The head of the Italian eyewear maker Luxottica has a fresh and international perspective

THE MONDAY INTERVIEW

May 11, 2014 3:59 pm

An eye on the future of luxury 

By Rachel Sanderson

The head of the Italian eyewear maker has a fresh and international perspective

©Alessia Pierdomenico

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Looking glasses: Luxottica boss Andrea Guerra exchanges texts with Italy’s prime minister Matteo Renzi ‘a little bit more than a little bit’.

Andrea Guerra, the chief executive of eyewear group Luxottica, is fresh back in his Milan office from visiting Google Labs in Silicon Valley.

The 49-year-old recently signed a deal with Google to design, develop and distribute Google Glass, the technology company’s interactive $1,500 headset, which will incorporate des­igns from fashionable Luxottica brands Ray-Ban and Oakley.

The tech and consumer goods blogospheres are abuzz with questions. How secretive really is Google Labs, the tech giant’s incubator where Mr Guerra’s team are working? “Pretty significantly,” says Mr Guerra, who is not renowned for loquaciousness himself, after a pause.

Will Italy’s Luxottica really be able to make Google Glass fashionable? Many analysts now see design, rather than technology, as the biggest barrier to wearables’ wider adoption. “I’m 100 per cent certain it will,” is his answer.

“We could talk about the segmentation of wearable technologies on your face, we could talk about entertainment and what is important for computing, what is important for getting notifications, what is important for outdoor and indoor – but we need to prove it,” he adds.

The deal with Google underlines the Italian eyewear group’s emergence at the forefront of the merging of technology and consumer goods, which analysts believe threatens to disrupt the accessories sector – from watches to sunglasses – as thoroughly as it has in the media industry.

The deal has also thrown a spotlight on the publicity-shy Italian family-controlled business. Through in­nov­ation and acquisition it has bec­ome the world leader in its sector, with €7.3bn in annual sales in 2013, up 7.5 per cent at constant currency on 2012.

Luxottica was founded in 1958 by Leonardo del Vecchio, an orphan from Milan who has become a near mythological figure in Italian business. Mr Del Vecchio, 78, is considered to be Italy’s second-richest man, with an estimated personal fortune of €20bn, and remains Luxottica’s chairman. He hired Mr Guerra from another Italian family-owned group, white goods maker Indesit, a decade ago to take over from him as CEO.

The CV

Born:
Milan, 1965

Education:
1989: Receives a degree in business administration from the Sapienza University of Rome

Career: 
Joins Marriott Italia after graduating, eventually becoming director of marketing
1994: Joins Merloni Elettrodomestici (later called Indesit). Becomes CEO at Merloni in 2000
2004: Moves to Luxottica Group as chief executive

Family: Married, three children

Interests: Sport – tennis, running, skiing, swimming – and cooking for family and friends

It was a rare example in Italy of a family patriarch handing over to a trained manager after the first generation, thereby avoiding the malaise that causes too many of Italy’s family-owned businesses to fail. Luxottica’s share price has risen 200 per cent in the past 10 years. About a third of the company is listed; Mr Del Vecchio owns 65 per cent and the designer Giorgio Armani, 79, whose brand’s eyewear is made by Luxottica, owns 5 per cent.

Mr Guerra’s work persona is low-key, an important quality for man­agers where the owner-founder is still in the business. His regular uniform is a button-down shirt, jumper, casual trousers and square-framed Luxottica spectacles, a wardrobe notable for blandness in fashion-crazy Milan. He speaks softly. But his reputation is as a smart, tough-to-please CEO and plain-talker, with a global perspective that is uncommon in Italy.

That perspective has led him to conclude that Luxottica’s core sector of eyewear will only get stronger. Reflec­ting on the eurozone’s economic outlook, he says: “I think we’ve seen the worst but, to me, saying ‘recovery’ is a bit too much. I don’t know if we all as companies and consumers will be better off than in the past. There will be sectors flying and sectors dying much faster than has been the case.”

Eyewear is “ready to fly” because it has evolved from maker of sight-correctors to provider of fashion accessories and luxury goods. A pair of cateye filigree Dolce & Gabbana sunglasses, made by Luxottica, retails for £895 on online site Net-a-Porter.

“We are lucky for a number of reasons. First of all that we work in a very new sector, because the emotional link between ourselves and these objects is pretty new. We are leaders in this young industry and we are doing our best to please our customers and consumers around Eur­ope. Our main brands are in good health. There is no reason why we should suffer,” he says.

Part of that confidence comes from Luxottica’s global expansion. In 2013 78 per cent of revenues came from North America, 14 per cent from the Asia-Pacific region and 8 per cent split evenly between Europe and the rest of the world. The limited exposure to China that two years ago was considered by analysts to be a handicap is now seen as a boon, as growth there slows and the US luxury market is revving up again. Over the past decade, Luxottica has shifted its manufacturing from 85 per cent to 50 per cent based in Italy.

Nonetheless, Mr Guerra says he is more interested in cities than whole countries amid the tumult of consumer globalisation. “We have a very good competitive position in Belgium but our revenues in [three stores in the neighbourhood of] Times Square are larger than in Belgium. So we are not talking about macro-regions or cities, we are talking about a square.”

With his studied internationalism, Mr Guerra has become a poster boy for the generational upheaval in the country, most acutely represented by his friend Matteo Renzi, the mayor of Florence, who at 39 became Italy’s youngest prime minister in February.

“We need some more generational evolution. Working a lot in the US I never talk about youth, but about fresher ideas,” Mr Guerra says wryly.

Asked how much he and Mr Renzi talk – the prime minister often asks the advice of Italy’s up-and-coming business leaders – Mr Guerra replies that they text “a little bit more than a little bit”. Mr Renzi – whom Mr Guerra praises for being “very fast”, making up for him “probably not doing everything 100-per-cent right” – has equally been welcomed by Italian entrepreneurs, who see him as a re­former of bloated bureaucracy and res­trictive labour laws.

Mr Guerra, however, lambasts Italy’s corporate provincialism. Businesses with fewer than 20 workers employ about 60 per cent of the workforce, compared with about half the workforce in Spain and Portugal, a third in Germany and 20 per cent in the US, according to the OECD.

Italian companies are not big enough to deal with the challenges they face, he says: “What are they doing for consumers? What about branding? What are they doing about technology? Do they employ people who are citizens of the world? What’s the relationship bet­ween management and ownership? How many companies are listed in Italy versus France? These are not problems for the government. Italian companies are crying too much,” he says.

Mr Guerra’s business success, int­ernational experience and support of Mr Renzi have him tapped as a possible future minister for the economy or industry. He says holding nat­ional of­fice does not interest him – at least for the moment – but in a break from his usual reticence he appears not to rule it out. “We need people who know what they are doing, and I know how to do this job. But you need to be patient. I am so happy leading this company and having the opportunity to talk to the Google guys. I’m fine,” he says.

 

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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