactures, distributes, and retails its eyewear brands through its own subsidiaries. It is the largest eyewear company in the world.<ref>Template:Cite news</ref><ref>Template:Cite web</ref> It is, since October 2018, a subsidiary of EssilorLuxottica, which arose out of a merger between the Italian company and the French ophthalmic optics corporation Essilor.<ref>Template:Cite web</ref>

Luxottica was founded in Agordo by Leonardo Del Vecchio in 1961 as a sunglasses manufacturer selling and branding under its own name. Del Vecchio quickly acquired numerous businesses in the pursuit of vertical integration, buying distribution companies rapidly and signing its first designer licensing agreement with Giorgio Armani. In 1990, the company listed American depositary receipts on the New York Stock Exchange where it traded until 2017.

Luxottica retails its products through stores that it owns, predominantly LensCrafters, Sunglass Hut, Pearle Vision, Target Optical, and Glasses.com. It also owns EyeMed, one of the largest vision health insurance providers. In addition to licensing prescription and non-prescription sunglasses frames for many luxury and designer brands including Chanel, Prada, Giorgio Armani, Burberry, Versace, Dolce and Gabbana, Michael Kors, Coach, Miu Miu and Tory Burch,<ref>Template:Cite news
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Template:Cite news</ref> the Italian corporation further outright owns and manufactures Ray-Ban, Persol, Oliver Peoples, and Oakley. Luxottica's market power has allowed it to charge price markups of up to 1000%.<ref name=Lazarus2019/>

In January 2017, Luxottica announced its merger with Essilor, in which Essilor would buy Luxottica while Del Vecchio would become executive chairman of the combined company, as well as co-lead the company with then-Essilor CEO Hubert Sagnières.<ref>Template:Cite web</ref><ref name=Bray2017/> The combined entity would command more than one quarter of global value sales of eyewear.<ref>Template:Cite web</ref><ref name="Grdn2018">Template:Cite news</ref> In March 2018, the European Commission unconditionally approved the merger of Essilor and Luxottica.<ref>Template:Cite news</ref> On 1 October 2018, the new holding company EssilorLuxottica was born, resulting in combined market capitalization of approximately $70 billion.<ref>Template:Cite web</ref>

History

Founding of Luxottica

File:Luxottica Carlos.jpg

Luxottica Carlos sunglasses, produced by Luxottica prior to its licensing deals with fashion houses

Leonardo Del Vecchio started the company in 1961,<ref>Template:Cite news</ref> in Agordo north of Belluno, Veneto; today the company is headquartered in Milan, Italy.<ref name="Grdn2018"/>

Del Vecchio began his career as the apprentice to a tool and diemaker in Milan, but he decided to turn his metalworking skills to making spectacle parts. In 1961, he moved to Agordo in the province of Belluno, home to most of the Italian eyewear industry.<ref name="history">Template:Cite web</ref> The new company was Luxottica s.a.s., a limited partnership with Del Vecchio as one of the founding partners.<ref name="history" /> In 1967, he started selling complete eyeglass frames under the Luxottica brand, which proved successful enough that by 1971 he ended the contract manufacturing business.<ref>Template:Cite web</ref>

Vertical integration and acquisitions

Convinced of the need for vertical integration, he acquired Scarrone in 1974, a distribution company.<ref name="history" /> In 1981, the company set up its first international subsidiary, in Germany, the first in a rapid period of international expansion.<ref name="history" /> The first of many licensing deals with a designer was struck with Giorgio Armani in 1988.<ref>Template:Cite web</ref>

The company listed in New York in 1990,<ref>Template:Cite web</ref> and in Milan in December 2000,<ref>Template:Cite web</ref> joining the MIB-30 (now FTSE MIB) index in September 2003.<ref>Template:Cite web</ref> The listing raised money for the company and allowed it to use its shares to acquire other brands, starting with Italian brand Vogue Eyewear in 1990, Persol and LensCrafters in 1995, Ray-Ban from Bausch & Lomb in 1999 and Sunglass Hut in 2001.<ref name="history" /> Luxottica later increased its presence in the retail sector by acquiring Sydney-based OPSM in 2003, Pearle Vision and Cole National in 2004.<ref name="facts and figures">Template:Cite web</ref>

Luxottica acquired Oakley in November 2007 for US$2.1 billion. Oakley had tried to dispute their prices because of Luxottica's large marketshare, and Luxottica responded by dropping Oakley from their stores, causing their stock price to drop, followed by Luxottica's hostile take over of the company.<ref>Template:Cite web</ref>

In August 2011, Luxottica acquired Erroca for €20 million.<ref>Template:Cite web</ref> In March 2014, it was announced that Luxottica would partner with Google on the development of Google Glass and its integration into Luxottica's eyewear.<ref>Google to De-Dorkify Glass in Partnership With Ray-Ban Maker Luxottica, Businessweek, 25 March 2014</ref>

Reorganization and merger with Essilor

On 1 September 2014, a new organizational structure was announced, composed of two co-CEOs, one focusing on market development and the other overseeing corporate functions. After the exit of former CEO Andrea Guerra, Enrico Cavatorta was appointed CEO of Corporate Function and Interim CEO of Market (until new and permanent appointment to this role).<ref>Template:Cite web</ref><ref>Template:Cite news</ref><ref>Template:Cite web</ref> Cavatorta left the company 40 days after being appointed CEO. In 2016, it was reported that Luxottica had lost its third chief executive in a year and a half, as Cavatora's replacement, Adil Mehboob-Khan stepped down one year after he gained the position.<ref>Template:Cite news</ref> Upon the departure of Mehboob-Khan, Del Vecchio reclaimed executive powers and became much more active in the company.<ref>Template:Cite web</ref>

In January 2017, the company agreed to a merger with Essilor.<ref>Template:Citation</ref> The deal also offered a succession plan for Leonardo Del Vecchio, the company's founder.<ref>Template:Cite news</ref> Shortly before the merger completed, reporter Sam Knight wrote in The Guardian, "in seven centuries of spectacles, there has never been anything like it. The new entity will be worth around $50bn (£37bn), sell close to a billion pairs of lenses and frames every year, and have a workforce of more than 140,000 people."<ref name=Grdn2018/> On 1 October 2018 the new holding company EssilorLuxottica was founded, resulting in combined market capitalization of approximately €46.3 billion as of the date of the merger announcement.<ref name=Bray2017>Template:Cite news</ref>

Eyewear brands

File:Persol sunglasses.jpg

Persol sunglasses

File:RayBanAviator.jpg

Ray-Ban's Aviators

Luxottica's two main product offerings are sunglasses and prescription frames. The company operates in two sectors: manufacturing & wholesale distribution, and retail distribution.<ref name="bloomberg">Template:Cite web</ref>

The house brands include the following:<ref name="reuters">Template:Cite news</ref><ref name="EssilorLuxottica - AR2019" /> Template:Columns-list

The company also makes eyewear under license for the following designer labels:<ref name="reuters" /><ref name="EssilorLuxottica - AR2019" />

These brands are sold in the company's own shops, as well as to independent distributors such as department stores, duty-free shops, and opticians.<ref name="Grdn2018"/>

Retail

Luxottica Retail has about 9,100 retail locations<ref name="EssilorLuxottica - AR2019" /><ref name="AR2017">Template:Cite web</ref> in the United States, Latin America, Canada, India, China, Australia, New Zealand, South Africa, the United Kingdom, and United Arab Emirates.<ref name="facts and figures" /> The headquarters of the retail division is in Mason, Ohio, United States (North America).<ref name="facts and figures" /> Their retail banners include the following:<ref>Template:Cite web</ref>

Luxottica is the largest optical retailer in the United States, with 7.3% of US retail sales in 2015.<ref>Template:Cite web</ref> With its merger with Essilor in 2018 the company owns Coastal/Clearly, an online contacts and glasses retail giant bought in 2014 that ships to over 200 countries beside its original North American market.Template:Citation needed

Medical managed care

Luxottica also owns EyeMed Vision Care, a managed vision care organization in the United States.<ref>Template:Cite web</ref> As of 2014, it is the second-largest vision benefits company in the United States.<ref>"Activities: Managed Vision Care", Luxottica website</ref><ref name="SIXTYMINUTES2012">Template:Cite news</ref><ref>Template:Cite web</ref>

Philanthropy

Luxottica is affiliated with the charitable organization OneSight, formed in 1988.<ref>Template:Cite web</ref> In August 2018, Luxottica restored Accademia Bridge in Venice.<ref>Template:Cite news</ref> In March 2022, EssilorLuxottica announced the launch of the OneSight EssilorLuxottica Foundation to unify the group's philanthropic efforts, primarily providing vision services to underserved communities.<ref>Template:Cite web</ref>

Criticism

Monopolistic pricing practices

The company has been criticized for the high price of its brand-name glasses, such as Ray-Ban, Oakley, and several others. A 2012 60 Minutes segment focused on whether the company's extensive holdings in the industry were used to keep prices high. Luxottica owns not only a large portfolio of brands (over a dozen<ref name=forbes>Template:Cite web</ref>) such as Ray-Ban and Oakley but also retailers such as Sunglass Hut, Lenscrafters and Oliver Peoples, the optical departments at Target, and (formerly) Sears, as well as key eye insurance groups including the second largest glasses insurance firm in the US, EyeMed. It has been accused of operating a complete monopoly on the optical industry and overcharging for its products; for example, temporarily dropping then-competitor Oakley from its frame design list, then, when the company stock crashed, purchasing the company, then increasing the prices of its Ray-Ban sunglasses. In addition, it has been argued that, by owning the vision insurance company EyeMed, it also controls part of the buyers' market as well.<ref name=SIXTYMINUTES2012 />

The company has said that the market is highly competitive, and that their frames account for ≈10% of sales worldwide and ≈20% in the United States.<ref name=snopes>Template:Cite web</ref><ref name=forbes/> In 2017, their share of the prescription lens market was 41%.<ref name="merger_matters">Template:Cite web</ref> Euromonitor International estimated that Luxottica's market share was 14% worldwide, with the second-largest company in the industry, Essilor, holding a 13% market share. The third-largest player was Johnson & Johnson, with a 3.9% market share. In October 2018, Luxottica and Essilor merged into a single company, EssilorLuxottica, which now occupies nearly 30% of the global market share and represents almost a billion pairs of lenses and frames sold annually.<ref name=Grdn2018/>

Despite not owning most of the market, the company has considerable price-setting power. It uses "spiff money", financial incentives to reward other industry players who co-operate with it, and has repeatedly driven companies that competed with it on price out of business, crashing their market share and stock price, then buying them out. It has used a variety of techniques, including compelling retailers to drop suppliers and making imitations of competitor's products. It also funds university chairs of ophthalmology and is influential in professional associations.<ref name=Grdn2018/>

The HBO series Last Week Tonight with John Oliver has criticized the company as a prominent instance of corporate consolidation,<ref>Template:Cite web</ref> as has the TruTV series Adam Ruins Everything.<ref name="HuffPo">Template:Cite web</ref>

In 2019, LensCrafters founder E. Dean Butler spoke to the Los Angeles Times, admitting that Luxottica's dominance of the eyewear industry had resulted in price markups of nearly 1,000%. In the interview, Butler noted "You can get amazingly good frames, with a Warby Parker level of quality, for $4 to $8. For $15, you can get designer-quality frames, like what you'd get from Prada." When told that some eyeglasses cost as much as $800 in the United States, Butler remarked, "I know. It's ridiculous. It's a complete rip-off."<ref name=Lazarus2019>Template:Cite web</ref><ref>Template:Cite web</ref><ref>Engineering a Monopoly: How to not get ripped off on your next pair of eyeglasses https://interestingengineering.com/how-not-to-get-ripped-off-on-your-next-pair-of-eyeglasses</ref>

Major shareholders

The list of Luxottica shareholders with more than 2% of holdings, December 2014.<ref>Template:Cite web</ref>

• Delfin S.à r.l. a company controlled by Leonardo Del Vecchio 66.485%
• Deutsche Bank Trust Company Americas (as ADR depository) 7.466%
• Giorgio Armani 4.955%

See also

• Essilor
• Safilo
• Marchon Eyewear

External links

• Template:Official website