17 March 2017 Europe Equity Research Luxury Goods Eyewear Industry Research Analysts SECTOR REVIEW Catherine Tillson 44 20 7888 6052
[email protected] Visions are changing Guillaume Gauvillé, CFA 44 207 888 0321 ■ Providing a more holistic view of the eyewear industry. We broaden
[email protected] our eyewear coverage by initiating on Essilor (Outperform, TP €127), GrandVision (Underperform, TP €19) and Safilo (Neutral, TP €6). This broadens our coverage to include all of the key eyewear players, enabling us to provide a more detailed industry view. This comes at a time of considerable change with the launch of the mega-merger between the two largest players in the industry: Essilor and Luxottica. ■ Three areas of differentiation. i) We initiate on Essilor and provide a detailed pro forma EssilorLuxottica model and explicit synergy forecasts. ii) We dissect the online vs. omni-channel dynamics, turning more bearish on the impact of online on the eyewear industry, especially for retailers. iii) Using the Optical Business Barometer, a survey carried out by Jobson Optical Research covering c300 ECPs in the US, we can provide a more transparent view of the largest eyewear market. We find sentiment in the US is improving, supporting our company forecasts. ■ Essilor (O/P, TP €127) and Luxottica (O/P, TP of €58 increased from €50). Essilor and Luxottica have traded sideways over the past month after losing some of the share price gains made on the day of the merger announcement. We see this as an attractive entry point into both names as, combined, we expect EssilorLuxottica to grow faster than the market, with greater margin accretion than the two companies would generate separately.