Milan bourse debutante keeps future firmly in its view


Did you notice that Italians always seem to wear sunglasses? It may have to do with the Mediterranean climate, but the fact is Italy accounts for about 66 per cent of the global market for luxury eyewear.

This enthusiasm for style has made Italy a world leader when it comes to the design, manufacture, marketing and distribution of luxury eyewear.

Much of that Italian eyewear industry is concentrated in the north-east, around the town of Belluno, an area where more than 150 eyewear firms employ 11,500 workers.

Largest of these companies is Luxottica, a multinational whose goods are marketed in 115 countries worldwide under a variety of well-known brand names such as Ray-Ban, Revo, Killer Loop, Persol, Vogue, Luxottica and Sferoflex. Furthermore, Luxottica's dominant market position is underlined by its production of designer lines for fashion houses such as Armani, Chanel, Genny, Brooks Brothers, Sergio Tachini, Bulgari, Moschino, Ferragamo, Ungaro and others besides.

Although the family-run Luxottica is primarily based in the small town of Agordo, in the foothills of the Dolomites near to Belluno, it has been quoted on the New York Stock Exchange since 1990.

With a market capitalisation of $6.1 billion (#6.9 billion), Luxottica has experienced 10 years of almost constant growth since that launch, with its share price growing at a yearly average of 30 per cent and its turnover growing at an annual 29 per cent. Turnover for the year 2000, incidentally, reached $1.53 billion in the third quarter of this year.

In the last decade, Luxottica further signalled its progress with the 1995 purchase of the US retail outfit, LensCrafters, which operates a chain of 861 stores in the US and Canada. That buy represented the largest American acquisition ever made by an Italian firm. Then just last year, Luxottica bought Bausch & Lomb's sunglass business, including the Ray-Ban and Killer Loop brands.

Given the above track record, it was hardly surprising that when Luxottica's chairman and company founder, Leonardo Del Vecchio (65) opted to "come home" last week, offering 10.3 million shares or 2.3 per cent of its capital on the Milan bourse, there was "considerable" market interest. Luxottica shares immediately soared more than the 10 per cent market ceiling, forcing their temporary suspension on their first day of trading.

By the end of a hectic first day, almost 1.5 million Luxottica shares had changed hands with the share value rising 6 per cent to #17.297 from #16.270.

Little wonder that Del Vecchio admitted the market response had been three times stronger than anticipated. But market analysts were less surprised, saying the company's remarkable returns over the last decade made it attractive.

But market uncertainty was on Del Vecchio's mind when analysing last week's launch in an interview with Milan-based daily, Corriere Della Sera, in which he repeated the firm's stated intention of offering a further 10-12 per cent of Luxottica's capital to institutional investors next year: "Our original intention was to float 12 per cent, which with the `green shoe' would have made it up to 14 per cent. But the current market turbulence forced us to change our minds. Remember, though, that 23 per cent of the company is quoted on Wall Street by way of ADRs [American depositary shares]".

That short interview was a rarity for the low-profile Del Vecchio, a man Forbes magazine rates the 56th most wealthy in the world. When he started up almost 40 years ago, he employed 14 people. Nowadays, Luxottica employs 22,000 worldwide in the manufacture, marketing and distribution of 2,700 models of prescription frames and sunglasses. The firm announced earlier this year that it was closing the former RayBan plant in Waterford with the loss of 91 jobs.

As far as Italy is concerned, Luxottica's future seems bright. Market analysts believe that next year's forthcoming share sale will make the stock a candidate to enter the benchmark or blue-chip, "Mib30" index.

On the day of Luxottica's Milan quotation, Del Vecchio confirmed company projections forecasting an annual growth rate of 10 per cent over the next few years, excluding both acquisitions and any plans for a capital increase.

But given the fast expanding nature of the Italian fashion and luxury goods industry, Luxottica is believed to be evaluating new acquisitions of companies and production plants in Italy.

One market analyst last week said: "It is only natural that a world group like this would look abroad but there are also good opportunities in Italy."

Indeed. Which reminds us. Perhaps in response to media demands, the soft-spoken Del Vecchio once published an official biography. The title? A Far-Sighted Man.