Luxottica Group, S.p.A. (LUX)

LensCrafters. As of March 31, 2009, we operated a retail network of 1,137 LensCrafters locations worldwide (of which 962 locations are in North America and 175 are in China and Hong Kong) offering a wide selection of prescription frames, sunglasses, lenses and other optical products. LensCrafters is currently the largest optical retail chain in North America in terms of sales. LensCrafters stores sell not only Luxottica products, but also a wide range of lenses and optical products made by other suppliers. LensCrafters’ products include innovative lenses, such as FeatherWates® (lightweight, thin and impact-resistant lenses), DURALENS® (super scratch-resistant lenses), Advanced View ProgressiveÔ (free-form, digitally surfaced progressive lenses), Invisibles® (anti-reflective lenses) and MVP Maximum View Progressives® (multi-focal lenses without visible lines). Substantially all of our LensCrafters stores are located in high-traffic commercial malls and shopping centers, have an employed optometrist or an independent, licensed optometrist on site (thereby allowing the customer to have an eye examination on site), provide a large range of prescription eyewear choices and, in North America, include a laboratory, which enables us to provide the selected frame with prescription lenses to our customers in approximately one hour. When we acquired LensCrafters in 1995, LensCrafters had approximately 600 stores. Between 1995 and 1998, we opened new stores and acquired other retail chains, reaching over 850 stores in North America by 1999.

 

From 1999 to 2004, LensCrafters’ expansion focused primarily on further development of those stores opened between 1996 and 1998. We continue to evaluate potential retail expansion opportunities in North America through the acquiring of retail chains and opening of stores in areas where we are not already heavily represented and in other prime locations. Since the LensCrafters acquisition, we have improved the efficiency of LensCrafters stores by managing the inventory from our central worldwide distribution center in Italy. This has improved inventory service and allowed for a

 

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LensCrafters. As of March 31, 2008, we operated a retail network of 1,110 LensCrafters locations worldwide (of which 951 locations are in North America) offering a wide selection of prescription frames, sunglasses, lenses and other optical products. LensCrafters is currently the largest optical retail chain in North America in terms of sales. LensCrafters stores sell not only Luxottica products, but also a wide range of lenses and optical products made by other suppliers. LensCrafters’ products include innovative lenses, such as FeatherWates® (lightweight, thin and impact-resistant lenses), DURALENS® (super scratch-resistant lenses), Advanced View ProgressiveÔ (free-form, digitally surfaced progressive lenses), Invisibles® (anti-reflective lenses) and MVP Maximum View Progressives® (multi-focal lenses without visible lines). Substantially all of our LensCrafters stores are located in high-traffic commercial malls and shopping centers, have an employed optometrist or an independent, licensed optometrist on site (thereby allowing the customer to have an eye examination on site), provide a large range of prescription eyewear choices and, in North America, include a laboratory, which enables us to provide the selected frame with prescription lenses to our customers in approximately one hour. When we acquired LensCrafters in 1995, LensCrafters had approximately 600 stores. Between 1995 and 1998, we opened new stores and acquired other retail chains, reaching over 850 stores in North America by 1999.

 

From 1999 to 2004, LensCrafters’ expansion focused primarily on further development of those stores opened between 1996 and 1998. We continue to evaluate potential retail expansion opportunities in North America through the acquiring of retail chains and opening of stores in areas where we are not already heavily represented and in other prime locations. Since the LensCrafters acquisition, we have improved the efficiency of LensCrafters stores by managing the inventory from our central worldwide distribution center in Italy. This has improved inventory service and allowed for a more rapid supply of styles based on daily sales and inventory data. This has also increased the volume of our products available in LensCrafters stores. In addition, we have focused our promotional activities on those customers looking for a better purchase experience with high-quality products, rapid and efficient customer service and innovative lens and frame technology. As a result of these initiatives, LensCrafters’ net sales have increased significantly since 1995.

 

During the last few years, we have shifted LensCrafters to a more premium brand. During this time, we have added additional elements, such as a new premium store concept that is being adopted as stores are remodeled across North America, associate training, advertising and marketing, which together represent the premium brand and future direction of LensCrafters. With these new initiatives, we have seen the average transaction per customer grow.  LensCrafters is becoming known as one of the best places to purchase fashionable, designer prescription frames and sunglasses.  LensCrafters hopes to shorten the purchase cycle of typically two to three years with this new focus on prescription frames as fashion. LensCrafters is also working to increase its share of the contact lens market.  This initiative focuses on selected products (mostly national brand names) and more competitive pricing.  This new push for contact lenses is being supported through in-store displays, marketing and associate training.

 

As noted above, one of the most visible changes in LensCrafters’ shift toward a premium and stylish eyewear shopping experience is a new design for the stores, which is adopted in new and remodeled store locations across North America. The store design features elegant eyewear display boxes, wood flooring, fashion graphics, sleek decorative accents and artistic lighting fixtures. Every feature of the design directs the spotlight on the shopping gallery of designer eyewear collections, while the “fit and finish” stations are more private and separated from the shopping and frame selection. We have begun to display the eyewear collections by designer brand to help our customers shop for the style that is right for them.

 

In 2006, we began to expand the use of the LensCrafters name by rebranding certain retail locations to “LensCrafters” that we acquired as part of the acquisitions of three optical retailers in China, which had a combined total of 274 stores across Asia, including Hong Kong. Hong Kong is one of the most significant Chinese luxury markets where middle class and affluent mainland Chinese visit frequently to purchase luxury goods. Launching LensCrafters as a premium brand in Hong Kong was important for increasing awareness and consumer demand for our products and services. In September 2006, we launched LensCrafters in Beijing, beginning the re-branding strategy of our acquisitions.  By the end of 2007, we rebranded 165 locations in China and Hong Kong with the LensCrafters name. Based on the strategy for 2008, the remaining not yet rebranded stores will maintain the original brand name.

 

LensCrafters

 

Twelve years after joining Luxottica Group, LensCrafters now spans two continents with significant presence in the United States, Canada, China and HongKong. It is North America’s leading operator in the fashion eyewear segment, with 951 stores in the United States and Canada, and by the end of 2007, 140 stores were operating under the LensCrafters brand in China and Hong Kong.

 

LensCrafters. Through LensCrafters in North America, we operate a retail network of 902 locations which offer a wide selection of prescription frames, sunglasses, lenses and other optical products. LensCrafters is currently the largest optical retail chain in North America in terms of sales. LensCrafters stores sell not only Luxottica products, but also a wide range of lenses and optical products made by other suppliers. LensCrafters’ products include innovative lenses, such as FeatherWates® (lightweight, thin and impact-resistant lenses), DURALENS® (super scratch-resistant lenses), ByeLinesÔ (bifocal lenses without visible lines), Invisibles® (anti-reflective lenses) and MVP Maximum View Progressives® (multi-focal lenses without visible lines). Substantially all of our LensCrafters stores are located in high-traffic commercial malls and shopping centers, have an employed optometrist or an independent, licensed optometrist on site (thereby allowing the customer to have an eye examination on site), provide a large range of prescription eyewear choices and include a laboratory, which enables us to provide the selected frame with prescription lenses to our customers in approximately one hour.

We believe that our acquisition of LensCrafters in 1995 has allowed us to:

•                    obtain a significant competitive advantage for market share in the North American market; and

•                    enter a complementary segment that allows for a direct distribution to, and closer relationship with, the end customer.

When we acquired LensCrafters in 1995, LensCrafters had approximately 600 stores. Between 1995 and 1998, we opened new stores and acquired other retail chains, reaching over 850 stores in North America by 1999.

From 1999 to 2004, LensCrafters’ expansion focused primarily on further development of those stores opened between 1996 and 1998. We continue to evaluate potential retail expansion opportunities in North America through the opening of retail chains and stores in areas where we are not already heavily represented and in other prime locations. As of December 31, 2006, LensCrafters leased 902 retail stores in North America.

Since the LensCrafters’ acquisition, we have improved the efficiency of LensCrafters stores by managing the inventory from our central worldwide distribution center in Italy. This has improved inventory service and allowed for a more rapid supply of styles based on daily sales and inventory data. This has also increased the percentage of our products available in LensCrafters stores. In addition, we have focused our promotional activities on those customers looking for a better purchase experience with high-quality products, rapid and efficient customer service and innovative lens and frame technology. As a result of these initiatives, LensCrafters’ net sales have increased significantly since 1995.

During the last few years we have shifted LensCrafters to a more premium brand. During this time we have added additional elements such as a new store concept, associate training, advertising and marketing that together represent the premium brand and future direction of LensCrafters. With these new initiatives, we have seen the average transaction per customer grow.  LensCrafters is becoming known as one of the best places to purchase fashionable, designer prescription frames and sunglasses.  LensCrafters hopes to shorten the purchase cycle of typically two to three years with this new focus on prescription frames as fashion. LensCrafters is also working to increase its share of the contact lens market.  This initiative focuses on selected products (mostly national brand names) and more competitive pricing.  This new push for contact lenses is being supported through in-store displays, marketing and associate training.

One of the most visible changes in LensCrafters’ shift toward a premium and stylish eyewear shopping experience is a new design for the stores, which will be adopted in new and remodeled store locations across North America. The store design features elegant eyewear display boxes, wood flooring, fashion graphics, sleek decorative accents and artistic lighting fixtures. Every feature of the design directs the spotlight on the shopping gallery of designer eyewear collections, while the

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LensCrafters

Eleven years after joining Luxottica Group, LensCrafters is North America’s leading operator in the fashion and luxury eyewear segment, with 902 stores in the United States and Canada. In 2006, North American comparable store sales increased well above the chain’s historical average, while producing higher margins despite LensCrafters’ significant investments in its stores during the year. These results are due to both the growth trend enjoyed by the mid- to premium segment and the effectiveness of the strategies the Group has implemented.

Luxottica Group’s plan to strengthen LensCrafters’ high-end positioning, including focusing on customers interested in premium products, fashion and high-level service, was introduced with the opening of the flagship store on Fifth Avenue in New York. Inaugurated in April 2006 after a complete renovation and redesign of the store concept, based on extensive studies and market research, the new flagship store heralded a new concept and a quantum leap in quality.

Characterized by sophisticated interiors and a high capacity for product personalization, the new format targets sophisticated consumers who demand high quality of service. This type of customer is becoming increasingly important, partly due to LensCrafters’ communication campaign to target American consumers and its 2006 “Make an Appearance” ad campaign supporting the new store concept.

The opening of the New York flagship store, signaled by a prominent article in The New York Times, was followed up by the roll out of the new store design to approximately 50 stores across North America in 2006. LensCrafters’ results from these renovated stores in their first few months, through the end of 2006, were very encouraging. In fact, comparable store sales for these remodeled stores have been above the already high average.

A very strong performance was also seen in stores that had yet to be renovated. These stores continue to benefit from the Group’s ongoing investment in its store base.

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With a North American market firmly focused on rediscovering luxury and fashion products and related values, LensCrafters’ revamping of its brand image in 2005 along with its new store concept introduced in 2006 have enabled LensCrafters to continue to grow by leveraging the Group’s high-end brands. The introduction of the Dolce & Gabbana collections, followed by the launch of the new Burberry and Polo Ralph Lauren lines, will continue to strengthen the chain’s top-range positioning.

Sales of prescription frames and sunglasses produced by Luxottica Group, particularly its fashion and luxury brands, accounted for around 72% of total sales in 2006.

Lenses are another important dimension of LensCrafters’ expertise. Sales of anti-reflective lenses grew 24% in 2006. In late summer 2006, LensCrafters introduced FeatherWates® Complete Lenses made with Scotchgard™ Protector, an innovative product that is resistant to water, dirt and dust and does not require frequent cleaning. This product accounted for 64% of total anti-glare lens sales in 2006.

During 2006, lenscrafters.com was relaunched, reflecting a more fashion-oriented look, in keeping with the new store concept, and with a stronger focus on highlighting designer products and fashion expertise. The site also allows customers to schedule eye exams online.

2006 was a very positive year for LensCrafters in North America. The breadth of its investments in store remodeling, products and its website enabled LensCrafters to capitalize on favorable trends in the North American market and to cultivate the organic growth potential on which future development initiatives will concentrate.

In China and Hong Kong, 2006 was a year of reorganization and extension of the retail network. After the 2005 acquisition of the Xueliang Optical and Ming Long Optical chains, in November 2006 Luxottica Group acquired Modern Sight Optics, a leading chain in the premium prescription frame segment operating 28 stores in Shanghai. By the end of the year, the Group’s retail network in China and Hong Kong included around 274 stores, making it China’s leading optical and one of its biggest luxury retailers.

With the September opening of LensCrafters’ new flagship store in Beijing’s Oriental Plaza, an icon of fashion and shopping, Luxottica Group took the first step towards making the LensCrafters brand a synonym for prestige eyewear in China. LensCrafters offers the best of «Made in Italy» eyewear, an extraordinary level of customer service and the most advanced technology in the industry, thus positioning itself as the first real eyewear “boutique” in the Chinese market and serving as a benchmark for premium eyewear products.

Under this program, 75 stores, 55 in Hong Kong and 20 in China, were rebranded in 2006 to the LensCrafters brand, alongside those of the Xueliang, Modern Sight and Ming Long chains. An objective for 2007 is to significantly increase the number of LensCrafters stores in the Chinese market, both by converting existing stores and opening new stores.

In 2006, LensCrafters in China reported improved sales, and contributed, along with a general increase in the level of the brands, to the Group’s double-digit growth rate for stores in China and Hong Kong.

Luxottica Group’s focus in China is for the long-term, and it is strategically making its stores accessible to all consumers seeking a premium service experience and brands. At present, the Group is growing mainly in the eastern part of the country, where GDP is rising twice as fast as in the rest of China. The Group’s product lines will vary by segment as the market continues to evolve and as more of the population reaches middle-class status.

The format of the new LensCrafters stores aids in assessing the various brands across different segments of the market and analyzing relative performance and demand. The optical segment will continue to grow in line with the offering of fashion brands and products. The sun segment is another business opportunity as increasing numbers of Chinese view sunglasses as an important part of their wardrobe.

Store performance was particularly strong in Hong Kong, where all of the Group’s optical stores have been converted to the LensCrafters brand. LensCrafters stores reported high sales performance in line with that of stores in the United States and Australia. Luxottica Group’s premium brands, the high profile of its stores and its high level of service quality have been a great success, as reflected by its growing market share in Hong Kong.

LensCrafters. Through LensCrafters, we operate a retail network of over 893 locations which offer a wide selection of prescription frames, sunglasses, lenses and other optical products in the North American market. LensCrafters is currently the largest optical retail chain in North America in terms of sales. LensCrafters stores sell not only Luxottica products, but also a wide range of lenses and optical products made by other suppliers. LensCrafters’ products include innovative lenses, such as FeatherWatesÔ (lightweight, thin and impact-resistant lenses), FeatherWates Complete with ScotchgardÔ (thin, light, scratch and impact resistant, anti-reflective and easy-to-clean lenses), DURALENSÔ (super scratch-resistant lenses), ByeLinesÔ (bifocal lenses without visible lines), InvisiblesÔ (anti-reflective lenses) and “MVP Maximum View Progressives” (multi-focal lenses without visible lines). Substantially all of our LensCrafters stores are located in high-traffic commercial malls and shopping centers, have an employed optometrist or an independent, licensed optometrist on site (thereby allowing the customer to have an eye examination on site), provide a large range of prescription eyewear choices and include a laboratory, which enables us to provide the selected frame with prescription lenses to our customers in approximately one hour.

We believe that our acquisition of LensCrafters in 1995 has allowed us to:

•                    obtain a significant competitive advantage for market share in the North American market; and

•                    enter a complementary segment that allows for a direct distribution to, and closer relationship with, the end customer.

When we acquired LensCrafters in 1995, LensCrafters had approximately 600 stores. Between 1995 and 1998, we opened new stores and acquired other retail chains, reaching over 850 stores in North America by 1999.

From 1999 to 2004, LensCrafters’ expansion focused primarily on further development of those stores opened between 1996 and 1998. However, we will continue to evaluate potential retail expansion opportunities in North America through the opening of retail chains and stores in areas where we are not already heavily represented and in other prime locations. As of December 31, 2005, LensCrafters leased 893 retail stores.

Since the LensCrafters’ acquisition, we have improved the efficiency of LensCrafters stores by managing the inventory from our central worldwide distribution center in Italy. This has improved inventory service and allowed for a more rapid supply of styles based on daily sales and inventory data. This has also increased the percentage of our products available in LensCrafters stores. In addition, we have focused our promotional activities on those customers looking for a better purchase experience with high-quality products, rapid and efficient customer service and innovative lens and frame technology. In order to increase LensCrafters’ focus on sunglasses, we added a section, “one-third sun,” devoted only to sunglasses, in many stores. As a result of these initiatives, LensCrafters’ net sales have increased significantly since 1995.

During the last few years we have shifted LensCrafters to a more premium brand. During this time we have added additional elements such as a new store concept, associate training, advertising and marketing that together represent the premium brand and future direction of LensCrafters.

One of the most visible changes in LensCrafters’ shift toward a premium and stylish eyewear shopping experience is a new design for the stores, which will be adopted in new and remodeled store locations across North America. The store design features elegant eyewear display boxes, wood flooring, fashion graphics, sleek decorative accents and artistic lighting fixtures. Every feature of the design directs the spotlight on the shopping gallery of designer eyewear collections, while the “fit and finish” stations are more private and separated from the shopping and frame selection. We have begun to display the eyewear collections by designer brand to help our customers shop for the style that is right for them.

As part of the brand transformation, LensCrafters has rolled out a new style-focused magazine advertising campaign  to communicate the brand’s approach to eyewear style. The ads have appeared in more than two dozen premium fashion,

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lifestyle, cultural and entertainment magazines for women and men. Titled “Make an Appearance,” they are distinguished from other LensCrafters’ ads, using bold, engaging visuals to emotionally appeal to the fashion and style desires within eyeglass wearers.

LensCrafters.  Through LensCrafters, we operate a retail network of over 880 locations which offer a wide selection of prescription frames, sunglasses, lenses and other optical products in the North American market. LensCrafters is currently the largest optical retail chain in North America in terms of sales. LensCrafters stores sell not only Luxottica products, but also a wide range of lenses and optical products made by other suppliers. LensCrafters’ products include innovative lenses, such as FeatherWatesÔ (lightweight, thin and impact-resistant lenses), DURALENSÔ (super scratch-resistant lenses), ByeLinesÔ (bifocal lenses without visible lines), InvisiblesÔ (anti-reflective lenses) and “MVP Maximum View Progressives” (multi-focal lenses without visible lines). Substantially all of our LensCrafters stores are located in high-traffic commercial malls and shopping centers, have an employed optometrist or an independent, licensed optometrist on site (thereby allowing the customer to have an eye examination on site), provide a large range of prescription eyewear choices and include a laboratory, which enables us to provide the selected frame with prescription lenses to our customers in approximately one hour.

 

We believe that our acquisition of LensCrafters in 1995 has allowed us to:

 

•                  obtain a significant competitive advantage for market share in the North American market; and

 

•                  enter a complementary segment that allows for a direct distribution to, and closer relationship with, the end customer.

 

When we acquired LensCrafters in 1995, LensCrafters had approximately 600 stores. Between 1995 and 1998, we opened new stores and acquired other retail chains, reaching over 850 stores in North America by 1999.

 

From 1999 to 2004, LensCrafters’ expansion focused primarily on further development of those stores opened between 1996 and 1998. However, we will continue to evaluate potential retail expansion opportunities in North America through the opening of retail chains and stores in areas where we are not already heavily represented and in other prime locations. As of December 31, 2004, LensCrafters leased 888 retail stores.

 

Since the LensCrafters acquisition, we have improved the efficiency of LensCrafters stores by managing the inventory from our central worldwide distribution center in Italy. This has improved inventory service and allowed for a more rapid supply of styles based on daily sales and inventory data. This has also increased the percentage of our products available in LensCrafters stores. In addition, we have focused our promotional activities on those customers looking for a better purchase experience with high-quality products, rapid and efficient customer service and innovative lens and frame technology. In order to increase LensCrafters’ focus on sunglasses, we added a section, “one-third sun,” devoted only to sunglasses, in many stores. As a result of these initiatives, LensCrafters’ net sales have increased significantly since 1995.