ANNUAL REPORT 2004 - Luxottica Group

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Cornerstone of Luxottica Group’s leadership, the distribution structure is one of the most extensive and effective in the industry. Luxottica Group’s wholesale distribution network presently extends to 120 countries across the globe, with a direct presence in the 28 most important markets. The retail division, on the other hand, is mainly present in North America and Asia Pacific, ensuring the best, most efficient product distribution in the world’s most important optical and sun markets. Luxottica Group controls over 5,500 optical and sun stores (company-owned, in franchising and through the licensed brand model) primarily in North America, Australia, New Zealand and South East Asia. In Europe, Luxottica Group’s retail presence is limited to approximately 100 stores of the Sunglass Hut chain, specializing in sunglasses and largely concentrated in the United Kingdom. This distribution structure is the result of the Group’s fundamental strategic intuition; management understood years ago that increasing participation to retail distribution would increase opportunities for development. As a result, from its origins as a manufacturer of frames, Luxottica Group has increasingly integrated wholesale distribution into its structure, and since 1995, retail distribution as well. Thanks to its extensive distribution network, the Group is now present in all of the world’s most important markets for both wholesale and retail. At the same time, the Group closely monitors the development of new markets with the greatest growth potential, ready to intervene and consolidate its distribution presence in response to significant developments. ANNUAL REPORT 2004 DISTRIBUTION RETAIL Luxottica Group’s retail division manages the LensCrafters, Pearle Vision, Sunglass Hut, Sears Optical, Target Optical, BJ’s Optical retail brands as well as those of OPSM Group. In North America, Luxottica Group is the leader in optical retail sales, in both the prescription and sun segments. Sunglass Hut is the world’s leading specialty sun retail chain with 1,858 stores primarily in North America and Australasia. Finally, OPSM Group ensures the Group’s leadership in Asia Pacific: Australia, New Zealand and Hong Kong. 2004 was an especially positive year, both in terms of performance of the chains already controlled by the Group, such as LensCrafters, Sunglass Hut and OPSM Group, as well as the expansion of the retail distribution network in the U.S. with the acquisition of Cole National. With this operation, Luxottica Group’s presence in the North American market was not only strengthened in terms of number of retail outlets, but also in overall reach and balance. Today Luxottica Group manages the two most important optical retail chains in the industry in North America (LensCrafters and Pearle Vision) and is the leading operator of licensed brands optical departments, a segment in which it formerly had no presence. Furthermore, through the new EyeMed Vision Care, Luxottica Group is today the second largest administrator of managed vision care programs, an increasingly important segment in the U.S. optical sector. 19
DISTRIBUTION As for the performance of other markets, in 2004 Luxottica Group moved to gain control of 100% of the share capital of OPSM Group. The full integration of this group is especially significant, in that the markets of Australia, New Zealand and South-East Asia, where Luxottica Group can now enjoy a position of leadership, offer important opportunities for growth. In North America Luxottica Group also manages the Watch Station, Watch World and Things Remembered chains. Watch Station and Watch World stores operate within the Sunglass Hut chain and offer a product, watches, which is highly complementary to sunglasses. Things Remembered, acquired with Cole National, is one of the leading specialty gift retailers in the U.S.; it is controlled by Luxottica Group’s North American retail division but it is independently managed since its business is non-core. LUXOTTICA RETAIL NORTH AMERICA LENSCRAFTERS Luxottica Group acquired the North American optical chain LensCrafters in 1995 entering the retail market for the first time, an important and significant undertaking for the Group. In the space of a few years, this has proven a highly successful strategy as it allowed the Group to benefit from high growth rates and increasingly more efficient penetration of the market by its retail division. LensCrafters was the first U.S. optical chain to offer at its stores a vast array of premium eyewear, an optometrist and an in-house lab. LensCrafters built its reputation on the customer promise of eyeglasses in about one hour. Today, at LensCrafters stores customers enjoy a vast array of fashion frames, stateof-the-art lens technology, and knowledgeable, high quality service. With a large portion of its customers extremely attuned to fashion and demanding efficient and top quality service, LensCrafters’ strategy focuses especially on high-end products and customer care. In this atmosphere, last year LensCrafters launched a sales leadership model in which associates are trained to develop strong consultative and selling skills. Results from this program have been extremely positive, with 20 87.4% of customers rating services received from very good to excellent. Regarding products sold, Luxottica Group’s house, license and private label brands represented approximately 70% of units sold. Among the most popular were Adrienne Vittadini, Anne Klein, Brooks Brothers, Ray-Ban and Vogue. In keeping with the latest technological advancements in lenses, FeatherWates Colors by Transitions were exclusively launched at LensCrafters stores. The labs within LensCrafters stores are a strong benefit for customers; for this reason, Luxottica Group intends to continue its involvement in research into the latest innovations, so that LensCrafters maintains its reputation for state-of-the-art technology. As for marketing, LensCrafters appeared in the principal North America television networks and large distribution magazines, with the “Inspired Confidence” campaign, created specifically to reinforce consumer confidence in the LensCrafters brand. Within this campaign, launched in 2004 is “Total Recall”, which allows patients to receive an eye exam reminder one year after their last optometry visit, a message reminding them of their next appointment. The program should show its first results in 2005. LensCrafters operates 888 stores in the U.S. and Canada. PEARLE VISION In October of 2004 Luxottica Group closed the acquisition of Cole National which included Pearle Vision, thus making a decisive step in consolidating its leadership in the premium optical market in the U.S., now served by Pearle Vision and LensCrafters in a complementary fashion. Pearle Vision has been present in the U.S. market for over 40 years and represents in the eyes of most consumers the brand for excellence for those who take care of their vision needs with the highest quality eyewear. Pearle Vision stores were the first in 1961 to marry optical care with vast selection of frames. Today Pearle Vision is one of the best known brands in the U.S., synonymous with a trustworthy optometrist and personalized care. The brand operates 843 stores, company-owned and in franchising. With Pearle Vision, for the first time, Luxottica Group, in
Page 1 and 2: ANNUAL REPORT 2004
Page 7 and 8: ANNUAL REPORT 2004 PROFILE OF LUXOT
Page 9 and 10: PROFILE OF LUXOTTICA GROUP QUARTERL
Page 15 and 16: LUXOTTICA GROUP IN 2004 to have dir
Page 17 and 18: LUXOTTICA GROUP IN 2004 Luxottica G
Page 19: ANNUAL REPORT 2004
Page 23 and 24: DISTRIBUTION focused on the relatio
Page 25 and 26: DISTRIBUTION capacity, a direct pre
Page 29 and 30: CHANGE YOUR VIEW
Page 31 and 32: www.vogue-eyewear.com
Page 34 and 35: Making its debut in 1926, Persol wa
Page 36 and 37: Launched in California in 1992, Arn
Page 38 and 39: The Sferoflex brand was acquired by
Page 40 and 41: DISTRIBUTION LICENSE BRANDS 39
Page 42 and 43: The Byblos brand has been licensed
Page 44 and 45: The Miu Miu brand was created in 19
Page 46 and 47: Sergio Tacchini, ever synonymous wi
Page 50 and 51: DISTRIBUTION Today, Luxottica Group
Page 52 and 53: VERTICAL INTEGRATION Over the decad
Page 54 and 55: Over the years, Luxottica Group has
Page 56 and 57: WHOLESALE BRAND PORTFOLIO Luxottica
Page 58 and 59: Give the Gift of Sight is a Luxotti
Page 62 and 63: In accordance with U.S.GAAP (1) 200
Page 64 and 65: MANAGEMENT’S DISCUSSION AND ANALY
Page 66 and 67: expenses, thanks to economies of sc
Page 68 and 69: This information is being provided
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The swap will expire on June 17, 20
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ANNUAL REPORT 2004
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(1) Except for earnings per share (
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(1) 1 ADS = 1 ordinary share. (2) C
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with the procedure set forth by it,
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CORPORATE GOVERNANCE Set out below
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- Sergio Erede - Sabina Grossi: Mem
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INTERNAL AUDIT COMMITTEE The commit
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3. the Chief Financial Officer, the
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STOCK OPTIONS PLANS At the Extraord
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ANNUAL REPORT 2004 LUXOTTICA GROUP
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(1) Through 1998 the Euro/U.S. Doll
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LUXOTTICA GROUP S.P.A. We have audi
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In accordance with U.S. GAAP (1) Tr
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In accordance with U.S. GAAP In tho
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In accordance with U.S. GAAP (1) Tr
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NOTES TO CONSOLIDATED FINANCIAL STA
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Maintenance and repair expenses are
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customers take receipt of products
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In thousands Weighted average share
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The Company recognizes forfeitures
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2. RELATED PARTY TRANSACTIONS FIXED
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In thousands of Euro Assets purchas
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This pro forma financial informatio
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The Company believes that the preli
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(1) Goodwill acquired in 2003 and 2
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Estimated annual amortization expen
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Since fiscal year 2004, for income
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8. LONG-TERM DEBT Long-term debt co
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Excluding current maturities, long-
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OBLIGATIONS AND FUNDED STATUS In th
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The accumulated benefit obligations
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CONTRIBUTIONS U.S. Holdings expects
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The following table sets forth the
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STOCK INCENTIVE PLANS Luxottica Gro
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Years ended December 31 (1) Inter-s
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In thousands of Euro Years ending D
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such higher consideration to all te
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eviewed at the end of January 2004,
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ANNUAL REPORT 2004 KEY CONTACTS AND
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EUROPE LUXOTTICA S.r.l. KILLERLOOP
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MIDDLE EAST AND FAR EAST LUXOTTICA
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ANNUAL REPORT 2004 - Luxottica Group

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