Luxottica Has Its Eyes on Brazil and Asia; Andrea Guerra, head of Luxottica Group, on leadership, listening, and competing for customers

July 30, 2013, 9:58 p.m. ET

Luxottica Has Its Eyes on Brazil and Asia

MANUELA MESCO

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Andrea Guerra, head of Luxottica Group, on leadership, listening, and competing for customers.

The overall global luxury market may be cooling, but for sunglasses and eyewear in emerging markets, the future looks hot. That’s good news for Luxottica S.p.A.,LUX.MI +0.73% the world’s largest eyewear group. The Italian company, which owns iconic brands like Ray-Ban and holds licenses to produce eyewear for designer labels such as Burberry, Chanel and Armani, logged €7 billion ($9.29 billion) in sales last year and recently reported a 7% year-on-year increase for second-quarter revenue. Andrea Guerra, the company’s chief executive since 2004, has spearheaded an acquisition drive intended to establish Luxottica in new markets around the globe. Last year alone, it made four acquisitions, including Grupo Tecnol Ltda, a leading eyewear maker in Brazil, as well as retail chains in Spain, Portugal and Italy.Luxottica’s European market also continues to expand, despite an economic crisis that has hurt makers of designer handbags and clothes and driven many Italian fashion companies into the arms of conglomerates.

Speaking with The Wall Street Journal from Luxottica’s Milan headquarters, the 48-year-old Mr. Guerra discussed price competition, Americans’ pragmatic style, and why Brazil is the eyewear market to watch. Edited excerpts:

WSJ: How do European, Asian and U.S. customers differ?

Mr. Guerra: This is a million-dollar question. There are a lot of similarities between Mediterranean and Asian consumers: They both want a certain lifestyle, and they’re in search of an emotional relationship with the objects they buy.

U.S. consumers are more pragmatic. America, compared with Europe, is always a step more conservative and traditional. Think of the most legendary sunglasses: They were all born in the U.S.—Ray-Ban and Oakley for example—but only because of their functional value.

Oakley was perfect for sports, thanks to its technological value, while Ray-Bans were the pilots’ sunglasses that made it easier to see in whatever climatic condition. It’s all about practical features rather than a real connection with the brand. But this is changing.

 

‘Our two big drivers are brands and geography,’ said Andrea Guerra, CEO of Luxottica, during an interview in the glasses maker’s Milan offices.

WSJ: What about Asia?

Mr. Guerra: Asia is a new discovery every day. It’s like a candy store, a new world, new business models, consumers that discover a new trend every day. In China, up until five years ago, sunglasses didn’t even exist. Now they’re gaining ground.

Our most important markets are Brazil, Turkey, India and China. And I mentioned them in this order for a reason. Brazil is definitely our first priority. China is surely growing but is still small for us.

WSJ: How do you respond to critics who say Luxottica has used its position to keep eyewear prices artificially high?

Mr. Guerra: There are really no entry barriers in this sector. Anyone can come in and sell at competitive prices. The beautiful thing about eyewear is that you can really find them at any price—from $1 to $1,000.

Also, we don’t even represent 10% of the whole sector. Nobody—regulators or other authorities—has ever brought forth any competition concerns to us. We are so far from it.

WSJ: Are you feeling heat from companies, for example Warby Parker, that are taking eyewear purchases online and at a low cost?

Mr. Guerra: I think one thing is communication, one thing is reality. I think Warby Parker has done a good job on their brand.

WSJ: What’s your strategy for making acquisitions?

Mr. Guerra: Our two big drivers are brands and geography. We look at global, high-value brands, of which we typically don’t have an equivalent in our portfolio. On the retail side, we look at areas with high potential—Latin America, Southeast Asia, other emerging nations.

WSJ: You bought a sunglasses retail business in Spain and Portugal, Sun Planet, last year.

Mr. Guerra: This answers another need. Some acquisitions, as in that case, are made as a way to establish a retail presence in a country.

We always have a lot of talks opened, but then some go faster than others.

WSJ: How has Luxottica made Italy profitable in terms of sales?

Mr. Guerra: First, we operate in a relatively young sector so we’re benefitting from a globally growing context. Also, we have built strong brands and good, emotional relationships with customers. Brands are much more important today than 10 or 15 years ago.

WSJ: Why are so many Italian brands being eyed by foreign conglomerates?

Mr. Guerra: Many Italian companies face internal as well as external challenges—the latter due to the difficult economic conditions in Italy. Some of them—which are often managed by their own founders—now wonder about their future, at risk because of general instability and internal weaknesses. And they are not always equipped to answer that question.

The real issue is that foreign companies are in a much different condition than Italian ones. They’ve already gone through that first-generation phase and are already more open, better organized and stronger.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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