LensCrafters 2005 Annual Report Download - page 26

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A cornerstone of its leadership, Luxottica Group’s distribution structure is one of the most extensive and
effective in the industry. It is a unique system embracing the Group’s own stores, a wholesale distribution
network and third-party retail brands and independently owned stores. The wholesale distribution network
covers over 130 countries, with direct operations in the 38 most important markets. The retail division operates
mainly in North America, Asia-Pacific and, since the second half of 2005, in China (thanks to the acquisition
of two retail brands in addition to the stores the Group already operated in Hong Kong), thus ensuring
improved distribution of products in the world’s key markets. Luxottica Group nearly 5,700 sun and optical
stores are mainly located in the United States, Canada, Australia, New Zealand, Singapore, Hong Kong and
China. In Europe, the Group’s retail presence is limited to approximately 100 Sunglass Hut stores, exclusively
focused in the sun segment and for the most part located in the United Kingdom. This robust distribution
structure is based on a fundamental strategic intuition that management had years ago, that increasing
control over distribution was key to future growth. Originally set up as a manufacturer of frames, Luxottica
Group has gradually integrated wholesale distribution into its structure and since 1995, retail distribution as
well. Thanks to this distribution network, the Group is now present in all of the world’s most important eyewear
markets for both wholesale and retail and, as a result, can closely monitor the development of the markets
with the greatest growth potential, ever ready to intervene and consolidate its presence.
RETAIL
Luxottica Group’s retail division operates the following retail brands:
• LensCrafters, Pearle Vision (own and franchise stores), Sears Optical, Target Optical and BJ’s Optical
in North America, where the Group is the leading retailer in both prescription and sun;
• OPSM, Laubman & Pank and Budget Eyewear in Australia and OPSM in New Zealand, which ensure
the Group’s leadership in this region;
• a network of 276 stores in China and Hong Kong, including Xueliang Optical and Ming Long Optical,
the two retail brands acquired in 2005;
• Sunglass Hut, the world’s leading specialty premium sun retail chain, with 1,849 stores mostly in North
America, Asia-Pacific and Europe.
2005 was a particularly good year for the Group’s retail business, both in terms of market share and
overall results.
In the United States, the Group’s main retail brands (LensCrafters, Sunglass Hut) continued to
consolidate their positions. The integration of Cole National’s retail distribution network successfully
continued and was completed at the operating level by year-end. Luxottica Group’s presence in the
North American market benefited from this operation not only in terms of additional stores but also in
overall reach and balance. The Group now controls the two leading retail brands in the optical segment
(LensCrafters and Pearle Vision) and is the leading operator of licensed brand optical departments
(Licensed Brands), a segment in which it hadn’t previously operated at all. Further, with EyeMed Vision
Care the Group is now the second largest administrator of managed vision care programs, a segment
of growing importance in the United States.
Regarding Asia-Pacific, following the completion in February 2005 of the tender offer for OPSM Group’s
remaining outstanding shares Luxottica Group now controls 100% of that company. Full integration of
these assets is particularly significant in that the Australian, New Zealand and South-East Asian markets,
where Luxottica Group can now enjoy a leadership position, are showing growth opportunities for the
short, medium and long term.
With the acquisition of two retail brands in China in 2005, Luxottica Group made a bold entry into a
market with an immense potential for growth and that it will require all of the Group’s capacity and
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