EssilorLuxottica: ‘See more, be more, live life to the fullest’
25th September 2019
CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission is strictly prohibited Disclaimer
This presentation contains forward-looking statements that reflect EssilorLuxottica's current views with respect to future events and financial and operational performance. These statements take into account all the information currently available and cannot be intended as a guarantee of future performance. By their nature, forward looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future, and EssilorLuxottica cannot guarantee the accuracy and completeness of forward-looking statements. A number of important factors, not all of which are known to EssilorLuxottica or are within EssilorLuxottica's control, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement as a result of risks and uncertainties facing EssilorLuxottica. Any forward-looking statements are made only of the date of this presentation.
CAPITAL MARKET DAY – SEPTEMBER 2019 1 Agenda Topic Speaker Time Welcome and introduction Laurent Vacherot, Francesco Milleri ~10’ Our perspective on the industry Chiara Occulti, Grita Loebsack ~15’ EssilorLuxottica today: key highly complementary assets Paul du Saillant ~10’ Integration: the path to build our future Pierluigi Longo, Eric Léonard ~20’ Developing a powerful shared infrastructure • Transformation of supply chain into a single network Giorgio Striano ~10’ Coffee break ~30’
Innovation and R&D Federico Buffa, Norbert Gorny ~10’ • New eye exam technology to boost retail opportunities Arnaud Ribadeau Dumas ~5’ Combining our assets to boost growth • Transitions in EssilorLuxottica retail Chrystel Barranger, Leonardo Maria Del Vecchio ~10’ • Branded lenses and complete pair Grita Loebsack, Chiara Occulti ~10’ Developing new go-to-market approaches • New digital consumer experience Bernhard Nuesser, Paolo Alberti ~10’ • Addressing myopia in China Eric Thoreux ~5’ Guidelines on financial targets Hilary Halper, Stefano Grassi ~20’ Q&A session ~30’ Exit canapés and drinks
CAPITAL MARKET DAY – SEPTEMBER 2019 2 WELCOME AND INTRODUCTION
Laurent Vacherot & Francesco Milleri
CAPITAL MARKET DAY – SEPTEMBER 2019 EssilorLuxottica’s mission: ‘See more, be more, live life to the fullest’
See well: Look good: Vision Full branded correction and offer protection
Address all client needs… At every price point… Everywhere in the world
CAPITAL MARKET DAY – SEPTEMBER 2019 4 EssilorLuxottica’s strategic vision: key pillars to shape the future of the industry…
Playing as a Creating value for Bringing cutting Embedding network company our customers edge innovation sustainability to and consumers the core
… contributing to accelerate the market growth
CAPITAL MARKET DAY – SEPTEMBER 2019 5 Evolving from product manufacturer to an integrated network company
• Open global digital network
Developing our • Access to all ~500k industry players ecosystem through a global • Full range of products and services open digital network • Reinvented supply chain • Sharing synergies with all players
• Improved industry efficiency to the benefit of consumers A unique industry with Offering a new consumer • Engaging consumer experience disparity in scale among experience across channels • Omnichannel approach players • Analytics and Big Data for all
CAPITAL MARKET DAY – SEPTEMBER 2019 6 EssilorLuxottica’s strategic vision: key pillars to shape the future of the industry…
Playing as a Creating value for Bringing cutting Embedding network company our customers edge innovation sustainability to and consumers the core
… contributing to accelerate the market growth
CAPITAL MARKET DAY – SEPTEMBER 2019 7 OUR PERSPECTIVE ON THE INDUSTRY
Chiara Occulti & Grita Loebsack
CAPITAL MARKET DAY – SEPTEMBER 2019 Main trends driving growth in the Eyecare and Eyewear industry
1 2 3 4 Demographics Under- Branding & Retail & lifestyle penetration Premiumization transformation change
CAPITAL MARKET DAY – SEPTEMBER 2019 9 Middle class in Fast-Growing Markets is driving population growth High net worth1 Middle class2 Disadvantaged3 4% 2% 3%
27% 33% Global 2010 Today 2030 population M people 6,800 7,600 8,400 50% 71% 47% 64%
Share of middle 2010 Today 2030 class from Asia 29% 54% 65% %
1 Daily spending per person above $110 in 2011 Purchasing Parity Power (PPP) 2 Daily spending per person between $11 and $110 in 2011 PPP 3 Daily spending per person below $11 per day per person in 2011 PPP SOURCE: World Bank
CAPITAL MARKET DAY – SEPTEMBER 2019 10 Myopia reaching epidemic levels, with half of the world’s population affected by 2050
Growing myopia prevalence People, % of global population Why? ~50%1 4.7 Bn
1 34% Indoor Genetics Prolonged 2.6 Bn lifestyle exposure to screens Risks 0.9 Bn Myopia 0.4 Bn Impaired Everyday Serious eye learning & safety disease High myopia development 2000 2010 Today 2030 2040 2050
1 Global population of ~7.6 billion people in 2020 and 10 billion people in 2050 SOURCE: Brian Holden Institute
CAPITAL MARKET DAY – SEPTEMBER 2019 11 Presbyopia affecting ~40% of world population by 2050
Growing presbyopia prevalence People, % of global population Why? 40%1 4.1 Bn
1 30% Ageing Prolonged 2.3 Bn population exposure to screens Risks Presbyopia and first symptons Eye Loss of Loss of fatigue productivity quality of life 2000 2010 Today 2030 2040 2050
1 Global population of ~7.6 billion people in 2020 and 10 billion people in 2050 SOURCE: United Nations, internal analysis
CAPITAL MARKET DAY – SEPTEMBER 2019 12 Large untapped opportunities in vision correction and protection 2.0 Bn 4.6 Bn Corrected (43%) (60%) require vision correction 2.6 Bn 7.6 Bn uncorrected people worldwide 1.4 Bn equipped with 100% sunglasses (18%) should protect their eyes (sun, UV, blue light) 6.2 Bn unequipped SOURCE: Internal estimates
CAPITAL MARKET DAY – SEPTEMBER 2019 13 Additional opportunities in value added lenses
Penetration of value added lenses on total prescription lenses Global penetration Highest penetration
100%
64% 66%
43% 36% 30% 25% 21% 15% 16% 10% 8% 6% 2% Polarized Sun Rx Photo- Progressive Blue-cut Thin Anti-reflective chromic (index>=1.6)
SOURCE: Internal estimates
CAPITAL MARKET DAY – SEPTEMBER 2019 14 Significant upside potential in Eyecare and Eyewear spend
Consumer Consumption per Capita (Index)
Fast-Growing Market Mature Market example: Mature Market example: example: United states France China
Eyecare and Eyewear 100 100 100
Shoes 192 174 417
Dentistry 306 180 83
Apparel1 317 454 996
1 Only includes women apparel SOURCE: Internal analysis
CAPITAL MARKET DAY – SEPTEMBER 2019 15 Brand importance growing and driving industry growth
Reasons for purchase Distribution channel
Search Engine Optimization Emotional, desire, differentiation, status, Physical stores Functional affiliation, identity (chains, mono-brand, Choice, Price, Quality Selfie culture independent…) Social media/community
CAPITAL MARKET DAY – SEPTEMBER 2019 16 Brands that make an impact are catalysts for category growth…
…and even more within younger generations as they need honest allies sharing their values and Meaning bringing value to their daily lives Meeting the consumer’s functional and emotional needs in ways that are relevant and create affinity Encouraging curiosity Celebrating Helping Difference fluid identities them to feel and encouraging good and Stand out from other brands, being diversity have fun distinctive, even trendsetting HOW? Saliency Inspiring Embracing Amplify the meaningful difference their imperfection through advertising, social media, retail Empowering imagination shelf position to become top of mind them to further their causes
CAPITAL MARKET DAY – SEPTEMBER 2019 17 Access can be improved in Fast-Growing Markets
# inhabitants per optical retail outlet 5,000 to 10,000 10,000 to 30,000 More than 30,000
Greater North Europe America China ~7 k ~7 k ~21 k
Asia-Pacific Fast-Growing Brazil 1 ~8 k India Markets Africa and ~27 k Middle East ~41 k Asia-Pacific ~80 k Developed Rest of Latin Markets America ~13 k ~10 k
1 Including Russia SOURCE: Internal estimates
CAPITAL MARKET DAY – SEPTEMBER 2019 18 Retail in the industry is fragmented, independents account for more than half of the market
Independent stores sales as percentage of Eyecare and Eyewear industry retail sales
90% 88% 81%
62% 53% 56% 50% 42%
North Europe China India Developed Latin Other FGM Total America AMERA1 America
1 Asia, Middle East, Oceania and Africa SOURCE: Internal data
CAPITAL MARKET DAY – SEPTEMBER 2019 19 Retail improving customer experience
Independent ECPs
Vision care retail Multi-brand Mono-brand Online-only (e.g., independent ECPs, alliances) retailers omnichannel players
From a need-based purchase to pleasure/desire driven purchase
CAPITAL MARKET DAY – SEPTEMBER 2019 20 The Eyecare & Eyewear industry is expected to grow at 3-4%, but could represent €300 Bn after transformation €Bn
300 Demographics
Underpenetration Existing x3 needs
Branding / premiumisation +3-4% p.a. 100
Access and retail transformation Today In 10 years Full potential
EssilorLuxottica to play as accelerator of Note: rounded figures; growth driven by demography, GDP per capita and convergence to best in class SOURCE: Internal analyses the industry growth
CAPITAL MARKET DAY – SEPTEMBER 2019 21 ESSILORLUXOTTICA TODAY: KEY HIGHLY COMPLEMENTARY ASSETS
Paul du Saillant
CAPITAL MARKET DAY – SEPTEMBER 2019 WE ARE A UNIQUE PLAYER…
CAPITAL MARKET DAY – SEPTEMBER 2019 … that is truly global Top 12 countries account for over 80% of revenue 2018 Revenue: €16.2 Bn 1 USA 2 France Europe 3 Greater China 25% 4 Italy 5 UK North 6 Australia America 7 Germany 52% 8 Brazil 9 Canada 10 Japan Asia, 11 Spain Oceania, 12 India Africa Latin 17% America 6% Fast-Growing Markets 19%
CAPITAL MARKET DAY – SEPTEMBER 2019 24 … with a portfolio of flagship brands covering all segments Lens Brands Frame Brands
Premium
Entry
CAPITAL MARKET DAY – SEPTEMBER 2019 25 ... present in both direct and indirect distribution channels in more than 150 countries
North America Europe ~4,400 retail stores ~1,100 retail stores 7 physical banners 5 physical banners Stores 6 online banners 11,000 7 online banners 17 Online banners Managed Vision Care 12,000 Inclusive Retail Providers 400K ECP & retail customers
Asia, Oceania, Africa Latin America ~2,800 retail stores ~2,500 retail stores >10 physical banners 7 physical banners 2 online banners 2 online banners
CAPITAL MARKET DAY – SEPTEMBER 2019 26 … with a powerful supply chain covering both frames and lenses As at September 2019
Pairs of prescription 7 270 M lenses North America Europe 137 54
Optical frames and 4 170 M sunglasses 3 2
14 Frame/sunglass manufacturing facilities Asia, Oceania, Latin America 188 29 Prescription lens production plants Africa 101 3 Sun lens production plants
8 Integrated prescription laboratories
18 Distribution centers
480 Local prescription laboratories
CAPITAL MARKET DAY – SEPTEMBER 2019 27 … leveraging the talent and the skills of 150,000+ engaged employees
Europe North America Expertise Diversity ~28,500 ~55,500 employees employees Proximity Global Entrepreneurial Purpose Driven Responsibility
Latin America Asia, Oceania, Africa ~14,500 ~53,500 employees employees
CAPITAL MARKET DAY – SEPTEMBER 2019 28 COMBINING THESE HIGH VALUE ASSETS
CAPITAL MARKET DAY – SEPTEMBER 2019 Innovation: EssilorLuxottica to combine frames and lenses
Enhancing vision Powering style
Next generation solutions for • Fashionable designs • Myopia control to suit all preferences • Presbyopia • Better comfort • Light management • Frame and lens combinations • 2.6B uncorrected consumers
Revolutionizing eye exams Making eyewear smart
• Digitally integrated • E-chromic • Greater precision • Integrating digital/artificial • Remote e-refractions intelligence into eyewear
CAPITAL MARKET DAY – SEPTEMBER 2019 30 Customers/Consumers: EssilorLuxottica to reshape consumer journey
Awareness Convenience Access
Inform and guide Digitally enhanced in-store Solutions for all price points, consumers experience channels and segments • Informative websites • Digitally-enabled stores • Engage on Vision and Lifestyle • Drive to Store • Digitalized frame offers • Cover all needs • Omnichannel solutions • New generation of instruments • Comprehensive go-to-market direct and indirect
CAPITAL MARKET DAY – SEPTEMBER 2019 31 Supply chain: EssilorLuxottica to integrate frames and lenses
Simplification and Complete jobs served by EssilorLuxottica’s improved service: supply chain per year ▪ Standardization and > 50 M automation ▪ Footprint optimization ▪ Complete pair offering 17 M ▪ 48h service 3 M 1 M 2022 Leading to: 2008 2013 2018 ▪ Lower costs ▪ Reduced obsolescence Prevents out of stock | Shortens delivery time | ▪ Faster delivery More cost efficient
CAPITAL MARKET DAY – SEPTEMBER 2019 32 Combining our assets to accelerate growth and drive efficiencies
➢ Unlock market growth Innovations ➢ Serve consumers in all segments and price points ➢ Deliver balanced growth in value Customers Wholesale / Retail and developed Consumers Markets / FGM ➢ Increase FGM presence Supply chain ➢ Improve costs, service and asset utilization
CAPITAL MARKET DAY – SEPTEMBER 2019 33 Combining our assets in these unique ways boosts awareness and access, serving our Purpose / Mission
See more, be more and live life to the fullest
CAPITAL MARKET DAY – SEPTEMBER 2019 34 INTEGRATION: THE PATH TO BUILD OUR FUTURE
Pierluigi Longo & Eric Léonard
CAPITAL MARKET DAY – SEPTEMBER 2019 Integration: the path to build our future
➢ A strong model in place to drive integration
➢ Progress and achievements systematically tracked 1 Team and Common ➢ 20+ priority workstreams and strategic initiatives Goal already launched
➢ A unique team of 40+ top executives 160+ Business initiatives ➢ Creation of our new foundation around common values and commitments to build a unified company 800+ Employees involved
On track to achieve synergy targets
CAPITAL MARKET DAY – SEPTEMBER 2019 36 A strong model in place to drive the integration
Integration Top Strategic Decision & Committee management guidelines making
Integration Management Integration Overall integration Office leaders process management
Workstream Operational initiatives Integration workstreams owners and execution A lean and efficient integration machine to deliver our targets
CAPITAL MARKET DAY – SEPTEMBER 2019 37 First steps to build one unified company
➢ One single IT Platform: launched pilot in Italy
➢ One single lab network: integration ongoing
➢ Shared back office activities: developed a plan for the US
➢ Co-location: systematic review of headquarters locations
➢ Common shareholding plan: launching this September
CAPITAL MARKET DAY – SEPTEMBER 2019 38 Workstreams and initiatives have been launched
Revenues Efficiency
Business Supply chain Innovation Cross-selling development and infrastructure G&A
Foster product Maximize our highly Capture new Unify our Improve our development complementary opportunities operations cost efficiency and technology businesses to expand our and systems levels disruption businesses
CAPITAL MARKET DAY – SEPTEMBER 2019 39 Key examples of the ongoing integration
Transformation Innovation Transitions in Branded lenses New digital Addressing of supply and R&D EssilorLuxottica and complete pair consumer myopia chain into a New protocol to retail experience in China single network boost retail opportunities
Giorgio Striano Federico Buffa Chrystel Barranger Chiara Occulti Paolo Alberti Eric Thoreux Norbert Gorny, Leonardo Maria Grita Loebsack Bernhard Nuesser Del Vecchio Arnaud Ribadeau Dumas
CAPITAL MARKET DAY – SEPTEMBER 2019 40 DEVELOPING A POWERFUL SHARED INFRASTRUCTURE Transformation of supply chain into a single network
Giorgio Striano
CAPITAL MARKET DAY – SEPTEMBER 2019 Transformation into a single supply chain (1/2)
Synergies coming from the combined spending of overlapping categories and using best practice applied by both parties - leveraging not just joined negotiation but looking at value engineering activities to improve service and develop supplier base: Sourcing ▪ Raw Materials ▪ Contact Lenses activities ▪ Packaging Materials ▪ Consumable ▪ Tools ▪ Logistic >6% Reduction in Maximize purchasing of products between Essilor & Luxottica in addressable comparison with 3rd party companies: ▪ Rx lenses: Luxottica moving from 45% to >85% Essilor product spending (75% already implemented) Insourcing ▪ Equipment: implementing Essilor technology in Luxottica prescription laboratories activities ▪ Frame manufacturing: using Luxottica factories to produce Essilor frames (i.e., Costa del Mar) ▪ Polarized wafer ▪ Special finished lenses ▪ Plano lenses
CAPITAL MARKET DAY – SEPTEMBER 2019 42 Transformation into a single supply chain (2/2)
Adopting EssilorLuxottica technology to elevate our joint product offer and services: ▪ Design to match: combine frame and lenses design to create an improved experience for complete job ▪ Grow in Light Management technology to support Transition, Oakley Prizm, Ray-Ban Chromance Lens expansion in RX ▪ Enlarge Multifocal Lenses portfolio manufactured in Luxottica labs to increase product offer into technology our store (75% already active) ▪ Grow Sun Rx offer to enhance experiences consistent with Plano version (same protection, same colors, same logo) ▪ Standardize technologies Anti Reflective and Anti Scratch Premium Coating across all EssilorLuxottica lab network
Combine Essilor equipment with Luxottica automation technology to enhance quality and Lab productivity increase across all the network: equipment & ▪ Standardize equipment platform to support know-how transfer and best practice sharing manufacturing ▪ Adopt in Essilor labs block of Luxottica automation module to increase quality and productivity ▪ Establish a common fully integrated IT (ERP+LMS+Calculator) platform to support flexibility in processes the entire EssilorLuxottica network
CAPITAL MARKET DAY – SEPTEMBER 2019 43 A single Rx lab network maximizing efficiency, agility and competitiveness
Building a single network of EssilorLuxottica labs to better serve our customers developing complete pair, Sun Rx and e-commerce offers: ▪ Standardize processes including automation and IT, unified set of KPI As a result we will achieve: ▪ Optimize production cost (fixed cost and lab productivity) ▪ D+2 days in store and support improved business continuity plan ▪ Reduced Working Capital ▪ Improve asset utilization and reinforce proximity: Luxottica Improved Quality retail supplied by local Essilor lab (e.g., Chile, Colombia, ▪ India, Australia) ▪ >3% saving mfg transformation ▪ Consolidate planning, distribution and delivery of frames cost coming from footprint and lenses, and improve replenishment consolidation and efficiencies ▪ Accelerate Innovation and shorten time to market: faster in industrial lab for best new product phase-in and phase-out management, same day practice sharing delivery
CAPITAL MARKET DAY – SEPTEMBER 2019 44 Lab Network to enable new commercial offer and greater service
Canada 2 M Jobs Export Labs 26M Jobs Europe Gr China 13 M Jobs 3 M Jobs Current Rx footprint
ELOA 14 M Jobs
LatAm AMERA 5 M Jobs 17 M Jobs
Key ▪ 80 M jobs (72M surfaced) ▪ 11+ M jobs indicators ▪ 8 Export Labs covering 35% of needs ▪ 4 integrated hubs covering 45% of needs
Integrating EssilorLuxottica Rx footprint will consolidate position as world leader in Rx and fasten synergy capture
CAPITAL MARKET DAY – SEPTEMBER 2019 45 Insourcing activities – How integrating Costa into Luxottica frame network will accelerate its growth
Leveraging Luxottica assets to accelerate Costa journey in becoming a global brand: ▪ Using Luxottica frame and lens factories to Integrating Sales enhance faster product development and greater Costa into increase execution Luxottica and ▪ Leveraging Luxottica logistic network for a more frame network margin x2 efficient and wider distribution ▪ Wholesale integration across sport, optical, department store, travel retail channel ▪ Increase expansion in our retail stores
CAPITAL MARKET DAY – SEPTEMBER 2019 46 INNOVATION AND R&D
Federico Buffa & Norbert Gorny
CAPITAL MARKET DAY – SEPTEMBER 2019 How we innovate together at EssilorLuxottica
One common vision unifying two approaches Create unique customer and consumer experiences
A powerful global R&D network Updated Footprint 5 + 1 strategic pillars to drive innovation Aligned and coordinated
Already 40 R&D Projects under co-development Examples of joined research efforts:
Changing the consumer The myopia Electro-chromic experience for challenge lenses children
CAPITAL MARKET DAY – SEPTEMBER 2019 48 INTEGRATION: THE PATH TO BUILD OUR FUTURE INNOVATION AND R&D One common vision unifying two approaches
Style and tech innovations as Product excellence and Brand differentiation enabler
Common powerful innovation capabilities dedicated to create Innovate to continuously improve correction, protection, unique consumer and preservation of everyone´s vision experiences
CAPITAL MARKET DAY – SEPTEMBER 2019 49 A powerful global R&D network Supported by leading scientific, industrial and academic communities
R&D Tech Center R&D Tech Center R&D Style Center R&D Labs
Fukui
Hong Kong Headcount 900
New Patents/ 130 year New Product >2,250 Output/year
CAPITAL MARKET DAY – SEPTEMBER 2019 50 5 + 1 strategic pillars to drive innovation Empowering people to ‘See more, be more, live life to the fullest’ by… Joint product R&D
Branded Product Sun 2.0 Smart Optical Kids and Sustainability Strategy (F + L) (Plano and Rx) Eyewear Techno Youth …providing vision …reinforcing ...preserving …investing in a …creating a new, …searching for low solutions that our worldwide our strength common process fun and unique impact materials, harmonize leadership in with new digital and product journey for kids and processes and branded Frames sun lenses products platform youth to guide them technologies and Lenses through joint to approach the innovation best optical solutions
CAPITAL MARKET DAY – SEPTEMBER 2019 51 Changing the consumer experience for children The perfect complete pair just for them starting from 2020 EXCLUSIVE NON-TOXIC MATERIAL
COLOURFUL PALETTE
ADJUSTABLE TEMPLE TIPS
SAFETY LENS RETENTION
IMPACT RESISTANT Ray-Ban kids Oakley youth Vogue junior POLICARBONATE LENSES
Ray-ban kids play Oakley’s youth blends A new dedicated line SPECIFIC DESIGN hard. We built optical performance for Vogue junior to the perfect complete with style to endure re-juvenate fashion HARMFUL BLUE pair just for them! the daily activities in the category LIGHT PROTECTION of young active lives SCRATCH RESISTANCE
CAPITAL MARKET DAY – SEPTEMBER 2019 52 The myopia challenge Promising new technology to manage myopia progression
Peripheral defocus The new lens technology in myopic eyes creates manages peripheral a signal behind retina defocus
➢ New technology with invisible microlens arrays ➢ Two ongoing clinical tests Light focused behind Specially designed lenses ➢ Very encouraging results the retina is a trigger create a defocal area for myopia progression in front of the retina ➢ More than ten patents pending ➢ Market launch in 2020
CAPITAL MARKET DAY – SEPTEMBER 2019 53 Electro-chromic lenses We developed a proprietary Electro-chromatic technology platform
Technological Platform Enabling infinite product opportunities
e-chromic e-chromic e-chromic Lens shield e-chromic for sports for sunwear for everyday for Augmented Reality
Battery, Electronic & Sensors e-chromic e-chromic e-chromic e-chromic for e-sports for driving for professionals for health care Prescription Lens
CAPITAL MARKET DAY – SEPTEMBER 2019 54 INNOVATION AND R&D New eye exam technology to boost retail opportunities
Arnaud Ribadeau Dumas
CAPITAL MARKET DAY – SEPTEMBER 2019 EssilorLuxottica is re-designing the consumer experience to maximize consumer satisfaction and retail value Instruments + Protocols + Lenses + Frames + Digitalization Improved in store consumer experience …
Welcoming Screening & Diagnosis Refraction VR800®
Delivering & Personalizing & Product selection following Fitting Lens + Frame Visioffice X®
… to maximize consumer satisfaction and retail value
Traffic Conversion Trade up Efficiency
CAPITAL MARKET DAY – SEPTEMBER 2019 56 Best experience, combining EssilorLuxottica’s new eye exam, precise vision and amazing look
…for enhanced vision accuracy and High refraction precision… best complete pair fit and look
0.01D AI guided Easy to practice Real life Personalized Refraction algorithm for ECP experience fitting Lens+Frame
CAPITAL MARKET DAY – SEPTEMBER 2019 57 Promising results and tremendous potential
➢ Traffic & loyalty: new unique experience ➢ Conversion: see the difference of precise vision ➢ Trade up: categories demonstration in real life ➢ Efficiency: returns reduction ➢ New models: delegation to non specialists, specially in FGM
Testimonials from customers1
We have had many calls for people who wanted to have the new precision measurement Customers would definitely pay for this I’ve got to be honest these lenses are amazingly clear. Truly edge to edge clarity, script is spot on! VisionR800 & AVA brings important distinction from competitors. This is unique selling point
1 SOURCE: Internal market test CAPITAL MARKET DAY – SEPTEMBER 2019 58 COMBINING OUR ASSETS TO BOOST GROWTH Transitions in EssilorLuxottica retail
Chrystel Barranger & Leonardo Maria Del Vecchio
CAPITAL MARKET DAY – SEPTEMBER 2019 VISIONARY BRAND Beyond correction, master of light since the 90’s
GENIUS TECHNOLOGY Automatically adapting to changing light. Transitions lenses darken when outdoors and return back to clear when indoors.
EYE PROTECTION UV - Harmful Blue Light - Glare Brightest Lights - Brutal Changes
CAPITAL MARKET DAY – SEPTEMBER 2019 60 Transitions is a major group asset
A Global Category Light Intelligence Most Advanced Added Value CHAMPION LEADER TECHNOLOGY GROWTH ENGINE
4B$ 70% +7% PHOTOCHROMIC OF PHOTOCHROMIC BEST OVERALL ESSILOR VOLUME CONSUMER VALUE GENERATED PERFORMANCE GROWTH 18 VALUE BY TRANSITIONS TECHNOLOGY1
1 SOURCE: InfoMarche & BCG Analysis
CAPITAL MARKET DAY – SEPTEMBER 2019 61 Huge growth potential at reach Recruiting new wearers & unlocking ECP recommendation
LOW GLOBAL LARGELY PENETRATION PREFERRED 10% photochromic by clear lenses wearers penetration on 8/10 prefer clear lenses
HIGH USERS SATISFACTION CONSUMERS 85% not often proposed repurchase rate by ECPs
CAPITAL MARKET DAY – SEPTEMBER 2019 62 An ambition to become an everyday optical lens standardrul
LIGHT EXPOSURE A GLOBAL HEALTH CHALLENGE LIGHT INTELLIGENT LENSES Better eye protection: a pressing need #seethedifference
9/10 DECLARE THEY ARE ENHANCEDOPTIMUMGLASSES LIGHT SENSITIVE VISUALEYESSTYLE PROTECTION BOOSTER EXPERIENCE
CAPITAL MARKET DAY – SEPTEMBER 2019 63 Brand rejuvenation & breakthrough innovation TO RECRUIT NEW WEARERS
NEW NEW NEW NEW NEW COMMUNICATION COLORS & MIRRORS CATEGORY SPEECH ACUVUE OASYS
WITH TRANSITION
UNDER CONTROL PERFORMANCE OF LIGHT NEW FRONTIER UP LIGHT YOUR STYLE PROTECT YOUR EYES CATEGORY EXPANSION
CAPITAL MARKET DAY – SEPTEMBER 2019 64 The store is the critical touch point to recruit new wearers Joint collaboration to accelerate penetration gain at group retail
DRIVING TO THE STORE CONVERSION IN STORE Consumer Awareness & Interest Transitions Visibility, ECP Recommendation & Product demonstration
TRANSITIONS.COM TRANSITIONS.COM
ARE YOU LIGHT SENSITIVE ?
TAKE THE QUIZZ
CAPITAL MARKET DAY – SEPTEMBER 2019 65 Salmoiraghi & Vigan – The leading multi-brand retailer in Italy
400+ Stores High-single digit Revenue growth #1 Awareness among retailer brands 90+% 80+% In Milan In Italy
CAPITAL MARKET DAY – SEPTEMBER 2019 66 …and the engagement of our whole team
~2,000 ~36,000 Employees involved Hours of trainings already delivered
CAPITAL MARKET DAY – SEPTEMBER 2019 67 Impact has been achieved with a strong in-store execution…
Advertising In-store Lens Direct marketing simulator on iPad to client base
CAPITAL MARKET DAY – SEPTEMBER 2019 68 INTEGRATION: THE PATH TO BUILD OUR FUTURE – TRANSITIONS IN ESSILORLUXOTTICA RETAIL in – A success story
Penetration of photochromatic lenses since joint initiative launch
Single Vision Multi-focal
13.0% 35.0% 27.0% +30% >2X ~20% 6.2% of total lens sales Market S&V Market S&V
Growing at ~25p.p. Growing at ~10p.p. faster than the market faster than the market
CAPITAL MARKET DAY – SEPTEMBER 2019 69 COMBINING OUR ASSETS TO BOOST GROWTH Branded lenses and complete pair
Grita Loebsack & Chiara Occulti
CAPITAL MARKET DAY – SEPTEMBER 2019 Our brands drive value and differentiation
€8.4 Bn +4% Retail Value1 2018
1 Internal estimate
CAPITAL MARKET DAY – SEPTEMBER 2019 71 Our brands improve satisfaction
~2X 9/10 87%
more wearers of wearers are HIGHLY SATISFIED are VERY SATISFIED SATISFIED with their wearers with vs only 4/10 generic coating wearers lenses lenses compared to other progressive lenses1
1 Global studies conducted between 2009 and 2017 on 1903 wearers (n = 18 studies)
CAPITAL MARKET DAY – SEPTEMBER 2019 72 Our brands are category developers Varilux inventor of the Crizal leading the anti Eyezen inventing a new PAL category reflective category category of lenses for connected life
350M wearers equipped over 60 1 pair of Crizal lenses sold years every second worldwide +30% growth per year since the launch
SOURCE: Essilor internal sales data 710 M lenses with Crizal coating sold since 1992
CAPITAL MARKET DAY – SEPTEMBER 2019 73 PREFERRED VISION BRAND
WORLDWIDE, CAPITALIZING ON ITS CORE TECHNOLOGY AND BRANDS VARILUX•CRIZAL•EYEZEN
CAPITAL MARKET DAY – SEPTEMBER 2019 74 Driving desirability across 4 key targets
Doctors ECPs Managed Consumers Care
CAPITAL MARKET DAY – SEPTEMBER 2019 75 Essilor brand has 90+% awareness among ECPs
#1 Most recommended by ECPs 41%
#1 ECPs trust the most 43%
#1 Sets industry standards 53%
#1 Advanced technology 47%
SOURCE: 958 IECP’s – CSA – Feb 2018 – 10 countries
CAPITAL MARKET DAY – SEPTEMBER 2019 76 The quality of lenses is among the most important criteria when purchasing corrective eyeglasses
CAPITAL MARKET DAY – SEPTEMBER 2019 77 Why Ray-Ban prescription? Maximise the ‘complete pair’ opportunity
From an ‘assembled’ To a fully customized product-service… factory product
A fragmented Your Ray-Ban process Complete pair An assembled product
Re-assembled product
SOURCE: Strive – Clear Lens Way to Market 2016
CAPITAL MARKET DAY – SEPTEMBER 2019 78 INTEGRATION: THE PATH TO BUILD OUR FUTURE – BRANDED LENSES AND COMPLETE PAIR Complete pair opportunity – Extremely high consumer appeal of the Ray-Ban concept
With Ray-Ban, 8 out of 10 embrace the new opportunity Complete Pair Ray-Ban Complete Pair
Adopting 48% 83%
17% Rejecting 52%
Same brand Ray-Ban concept From a functional item… …to an emotional bond
SOURCE: Strive – Clear Lens Way to Market 2016
CAPITAL MARKET DAY – SEPTEMBER 2019 79 Complete pair opportunity – Address vision correction seekers’ hidden ‘pain points’
Different entry points for sun & clear
Sun Clear
Maintain authenticity Guarantee of perfect & originality fit ‘Frame + Lenses’
Rx-ability in sun x2 next year Authentic Ray-Ban logo Same color as plano Perfect fit: each lens is cut to fit the frame perfectly Same product ‘aesthetic’ as plano Elevate the single vision offer Same shopping experience as plano
CAPITAL MARKET DAY – SEPTEMBER 2019 80
80 Complete pair market opportunity – Maximise appeal and potential (1/2)
Combine the best of Luxottica & Essilor capabilities and expertise
Best of brands Best of lens expertise
Best of brands Best of lens expertise
SOURCE: Ray-Ban Brand Tracker, 2018
CAPITAL MARKET DAY – SEPTEMBER 2019 81 Complete pair market opportunity – Maximise appeal and potential (2/2)
Maximise attachment rate Create market demand to Ray-Ban frames by addressing consumer need across clear and sun for a unique & authentic Ray-Ban sun look
CAPITAL MARKET DAY – SEPTEMBER 2019 82
82 Oakley complete pair opportunity
Strategic vision Become the #1 prescription brand for the committed1, on and off the field, by offering Oakley authentic complete pair for sun and clear
A unique Oakley product built specifically for your needs
1 Oakley primary consumer target
CAPITAL MARKET DAY – SEPTEMBER 2019 83 Oakley Prizm lens technology
See more Premium Lens with Prizm technology technology platform The most advanced Average price Prizm contrast enhancing Sun is €21 higher Prizm Sun mix lens technology for than non-Prizm 12% to 59% sports environments (ca. 15% premium) in 4 years
CAPITAL MARKET DAY – SEPTEMBER 2019 84 DEVELOPING NEW GO-TO-MARKET APPROACHES New digital consumer experience
Bernhard Nuesser & Paolo Alberti
CAPITAL MARKET DAY – SEPTEMBER 2019 Digital influences all sales...
Discovery happens Digital experience drives Technology enhances online choice of retailer / brand experience
72% 89% Majority online discovery in North of North American consumers of consumers aged 18-34 America choose a retailer based on declare AR/VR enhances a great digital experience experience
SOURCE: Google | Deloitte 2019 online consumer survey, EssilorLuxottica analyses
CAPITAL MARKET DAY – SEPTEMBER 2019 86 Developing omnichannel opportunities USA example Leading Online Connected in Leading Retail presence a multi-touch approach ecosystem
Content Partners / Retail.com Franchise >100M unique Owned >10,000 Brand.com retail visitors stores E- E- commerce commerce Managed Care
Building a unified Data Platform ~50M consumers SOURCE: Internal estimates
CAPITAL MARKET DAY – SEPTEMBER 2019 87 Key technologies to stitch the ecosystem together
Web-to-store Web-to-web CRM
➢ Store locators ➢ Linking → SEO benefits ➢ Audience sharing → social and cross property conversion networks and retargeting ➢ Driving Eye Exam Appointments ➢ Re-targeting ➢ Consumer data and understanding ➢ Consumer marketing
CAPITAL MARKET DAY – SEPTEMBER 2019 88 New digital consumer experience (Digital tools for wholesale and retail customers)
“Don’t convert an old store… into a new old store”
CAPITAL MARKET DAY – SEPTEMBER 2019 89 … the journey continues
TRANSFORMING ELEVATING THE INDUSTRY FROM WITHIN CONSUMER EXPERIENCE
CAPITAL MARKET DAY – SEPTEMBER 2019 90 DEVELOPING NEW GO-TO-MARKET APPROACHES Addressing myopia in China
Eric Thoreux
CAPITAL MARKET DAY – SEPTEMBER 2019 Chinese Eyecare and Eyewear industry is already large and shows huge potential Eyecare and Eyewear industry value, €Bn
Growth drivers: #1 66 ▪ Myopia WW market by volume x6 ▪ Middle class ▪ Urbanization #2 21 ▪ New channels by value 2 Acceleration 11 ~6-8% ▪ Premiumization 19 Momentum growth ▪ Digital consumer 2018 2025 Industry full potential
SOURCE: Internal analyses
CAPITAL MARKET DAY – SEPTEMBER 2019 92 Leading China myopia battle via consumer understanding
▪ Rapid increase (-1.00 D/year) Kids and 1 Myopia 130 M ▪ High prevalence control teens (80% myopes among 18 y.o. in universities) Myopia correction
▪ Increase of high myopia 2 Eye exams Adults ~500 M ▪ Exponential risk of retinopathy and access
1 Based on the results of National Health Commission 2018 Student Myopia Survey 2 Based on Holden B, et al. Global Myopia Trends 2000-2050.
CAPITAL MARKET DAY – SEPTEMBER 2019 93 EssilorLuxottica tackling myopia with an integrated go-to-market effort
Unique go-to-market
Government Consumer Ecosystem ECP Digital collaboration awareness partnership professionalization acceleration
Joint innovation Kids and teens Adults • Luxottica and Essilor kids frames • Elevating Lenses
• Myopia control lens leadership: • Switching 45M mid tier frames to branded Myopilux, new innovations • Shanghai School Association partnership
CAPITAL MARKET DAY – SEPTEMBER 2019 94 Shaping the market in China by combining all common assets and market drivers, building a €1.5 to 2 Bn business by 2025
Wide penetration Large consumer impact Strong operation • 35,000 doors coverage • #1 ranking brands • >30,000 employees • Strong online presence • 200M consumers • 6 lens, 2 frame plants • All price tiers covered • 1,600 stores • 2 world class labs
CAPITAL MARKET DAY – SEPTEMBER 2019 95 GUIDELINES ON FINANCIAL TARGETS
Hilary Halper & Stefano Grassi
CAPITAL MARKET DAY – SEPTEMBER 2019 EssilorLuxottica has a strong foundation to build upon
FY 2018 Strong brands ▪ Focus on leading premium brands Pro forma revenue +3.2% ▪ Continued investment in marketing and media ex. currency growth Innovation leadership ▪ Product innovation and category development Adj. Pro forma 15.9% ▪ Digital transformation & selling model evolution Developing sustainable growth levers Operating Profit of Revenue ▪ FGM, e-commerce and omnichannel, STARS ▪ Myopia, 2.5 NVG activities Combined net ~0.6x ▪ Leveraging new acquisitions debt/adj. EBITDA Improving efficiencies ▪ Simplification, continued investment in operations Combined free cash ▪ Financial discipline and start of synergy program flow €1.8 Bn Strong human capital ▪ Mission driven, talent development
CAPITAL MARKET DAY – SEPTEMBER 2019 97 Long term sales outlook Excluding strategic acquisitions, including synergies, at constant exchange rates
Long term view 2018 (up to 2023)
Organic sales growth acceleration Revenue synergies, innovation, market growth Mid-single ▪ Sales growth YoY +3.2% digit ▪ Business and Channel mix
Fast-Growing Markets Rebalanced global coverage % of sales ~20% ~25% ▪ Continued expansion in Fast-Growing Markets
Direct to Consumer Increasing share of direct distribution ~40% >40% % of sales ▪ Continued investments in e-commerce platforms
CAPITAL MARKET DAY – SEPTEMBER 2019 98 Value creation levers
Short term growth, % Mid / long term, % Initiatives Sales Operating Profit Sales Operating Profit Business opportunities ▪ Combined offers ▪ Innovation ▪ Brand development
New markets and channels ▪ Online ▪ Fast-Growing Markets ▪ Sun Rx
Operating efficiencies ▪ Industrial efficiency ▪ Cost Management ▪ Supply chain
CAPITAL MARKET DAY – SEPTEMBER 2019 99 Cash conversion & leverage
Cash conversion ratio, 2018 €M Financial Leverage Ratio Net Debt on EBITDA ~1,870 ~1,830
2017 0.7x
Net Income Adj.1 Combined Adj. FCF 2018 0.6x 1.0x
1 Pro forma
CAPITAL MARKET DAY – SEPTEMBER 2019 100 CAPEX structure 2018-2019 Commercial fixtures & Other other wholesale ▪ Continued optimization of ~10% ~10% operations and supply chain IT ▪ Improve efficiencies for ~20% Store better service and quality ~5.5-6.0% ~25% investments on Sales ▪ Digital transformation ▪ Keep the pace on IT investments ▪ Stores opening and Operations & ~35% remodeling production
CAPITAL MARKET DAY – SEPTEMBER 2019 101 Synergies
2019-2021 Adj. EBIT impact 2022 – 2023 Adj. EBIT impact €M €M
Net revenue 140-160 200-300 synergies
Costs 160-190 220-300 synergies
Total Adj. EBIT 300-350 420-600 impact
CAPITAL MARKET DAY – SEPTEMBER 2019 102 Net sales & costs by currency
Other Other 17% 21% BRL 3% AUD 3% BRL 3% Net Sales Costs 45% USD 50% USD AUD 4% 2018 CNY 7% 2018 4% CNY
18% 25% EUR EUR
CAPITAL MARKET DAY – SEPTEMBER 2019 103 Financial outlook Excluding strategic acquisitions, including synergies, at constant exchange rates
Long term view 2018 (up to 2023)
Sales growth at constant Fx +3.2% Mid-single digit
Adjusted operating profit 15.9% 1.0 – 1.4x sales growth
Adjusted net profit 11.6% 1.0 – 1.5x sales growth
CAPITAL MARKET DAY – SEPTEMBER 2019 104 Q&A
CAPITAL MARKET DAY – SEPTEMBER 2019