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

Sunglass Hut. With the acquisition of Sunglass Hut in 2001, we became the world’s leading specialty retailer of sunglasses based on sales. As of March 31, 2009, Sunglass Hut had 1,562 retail locations in North America, 212 in Asia-Pacific, 81 in Europe, 56 in South Africa and 33 in the Middle East. Sunglass Hut operates in-line stores and kiosks in shopping malls, as well as stores in street centers on high-traffic streets and in airports. We have increased sales of Luxottica-manufactured products at Sunglass Hut locations from approximately 14.3 percent of total Sunglass Hut net sales in April 2001 (the first month following the acquisition) to 81 percent in December 2008, including Oakley products.  In addition to sunglasses that we manufacture, Sunglass Hut continues to sell a variety of frames manufactured by third-party vendors, including Maui Jim, Safilo, Bushnell, Spy and others.  Although we buy products from third parties, we do not believe that the loss of any one supplier would have a significant impact on our future operations as we could easily replace lost supply with other sunglasses manufactured by us or other third-party vendors. After the acquisition of Sunglass Hut and Cole, we consolidated the administrative and certain other functions of these businesses with our existing business to allow significant synergies between sun and optical retail operations. Sunglass Hut outlets are located mostly in enclosed malls and airports with an average retail space of approximately 400 square feet per kiosk/store.

 

In 2007, we completed the acquisitions of two prominent specialty sun chains in South Africa, for a total of 65 stores, which were rebranded to Sunglass Hut stores in 2008. Both chains have prominent locations in shopping centers in urban areas, including Johannesburg and Cape Town, as well as attractive airport locations.

 

Today, the Sunglass Hut brand is positioned as a key destination for premium sunglasses.  Sunglass Hut offers the latest name-brand products along with outstanding customer service to help customers “find their cool.”

 

Sunglass Hut. With the acquisition of Sunglass Hut in 2001, we became the world’s leading specialty retailer of sunglasses based on sales, and a specialty retailer of popularly priced watches. As of March 31, 2008, Sunglass Hut had 1,567 retail locations in North America, 288 in Australia, New Zealand and South Africa, and 115 in the Middle East and Europe. Sunglass Hut operates in-line stores and kiosks in shopping malls, as well as stores in street centers on high-traffic streets and in airports. We have increased sales of Luxottica-manufactured products at Sunglass Hut locations from approximately 14.3 percent of total Sunglass Hut net sales in April 2001 (the first month following the acquisition) to 69.4 percent in December 2007, including Oakley products.  In addition to sunglasses that we manufacture, Sunglass Hut continues to sell a variety of frames manufactured by third-party vendors, including Maui Jim, Inc. and others.  Although we

 

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Sunglass Hut

 

Sunglass Hut is the world’s largest and most important specialty sun retailer, with 2,003 stores (1,600 in North America, 219 in Australia, New Zealand and Singapore, 87 in Europe. In addition to the 23 stores in Middle East, Sunglass Hut opened in 2007 six stores in Hong Kong, and has now a national presence, thanks acquisitions made, in South Africa, with 67 stores currently being rebranded. In the eyes of consumers, Sunglass Hut increasingly represents fashion and the latest trends. Founded in 1971, initially only inside department stores in the United States, Sunglass Hut has cultivated a young, active and fashion-conscious image. It is now the leader in the high-end sun retail market.

 

While 2006 saw the completion of the brand repositioning process, 2007 was characterized by the ongoing conversion of stores to a new format, the aim being to further refine Sunglass Hut’s image for fashion conscious consumers. Thanks to this gradual move up-market and increasing appeal to fashion-conscious women, sales have risen 40% over the last three years on a comparable store basis.

 

In the United States, Sunglass Hut further expanded with 199 new store openings and a restyling of another 249, mainly in the key states of California, Florida, Texas and New York. Fashion products were popular, driven mainly by oversized designer sunglasses and by the launch of new brands: Dolce & Gabbana in 300 stores and D&G in 1,300 stores.

 

In Australia and New Zealand, Sunglass Hut strengthened its positioning and secured a number of stores at major airports. Its market presence in the fashion and luxury segment grew, with the largest increase in the luxury brands. Brand awareness improved significantly, especially amongst women in the 25- to- 39 age bracket.

 

In Europe, Sunglass Hut has nearly 90 stores, mostly in the UK and notably in the country’s major airports. In 2007, it continued with its brand repositioning process by rolling out the new store design, improving product mix, stepping up personnel training and cultivating the image of a truly customer-focused retailer. Such efforts attracted more fashion conscious customers and fueled sales of premium and luxury products of special appeal to women. Further improvements will be made in 2008 with a focus on airports; for example, a new store will open in Heathrow’s Terminal 5. A strong brand campaign to consolidate Sunglass Hut’s focus on the consumer will be launched in 2008.

 

Sunglass Hut. With the acquisition of Sunglass Hut in 2001, we became the world’s leading specialty retailer of sunglasses based on sales, and a specialty retailer of popular priced watches. Sunglass Hut has 1,818 retail locations located throughout North America, Europe and Australia. Sunglass Hut operates in-line stores and kiosks in shopping malls, as well as stores in street centers in high-traffic streets and in airports. We have increased sales of Luxottica-manufactured products at Sunglass Hut locations from approximately 14.3 percent of total Sunglass Hut net sales in April 2001 (the first month following the acquisition) to 69 percent in December 2006. In addition to sunglasses that we manufacture, Sunglass Hut continues to sell a variety of frames manufactured by third-party vendors, including Oakley, Maui Jim, Inc. and others. Oakley is our largest third-party supplier, accounting for approximately 6.8 percent, 4.9 percent and 5.7 percent of our total merchandise purchases from suppliers in 2004, 2005 and 2006, respectively. See Item 4—“Information on the Company—Recent Developments—Acquisitions.” Although we buy products from third parties, including Oakley, we do not believe that the loss of any one supplier would have a significant impact on our future operations as we could easily replace lost supply with other sunglasses manufactured by us or other third-party vendors. After the acquisition of Sunglass Hut and Cole, we consolidated the administrative and certain other functions of these businesses with our existing business to allow significant synergies between sun and optical retail operations. Sunglass Hut outlets are located mostly in enclosed malls and airports with an average retail space of approximately 400 square feet per kiosk/store.

In the second quarter of 2007, we completed the acquisitions of two prominent specialty sun chains in South Africa, for a total of 65 stores, which will be converted into Sunglass Hut stores. Both chains have prominent locations in shopping centers in urban areas including Johannesburg and Cape Town as well as attractive airport locations.

Sunglass Hut

Sunglass Hut is the world’s largest specialty sun retailer, with 1,502 retail locations in North America, 224 in Australia, New Zealand and Singapore, and 92 in Europe. In the eyes of consumers, Sunglass Hut increasingly represents fashion and the latest trends. Founded in 1971, initially only inside department stores in the United States, Sunglass Hut has cultivated a young, active and fashion-conscious image. It is now the leader in the high-end sun retail market.

In 2006, Sunglass Hut completed its brand repositioning with the goal of capturing more fashion-minded consumers. The results of this process, which started in 2001 following the Group’s acquisition of Sunglass Hut, have been a key contributor to the chain’s excellent performance over the last two years. The repositioning effort has also solidified the chain’s foundation for future growth. In general, 2006 was a year of strong improvement for Sunglass Hut.

Concentrating increasingly on fashion and luxury, and with a special focus on fashion-sensitive women, Sunglass Hut’s sales, on a same store basis, rose nearly three times the average growth in retail sales in the United States.

In the United States, Sunglass Hut further expanded with 90 new store openings and a restyling of another 153 stores, mainly in the key states of California, Florida, Texas and New York. In 2007, an additional 120 stores will be remodeled. Fashion products were popular, driven mainly by oversize designer sunglasses and by the launch of two new brands: Dolce & Gabbana in 300 stores and D&G in 1,300 stores.

In Australia and New Zealand during 2006, Sunglass Hut strengthened its position by acquiring 50 stores and securing a number of stores at major airports. Its market presence in the fashion and luxury segment grew, with the largest increase occurring in the luxury brands, where sales rose 79%. Brand awareness rose from 52% to 60%, with women in the 25-to-39-age bracket accounting for much of this improvement.

Strengthened by these results, Sunglass Hut plans to expand in Southeast Asia and Hong Kong, early in 2007. Sunglass Hut is already operating five stores in major shopping centers in Singapore.

In Europe, Sunglass Hut has 92 stores in the UK. In 2006, it initiated a significant reorganization of its network and business plans to improve its brand positioning. The store format was redesigned, stores were moved to more favorable locations, preferably in airports, city high streets and shopping centers, and the product mix was improved. This process gave a strong boost to Sunglass Hut’s sales, especially in the luxury segment, with sales above the general retail average in the UK. Expansion plans contemplate ten new store openings per year for the next three years.

Sunglass Hut. With the acquisition of Sunglass Hut in 2001, we became the world’s leading specialty retailer of sunglasses based on sales, and a world leader in specialty retailing of popular priced watches based on sales. Sunglass Hut has about 1,850 retail locations located throughout North America, Europe and Australia. Sunglass Hut operates in-line stores and kiosks in shopping malls, as well as stores in street centers in high-traffic streets and in airports. We have increased sales of Luxottica-manufactured products at Sunglass Hut locations from approximately 14.3 percent of total Sunglass Hut net sales in April 2001 (the first month following the acquisition) to 61.9 percent in December 2005. In addition to sunglasses that we manufacture, Sunglass Hut continues to sell a variety of frames manufactured by third-party vendors, including Oakley Inc., Maui Jim, Inc. and others. Oakley Inc. is our largest third-party supplier, accounting for approximately 8.7 percent, 6.8 percent and 4.9 percent of our total merchandise purchases from suppliers in 2003, 2004 and 2005, respectively. Although we buy products from third parties, including Oakley Inc., we do not believe that the loss of any one supplier would have a siginificant impact on our future operations as we could easily replace lost supply with other sunglasses manufactured by us or other third-party vendors. After the acquisition of Sunglass Hut, we consolidated the administrative and certain other functions of the Sunglass Hut business with our LensCrafters operations allowing us to realize significant synergies between the two optical retailing companies. As of December 31, 2005, Sunglass Hut operated an aggregate of 1,849 outlets throughout North America, Europe and Australia. Sunglass Hut outlets are located mostly in enclosed malls and airports with an average retail space of approximately 500 square feet per kiosk/store.

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Sunglass Hut.  With the acquisition of Sunglass Hut in 2001, we became the world’s leading specialty retailer of sunglasses based on sales, and a world leader in specialty retailing of popular priced watches based on sales. Sunglass Hut has over 1,850 retail locations located throughout North America, Europe and Australia. Sunglass Hut operates in-line stores and kiosks in shopping malls, as well as stores in street centers in high-traffic streets and in airports. We have increased sales of Luxottica-manufactured products at Sunglass Hut locations from approximately 14.3 percent of total Sunglass Hut net sales in April 2001 (the first month following the acquisition) to 58.5 percent in December 2004. In addition to sunglasses that we manufacture, Sunglass Hut continues to sell a variety of frames manufactured by third-party vendors, including Oakley Inc., Maui Jim, Inc. and others. Oakley Inc. is our largest third-party supplier, accounting for approximately 11.8 percent, 8.7 percent and 6.8 percent of our total merchandise purchases from suppliers in 2002, 2003 and 2004, respectively. After the acquisition of Sunglass Hut, we consolidated the administrative and certain other functions of the Sunglass Hut business with our LensCrafters operations allowing us to realize significant synergies between the two optical retailing companies. As of December 31, 2004, Sunglass Hut operated an aggregate of 1,858 outlets throughout North America, Europe and Australia. Sunglass Hut outlets are located mostly in enclosed malls and airports with an average retail space of 526 square feet per kiosk/store.

 

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