Luxottica will invest €225 million this year to expand and refurbish part of its global network of 5,700 stores. Under this program the group will open or refurbish nearly 1,000 stores, equally divided between optical and sunglass outlet.
New stores will result from openings or small acquisitions outside Europe, such as the purchase a couple of weeks ago of two sunglass retailers in South Africa for a total outlay of about €10 million. The retailers, Sunglass World and Occhiali for Sunglasses, have a combined 65 stores. Both transactions are expected to be closed in the second quarter of 2007.
Luxottica sees South Africa as a market offering opportunities from a growing tourist clientele as well as from local consumers. The two chains have locations in shopping centers in urban areas, including Johannesburg and Cape Town, and in airports.
The retail expansion plan also includes the 100 D.O.C stores purchased in February in the USA for $110 million. The company plans to turn half of these stores into Pearle Vision shops and the rest into LensCrafters. At the same time the LensCrafters chain will continue to roll out its new format in North America, where 51 stores were already converted in 2006 and a further 130 are due to be remodelled this year.
Coinciding with the introduction of Luxottica's new Polo Ralph Lauren and Burberry collections on its shelves, Lenscrafters will launch in April a fashion-focused advertising campaign with the theme ?Open Your Eyes to Fashion at LensCrafters.? The chain will also be more aggressive in the marketing of its contact lenses.
Meanwhile, Pearle Vision is in the process of launching a new advertising campaign of its own, skewed toward eye care and lens technology as it introduces eye exams using digital retinal imaging technology. It plans to roll out in the second quarter a new line of premium lenses costing more than $100 at retail.
Thanks to the integration of D.O.C and to new openings, Pearle Vision will have an additional 100 stores. A further 20 Pearle Vision stores could be opened this year through franchising licences. The company is willing to build up a franchising network but has so far been hamstrung by its information technology system.
The reorganization of Pearle Vision, which Luxottica took over in 2004 with the acquisition of Cole National, is still underway and the group continues to phase out sales of watches in its stores, while taking out its in-store laboratories to maximize their space, relying more on central laboratories which are being upgraded.
Luxottica will also close about 200 underperforming stores this year.
The group sees Sunglass Hut as its ?best brand for global expansion.? Transformed by Luxottica into a trendy unisex retailer from a previously male, sports and beach-oriented brand, it currently has more than 1,800 stores worldwide.
In North America Sunglass Hut will continue remodelling its store base, which is expected to be 55 percent upgraded by the end of the year, and to open more than 220 new points of sale, including dedicated shops in department stores.
The brand will aggressively expand elsewhere, with 10 store openings planned in Hong Kong this year, a franchising agreement for 50 stores in the Persian Gulf region and an entry into the Egyptian market, where it expects to have 50 stores eventually at some stage.
Sunglass Hut recently opened a flagship store in Reading, in the UK, where it expects one-third of its stores to be upgraded by the end of the year. The expansion drive should boost the chain's annual sales to over €1 billion in 2010 from a target of €800 million this year.
Luxottica claims that the Sunglass Hut brand is so successful that its new stores are generally immediately profitable. Nevertheless, to further increase the brand's appeal, Luxottica is rolling out a new store format which so far has only been applied to three outlets in the North America and to the Reading store.