Luxottica is engaged in a huge reorganization, expansion and upgrading program for its main retail businesses, which employed 48,000 people at about 7,300 stores in the past year, representing 60.1 percent of its adjusted revenues. The management wants to boost the retail network to some 8,000 stores by mid-2017. Many of the new stores will reportedly be smaller, relying in part on mobile connected devices.
The group is centralizing procurement operations for all its stores around the world in Milan. It is investing $60 million over five years to develop a new point-of-sale system for all its retail chains. The system has already been installed at Sunglass Hut stores and is being implemented at LensCrafters, where 25 percent of the stores have been equipped already. The deployment is scheduled to be completed by the end of the year.
The group also recently set up a new company, NeXtore, in charge of overseeing the construction of its stores globally in order to maximize efficiencies and synergies. According to a posting in LinkedIn, the unit is based in Cincinnati and is headed since last November by Andrea Fregonese, a former executive vice president for North America at an Italian engineering group, Permasteelisa. A third-party European contractor confirmed that this kind of work is migrating to NeXtore.
In November, Luxottica launched a new prototype store in Detroit. It features an AccuFit salon for digital eye measurements as well as a reorganization of customer flows and product displays. The company's management claims that the shop's performance has been “stellar” and said that the format will be used for new stores including the points of sale due to be installed at Macy's department stores. LensCrafters is due to set up over 80 stores at Macy's this year and up to 500 over a three-year period. The format will be applied to a further 300 LensCrafters stores, either newly built or refurbished, over the next three years.
After opening Target Optical shop-in-shops at 40 Target stores in the U.S. in 2015, Luxottica plans to double the number of openings this year and to double the brand's e-commerce business, while achieving double-digit growth in some-store sales. At the end of 2016, the group will have 500 points of sale at a quarter of Target's stores. By 2018, the Target Optical footprint is scheduled to cover 180 more locations. The banner is enjoying “great” profitability and client satisfaction, according to Luoxttica's management. Target is the second-largest discount retailer in the U.S. behind Walmart.
Sunglass Hut (SGH) aims to have more than 4,000 stores in three years from around 3,300 currently, with the opening of more than 300 new stores in 2016 and some 300 locations a year in 2017 and 2018, while entering the South Korean and Japanese markets, and expanding in Latin America, Southeast Asia, China and India.
SGH has enjoyed strong international growth over the past five years and its expansion will continue to focus on Europe and emerging markets. The banner has entered 14 new markets since 2010, when it had a presence in only eight countries. Its sales outside the U.S. have risen to more than 35 percent of its total turnover from 10 percent. In Europe, where SGH currently operates about 400 stores, it recently announced plans to open 57 stores over six months in the French department stores of Galeries Lafayette. SGH is forecast to raise sales this year by 8-10 percent at comparable currency rates, with single-digit growth on a same-store basis.
SGH expanded its sales by 25 percent in Europe in 2015, with same-store sales rising at a double-digit growth rate in Continental Europe. Worldwide, SGH also increased sales by 25 percent, or 10 percent at constant currency rates. Globally, comparable store sales grew by 6.4 percent, with North America up by 4.7 percent.
Regarding the group's Latin American GMO chain, which operates some 480 stores in Peru, Chile, Ecuador and Colombia, the group said it offers “by far” the best return on capital employed for every new store. Acquired by Luxottica in two stages in 2009 and 2011 along with other assets of Multiopticas Internacional, GMO is focusing on expanding its footprint in Chile and, especially, in Colombia. It sees a “big opportunity” for organic growth in the region but will also monitor possible further acquisitions.
After years trying to strike the right strategy for Pearle Vision, Luxottica has opted to transform the U.S. retail banner into a franchising network. It believes that Pearle is on track to become the largest and best franchise operator in the U.S. and plans to triple the number of franchisees over the next five to 10 years.
Up to a few years ago, franchising was not a priority for Luxottica. But after developing the model in North America it is testing the business in Australia with the goal to expand it “like never before” in the group's history.