LensCrafters 2006 Annual Report Download - page 28

>28 | ANNUAL REPORT 2006
One of Luxottica Group’s main strengths is its ability to offer pre- and post-sales services which
have been developed and continuously improved over decades. These high-quality services are
designed to provide customers with the best products in a timeframe and manner that best
enhance their value. The distribution system is connected at the international level to a central
production planning a network linking logistics and sales functions and outlets to the manufacturing
plants in Italy and China. Through this network, global sales and inventory are monitored daily and,
based on the information from the market, production resources and inventory levels are adjusted.
This integrated logistics system is one of the most efficient and fastest in the industry. In Asia,
Europe and the United States, centralized distribution centers over the years have significantly
improved distribution speed and efficiency. Luxottica Group is thus able to provide its customers
with a highly-automated system for order management that reduces delivery times and minimizes
inventory while providing high-quality products.
RETAIL
Luxottica Group’s retail division includes:
•LensCrafters, Pearle Vision (owned and franchise stores), Sears Optical, Target Optical and BJ’s
Optical in North America, where the Group is a leading retailer in both prescription and sun
eyewear;
•Anetwork of approximately 270 stores in China and Hong Kong, where the LensCrafters brand
was launched in September 2006;
•OPSM, Laubman & Pank and Budget Eyewear stores in Australia and New Zealand, where the
Group leads the region with 527 stores; and,
• Sunglass Hut, the world’s leading specialty premium sun retail chain, with 1,818 stores located
mostly in North America, Asia-Pacific and the UK.
2006 was an important year for the retail division, which continued its long run of strong results. With
an excellent performance by the retail division’s store chains, especially LensCrafters and Sunglass
Hut, the contribution from the OPSM chain in Australia and the ongoing remodeling of the store
base, retail sales reached Euro 3.3 billion, a 7.6% increase from 2005. Comparable store sales (1)
rose 6.7%. Operating income increased to Euro 431.5 million, up 21.5% from 2005.
In 2006, the Group initiated a major investment plan for its stores to strengthen the foundation for
additional growth. Approximately 510 stores were remodeled and about 570 new and acquired
stores were added.
In 2007, Luxottica Group plans to make ongoing investments in its store base of Euro 225 million
so that it is well-positioned to take advantage of retail growth opportunities. The 2007 investment
plan provides for the renovation of 480 stores worldwide as well as the addition of over 500 new
stores. In North America, the Group will focus on Sunglass Hut, with plans for around 60% of its in-
line stores to be either new or recently remodeled by the end of 2007, and LensCrafters, whose new
store format was a factor in its excellent 2006 results.
Luxottica Group’s operations in North America expanded in 2006, while sharpening their focus and
fostering innovation. The Group controls the two largest chains in the prescription segment, LensCrafters
and Pearle Vision, and is the largest operator of optical stores under license (Licensed Brands). The retail
division strengthened its presence by acquiring D.O.C Optics, an optical chain with 100 stores in
the Midwest United States, particularly in the Detroit, Michigan area, and with sales of around US$
100 million.
(1) Comparable store sales reflect the change in sales from one period to
another that, for comparison purposes, includes in the calculation only
stores open in the more recent period that also were open during the
comparable prior period, and applies to both periods the average
exchange rate for the prior period and the geographical area.