LensCrafters 2011 Annual Report Download - page 107

| 31 >MANAGEMENT REPORT
of sales or increased costs of doing business and may have a material adverse effect on
business, results of operations, financial condition and prospects of the Group.
c) If vision correction alternatives to prescription eyeglasses become more widely
available, or consumer preferences for such alternatives increase, profitability of the
Group could suffer through a reduction of sales of its prescription eyewear products,
including lenses and accessories
Business of the Group could be negatively impacted by the availability and acceptance
of vision correction alternatives to prescription eyeglasses, such as contact lenses and
refractive optical surgery. According to industry estimates, over 39 million people wear
contact lenses in the United States, and the disposable contact lens market is the fastest
growing segment of the lens subsector. In addition, the use of refractive optical surgery has
grown in the United States since it was approved by the US Food and Drug Administration
in 1995.
Increased use of vision correction alternatives could result in decreased use of prescription
eyewear products of the Group, including a reduction of sales of lenses and accessories
sold in Group retail outlets, which could have a material adverse impact on its business,
results of operations, financial condition and prospects.
d) Unforeseen or catastrophic losses not covered by insurance could materially adversely
affect the Group’s results of operations and financial condition
For certain risks, the Group does not maintain insurance coverage because of cost and/
or availability. Because the Group retains some portion of its insurable risks, and in some
cases self-insure completely, unforeseen or catastrophic losses in excess of insured limits
could materially adversely affect its results of operations and financial condition.
RISKS RELATING TO GROUP BUSINESS AND OPERATIONS
e) If the Group is unable to successfully introduce new products and develop its brands,
its future sales and operating performance may suffer
The mid– and premium-price categories of the prescription frame and sunglasses
markets in which the Group competes are particularly vulnerable to changes
in fashion trends and consumer preferences. The Group’s historical success is
attributable, in part, to its introduction of innovative products which are perceived
to represent an improvement over products otherwise available in the market and
its ability to develop its brands, especially its Ray-Ban and Oakley house brands.
Group future success will depend on its continued ability to develop and introduce
such innovative products and continued success in building its brands. If the Group
is unable to continue to do so, its future sales could decline, inventory levels could
rise, leading to additional costs for storage and potential write-downs relating to the
value of excess inventory, and there could be a negative impact on production costs
since fixed costs would represent a larger portion of total production costs due to
the decline in quantities produced, which could materially adversely affect its results
of operations.