Luxottica Group SWOT & PESTLE Analysis

Strength

1. Strong Financial Performance: The revenue stands at €9,086 million with a growth of over 25% over the last five years. One trend which can be observed is the continuous growth of the bottom line i.e. the Net Income over the past couple of years. The net income is €851 million with the growth of nearly 6% year on year basis. This increasing trend shows the immense popularity of the brands under the Luxottica group.Income from operating activities increased to €867.9 million an approximate increase of 10.1% from 788.1 million in the first six months of 2016. This substantial improvement in the first 6 months shows group's growth despite the more challenging macroeconomic environment.

2. Diverse brand portfolio: The brand portfolio which has proprietary brands such as Ray-Ban, Oakley, Vogue etc and also licensed brands such as Giorgio Armani, Burberry, Chanel etc is a right mix of elegance and style. The portfolio appeals to many tastes of people and is well balanced between licensed brands and proprietary brands.

3. Market Leader: In January 2017, the company announced a merger with Essilor forming an entity whose market capitalization stands at €46 billion, making it the largest eyewear company in the world. Before the merger, the global market share of Luxottica was 14% and Essilor 13%. The synergy thus formed of two naturally complementary products, frames and lens will come under one roof and look to serve vision needs of 2.5 billion people all over the world. Also, the market share of the combined entity is expected to reach 30% after the merger is completed.

4. Strong supply and big network: An efficient distribution network helps the company to maintain close contact with its consumer as it maximizes visibility of the brand. The distribution mainly comprises of Wholesale chain and Retail chain network. As of December 2016, there were 7158 stores and 819 franchise stores.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

1. Consumer Preferences and consumerism: The business could be negatively impacted by the availability, accessibility, and acceptance of vision correction alternatives to prescription eyeglasses, like refractive optical surgery. Increase in use of such alternatives could result in decreased use of the prescription eyewear products impacting the sales of lenses which would lead to the reduction in the bottom line and have an adverse impact on the business and future prospects. Changes in the taste of consumer in terms of fashion also could affect the popularity and thus impact the overall business of the organization. Hence it is imperative that company should anticipate the demands of the consumer and respond the changing needs in order to thrive, failure to do so will adversely impact the operations and thus impacting the financial condition of the company.

2. Digitalization: The world is going digital and in order to address the prime segment of millennial, the company needs to give the consumer a digital experience. The online platform provides the consumer with the variety of options from style, material, lens colour etc. Hence Luxottica needs to chalk out an effective e-commerce strategy to tap into additional markets as the legacy business matures. The Company is continuously investing in evolving and improving its ecommerce sites, so that customers get a virtual window into their brand. Ray-Ban.com is the Group's omnipresent channel with its presence in 27 countries offering an expanding assortment of products, Virtual Try-On tool and the popular Ray-Ban Remix tool, which helps consumers customize their eyewear gadgets, right down to the smallest details. Apart from Ray-Ban.com, Oakley.com and SunglassHut.com are the two other Luxottica Group's potent e-commerce channels. The Company is also working on Persol and Vogue Eyewear as their digital channels which are currently in pipeline.

3. Investing in trending technology: A staggering 84% of Eye Care Professionals forecast that blue-light-barring lenses will spike sales in the coming two years as they recommend it to 41% of their patients, specially young and single-vision patients. Statistics show that blue light/digital eyewear sales have far outrun sun wear sales. This is a notable business trend for Luxottica to capitalize. Within sun wear, polarized product continues to lead the pack although sun wear with photo chromic lenses are also highly popular. Polycarbonate with a 74% share rules the roost where lens materials are concerned, followed by high index (45%), and CR 39 (44%). AR coating continues to hold ground as the premium lens treatment, up to 70% in 2016 from 63% in 2015. These are some of the trends Luxottica should investigate and customize merchandise and stocks accordingly.

Technological

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Legal

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Environmental

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References

1. Luxottica Group Annual Report 2016: https://www.luxottica.com/sites/luxottica.com/files/annual_review_eng_interattivo.pdf

2. Luxottica Group-Half Yearly Report 2017: https://www.luxottica.com/sites/luxottica.com/files/relazione_finanziaria_semestrale_2017_eng.pdf

3. Luxottica Group Annual Review 2016: https://www.luxottica.com/sites/luxottica.com/files/luxottica_group_relazione_finanziaria_annuale_2016_eng_0.pdf

4. Livemint: https://www.livemint.com/Companies/KixA8iLeApfvzDJvyb7GKP/Essilor-Luxottica-combines-share-in-Indias-eyewear-market.html

5. Reuters: https://www.reuters.com/article/us-luxottica-ceo/luxottica-ceo-exits-eyewear-giant-ahead-of-essilor-merger-idUSKBN1E92IB

6. CNN: https://money.cnn.com/2017/01/16/news/companies/glasses-merger-luxottica-essilor/index.html

7. International Monetary Fund: https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD