97263 LUX AR 2008 Eng V6 OK
Total Page:16
File Type:pdf, Size:1020Kb
ANNUAL REPORT 2008 ANNUAL REPORT 2008 FISCAL YEAR ENDED DECEMBER 31, 2008 All pictures in this Annual Report are from OneSight and are portraits of some of the thousands of people worldwide who received free eyecare from this Luxottica Group Foundation in 2008. Further information on the OneSight Foundation can be found in the section dedicated to it on page 31 and on www.onesight.org. SUMMARY 3< Chairman’s letter to shareholders 5 Financial highlights 6 Luxottica Group 7 Profile 9 History 10 Mission and strategy 12 Operations 14 Brand portfolio 17 Wholesale distribution 24 Retail distribution 25 Structure of the Group 28 OneSight, Luxottica Group Foundation 31 Annual review 2008 33 Key events 35 Financial overview 36 Outlook 41 Risk management 43 Human resources 45 Consolidated financial statements under US GAAP 49 Consolidated statement of income 51 Consolidated balance sheet 52 Consolidated statement of shareholders’ equity 54 Consolidated statement of cash flows 56 Notes to consolidated financial statements 59 Statement of the officer responsible for preparing Company’s financial reports 99 Independent Auditor’s Report 100 Annexes 103 2004-2008 financial highlights 104 2007-2008 quarterly results 104 Statement of changes in net financial position 105 Share capital and dividend per ordinary share (ADS) 106 2000-2008 evolution of number of stores 107 1990-2008 Luxottica ADS and ordinary share performances 108 1995-2008 average Euro/US$ exchange rate 110 Non US GAAP measures 111 Reconciliation of consolidated income statement prepared according to US GAAP and IAS/IFRS 114 Key contacts and addresses 116 CHAIRMAN’S LETTER TO SHAREHOLDERS 5< Shareholders, In 2008, our Company once again posted excellent results: with record sales of Euro 5.2 billion and net income of around Euro 400 million, Luxottica continued to be a world leader, even in times as difficult as last year. Credit for this goes above all to the undisputed force of our business model, based on integration between efficient manufacturing platforms, a brand portfolio of the very first order, a highly structured and extensive distribution system, a network of over 6,250 retail locations worldwide and, not least, the successful integration with Oakley, which has already begun, after only one year, to yield major synergies that demonstrate the soundness of the operation. These are strengths that we continued to develop, even in a year as difficult as 2008, which started with growth and ended in a slowdown. It’s worth noting, however, that we operate in an industry that’s proving resilient: in 2008, in fact, we did not see high growth rates, but neither did we see any unexpected negative swings. Above all, the prescription eyewear business, in which we are a world leader, did not show evident signs of slowing down. Over the year, Luxottica managed to react effectively and rapidly. As macro-economic conditions changed, the Group promptly took measures designed on one hand to boost sales and on the other to improve efficiency by adapting our cost structure to the new environment. 2008 was a challenging year but we are convinced that we made our Company even stronger and laid the foundations for further long-term growth, and this without compromising Luxottica’s commitment to helping the needy, for whom we launched OneSight, the global foundation that combined the Group’s existing charity structures. With 20 years of experience, during which nearly seven million people have been helped, OneSight is engaged in recovering and recycling used eyewear, organizing international and local missions clinics to distribute eyewear free of charge, and in the prevention of eye diseases and support for research. These are priority objectives that reflect our deep sense of social responsibility and help us move closer to our ultimate aim: people’s visual well-being and satisfaction. April, 2009 Chairman FINANCIAL HIGHLIGHTS > 6 NET SALES 6,000 4,000 BY GEOGRAPHICAL 5,202 3,457 AREA 4,966 3,500 3,390 5,000 4,676 3,188 North America 64% 4,134 3,000 2,761 Asia-Pacific 10% 4,000 Rest of the world 26% 2,500 3,180 2,127 3,000 2,000 1,500 2,000 1,000 1,000 500 0 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 millions of Euro millions of Euro NET SALES GROSS PROFIT NET SALES BY DISTRIBUTION 900 600 Retail 60% 813 (1) Wholesale 800 756 750 to third parties 40% (1) 500 479 700 431 581 395 (2) 600 400 331 500 479 300 279 400 300 200 200 100 100 0 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 millions of Euro millions of Euro OPERATING INCOME NET INCOME 4,000 16 3,000 30 3,294 26.0 26.5 3,500 3,062 3,234 (3) 15 2,472 3,109 2,500 23.2 25 22.1 3,000 2,271 14 21.3 (3) 13.1 1,993 13.1 2,000 20 2,500 13 1,715 2,000 11.6 12 1,500 15 11.2 1,310 1,500 11 1,095 1,000 10 1,000 10 9.4 500 5 (1) This excludes an extraordinary item 500 9 arising from the transfer of real estate in 2Q07 (approximately Euro 20 million pre- 0 8 0 0 tax and Euro 13 million after tax). 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 (2) This excludes an extraordinary capital loss of Euro 15 million net of tax due to millions of Euro Margin in % millions of Euro Margin in % the write-off of a credit related to the sale of the Things Remembered retail chain in September 2006. RETAIL WHOLESALE (TOTAL) (3) Does not include Oakley sales. NET SALES AND OPERATING MARGIN IN % NET SALES AND OPERATING MARGIN IN % LUXOTTICA GROUP PROFILE 9< With net sales of Euro 5.2 billion in 2008, over 60,000 employees and a solid global presence, Luxottica is a world leader in premium, luxury and sports eyewear. Founded in 1961 by Leonardo Del Vecchio, the Group is now a vertically integrated organization whose manufacturing of prescription and sun frames is backed by a wide-reaching wholesale distribution network and a retail distribution network comprising over 6,250 retail locations, mostly in North America, Asia- Pacific and China. Product design, development and manufacturing takes place in six production facilities in Italy, two wholly- owned factories in the People’s Republic of China and a sports sunglasses production facility in California, USA. Luxottica also has a small plant in India, serving the local market. In 2008, production reached approximately 50 million units, of which around 10 million were produced by the newly acquired Oakley production facility. Luxottica products are outstanding in terms of design and quality and are known all around the world thanks to a strong and well-balanced brand portfolio. House brands include Ray-Ban, the world’s best known sun brand, Oakley, Vogue, Persol, Oliver Peoples, Arnette and REVO, while its license brands include Bvlgari, Burberry, Chanel, Dolce & Gabbana, Donna Karan, Polo Ralph Lauren, Prada, Salvatore Ferragamo, Tiffany and Versace. The Group’s wholesale distribution, comprising 130 countries across five continents, has 23 logistics centers and 30 commercial branches providing direct operations in key markets. Penetration in emerging markets and in new channels of distribution, such as shopping centers, airports and railway stations, is particularly significant. Direct wholesale operations are complemented by one of the world’s most extensive optical retail networks. Luxottica is a leader in the prescription eyewear business in North America with its LensCrafters and Pearle Vision chains, in Asia-Pacific with OPSM, Laubman & Pank and Budget Eyewear, and in China with LensCrafters. In the sun business, the Group operates around 2,300 retail locations in North America, Asia-Pacific, South Africa, Europe and the Middle East, mainly through the Sunglass Hut brand. In North America, the world’s largest prescription eyewear market in terms of sales, Luxottica also operates licensed brand points of sale, with over 1,200 stores under the Target Optical and Sears Optical brands. In addition, Luxottica is one of the primary managed vision care operators in North America, through EyeMed, and the second biggest lens finisher, having a network of seven central laboratories and over 900 labs inside LensCrafters stores. Lastly, control of the Oakley brand, a global icon in optics for performance, provides a powerful presence in both the market as a whole and in the sport channel, in which Luxottica Group operates at both a wholesale level and through the single-brand O Stores retail chain. HISTORY > 10 FOUNDING Luxottica Group originated in 1961, when Leonardo Del Vecchio set up Luxottica di Del Vecchio e C. S.a.S., which subsequently became a joint-stock company under the name of Luxottica S.p.A. Having started out as a small workshop, the Company operated until the end of the ‘60s as a contract producer of dies, metal components and semi-finished goods for the optical industry. Leonardo Del Vecchio gradually widened the range of processes until he had an integrated manufacturing structure capable of producing a finished pair of glasses. In 1971, Luxottica’s first collection of prescription eyewear was presented at Milan’s MIDO (an international optics trade fair), thus marking Luxottica’s definitive transition from contract manufacturer to successful independent producer. EXPANSION IN WHOLESALE DISTRIBUTION In the early ’70s, the Company sold its frames exclusively through wholesale dealers. In 1974, after five years of sustained development of its manufacturing capacity, Del Vecchio understood the importance of directly controlling distribution and started to pursue a strategy of vertical integration, with the goal of distributing frames directly onto the market.