Prior Fiscal: $8.33 Billion
Percentage Change: +6.2%
No. of Employees: 150,000 (total)
Global Headquarters: Charenton-le-Pont, France
Leonardo Del Vecchio, Executive Chairman, EssilorLuxottica
Hubert Sagnières, Executive Vice-Chairman, EssilorLuxottica
Francesco Millieri, CEO, Luxottica Group
Paul du Saillant, CEO, Essilor International
David Wielemans, CFO, Essilor International
Norbert Gorny, Co-COO, Essilor International
Éric Thoreux, Co-COO, Essilor International
Chrystel Barranger, President Europe and Photochromics, Essilor International
Arnaud Ribadeau Dumas, President Greater China and Instruments, Essilor International
Rick Gadd, President North America, Essilor International
Tensions were running high last year at EssilorLuxottica, the company born from the October 2018 merger of Essilor International and Luxottica Group.
According to Bloomberg reports, the organization has been wracked with infighting among its leaders. Bloomberg also noted that the company’s share price was 22 percent down at the time of the news (last March). The public fight began with a disagreement over the group’s new chief executive. According to the report, Luxottica founder, EssilorLuxottica executive chairman, and largest company shareholder Leonardo Del Vecchio said Essilor’s leaders weren’t complying with the agreed-upon corporate governance terms.
According to Financial Times, Essilor went on the offensive after Del Vecchio seemed to put confidant and Luxottica Group deputy chairman/CEO Francesco Millieri forward as EssilorLuxottica CEO. Essilor leader and EssilorLuxottica executive vice chairman Hubert Sagnières claimed that Del Vecchio staged a “de facto attempt to take control of the new group.” He also said Del Vecchio made false accusations about the group’s governance and management.
“Francesco Milleri is a scapegoat. Hubert Sagnières must have the courage to say that, for him, I am the problem,” Del Vecchio told Financial Times.
Del Vecchio previously told French newspaper Le Figaro that Sagnières did not communicate with him on filling key management jobs. “He has acted as if Essilor bought Luxottica,” Del Vecchio was quoted saying. The merger agreement was crafted to ensure equal power between the two sides until spring 2021. The clash worried investors because synergies would take longer to occur.
“It’s war between the French and the Italians. All these risks blocking the planned synergies. It’s very bad for the stock. At one moment or another, one of the parties will have to take control,” Jerome Schupp, fund manager at Geneva-based investment firm Prime Partners, told Reuters.
Two months later, EssilorLuxottica and parent company Deflin developed a settlement agreement to overcome the governance issues. Millieri and then-Essilor CEO Laurent Vacherot were given the responsibility of integration and approved appointment of key executives for central functions. Vacherot was also appointed as an EssilorLuxottica director. The search for a new CEO (for which Millieri and Vacherot stated they would not be candidates) began mid-May last year, all existing claims were waived, and legal proceedings were terminated.
“I’m very pleased of this outcome. The industrial rationale of the combination is even stronger when looking at all the opportunities raised during the meetings of the Integration Committee,” Del Vecchio told the press.
“With these decisions driving to a more unified company, EssilorLuxottica is well positioned to accelerate its growth in order to achieve its mission…” Sagnières added.
Paul du Saillant was named CEO of Essilor International this March. He also replaced the retiring Vacherot as a director. He will work directly with Milleri. A proposal submitted April 18 to appoint one additional EssilorLuxottica director was also withdrawn. The search for a new EssilorLuxottica CEO is ongoing, and a final appointment is expected to be made by the end of this year.
Despite the infighting, Essilor International’s revenue jumped 6.2 percent to $8.84 billion last year. (Luxottica revenue also increased 3.2 percent to 9.5 billion euros, but this segment will not be further analyzed. Total EssilorLuxottica revenue grew 4.4 percent to 17.4 billion euros).
Strength across all geographical regions expanded Essilor’s Lenses & Optical Instruments division revenue 5.5 percent to 6.8 billion euros. The Vision-R 800 phoropter was particularly successful in Europe. Double-digit growth in China for Eyezen, Crizal, and Varilux lenses further padded the increase. Latin America gained a boost thanks to market expansion activities and a new partnership with a critical player in the region. In North America, sales grew 7.6 percent to 2.3 billion euros; European revenue rose 5.7 percent to 971 million euros; Asia, Oceania and Africa proceeds boosted 6.8 percent to 756 million euros, and Latin America earnings increased 1 percent to 304 million euros.
Essilor also launched its Transitions Signature GEN 8 lenses in the U.S. in July. Transitions Signature GEN 8 photochromic lenses offer protection, outdoor darkness, full indoor clarity, responsiveness, and long-lasting performance. Activation and fade back speed have also been improved.
Essilor’s Sunglasses and Readers segment revenue rose 8.9 percent to reach 885 million euros. Strong demand for Xiamen Yarui Optical (Bolon) products in China and robust demand for readers and sunglasses at Costa and FGX International in the U.S. helped to achieve the result. E-commerce sales for the division were up an impressive 20 percent. The company also divested its Turkish subsidiary Merve, which markets sunglasses to consumers, in keeping with an antitrust commitment outlined in the merger deal.
The firm’s Equipment division posted 2 percent sales gains with 221 million euros. Strong performance in Europe, Latin America, and Asia was able to offset a slowdown in other developed markets. Digitalization, new generation surfacing machines, and coating machines drove the positive performance. The order book business also contributed, enabling continued R&D investment for production methods and lab efficiency across the ophthalmic lens industry.
The company acquired a 76.72 percent interest in optical retailer GrandVision in an $8 billion deal at the end of July, making it a part of the global eyewear and eyecare group. This purchase will expand EssilorLuxottica’s optical retail platform and strengthen its direct-to-consumer business, mainly in Europe. Expanding retail operations while maintaining wholesale distribution will allow the company to more effectively drive consumer engagement with eye care. The buy will also add over 7,200 stores globally, over 37,000 employees, and is expected to garner about 3.7 billion euros in annual revenue. Upon completion of the transaction, the company will launch a mandatory public offer for the remaining shares.
“EssilorLuxottica is looking here to address all the segments of the market, from glasses with Essilor to spectacles with Luxottica and retail with GrandVision,” Gregoire Laverne, a fund manager with Roche Brune Asset Management, told Reuters.
The company completed 29 merger and acquisition deals in 2019, representing full-year revenue of close to 218 million euros. Major transactions included German online optical products retail platform Brille 24 in April, Mexican integrated prescription laboratory operating optical store chain Devlyn in July, Australian ophthalmic instrument distributor Optimed and Italian optical glass sun lens manufacturer Barberini in September, and Swedish sunglass/readers distributor Future. The company also completed purchase of a 51 percent stake in Ukrainian optical market leader Optical House on Jan. 3, 2020, which through about 190 stores under the Luxoptica brand provides a wholesale platform for lenses, frames, and contact lenses.
At the very end of its fiscal year, EssilorLuxottica uncovered fraudulent monetary transfers at a Thailand plant belonging to Essilor International as it was continuing its efforts to unite both companies’ supply chains and reorganize senior management. According to the firm’s annual report, these illicit activities impacted 2019 results by 185 million euros. The company also terminated any employees suspected of involvement.