LensCrafters 2014 Annual Report Download

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Table of contents

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    Index Letter to shareholders 1. 2. 2.1 2.2 2.3 2.4 2.5 2.6 2.7 3. 4. Financial highlights Luxottica Group Profile Mission and strategy Over 50 years of excellence From design to logistics Brand portfolio Distribution Luxotticans Group trends in 2014 Other information 3 5 9 10 12 19 22 28 38 48 51...

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    Letter to shareolders to shareholders Leonardo Del Vecchio, Chairman Founder and of Luxottica Chairman of Luxottica 2

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    ... fundamental role in our growth strategy. Oakley, Ray-Ban, Vogue, Persol, Oliver Peoples and Alain Mikli are proving their strength and developing strong synergies with our licensed brands. The extraordinary debut of the first Michael Kors collection produced by Luxottica proves that there is still...

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    1. Financial highlights 5

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    2 0 14 A N N UA L R E V I E W Net sales (millions of Euro) Gross profit (millions of Euro) 2010 2011 2012 2013 2014 2010 2011 2012 2013 4,789 5,798 6,222 7,086 7,313 7,652 3,762 4,006 4,650 5,078 2014 net sales by geographic area Asia-Pacific 14% North America 56% Europe 20%...

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    1. F I N A N C I A L H I G H L I G H T S Operating income (millions of Euro) Net income (millions of Euro) 2010 2011 2012 2013 2014 2010 2011 2012 2013 545 705 797 970 1,056 1,158 398 446 534 643 2014 net sales by type of distribution 42% Wholesale 58% Retail 2014 7

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    2. Luxottica Group 2.1 Profile 2.2 Mission and strategy 2.3 Over 50 years of excellence 2.4 From design to logistics 2.5 Brand portfolio 2.6 Distribution 2.7 Luxotticans 9

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    ..., Vogue Eyewear, Persol, Oliver Peoples, Alain Mikli and Arnette. Licensed brands include Giorgio Armani, Burberry, Bvlgari, Chanel, Coach, Dolce & Gabbana, DKNY, Michael Kors, Paul Smith, Ralph Lauren, Prada, Starck Eyes, Tiffany, Tory Burch and Versace. The Group's wholesale distribution network...

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    2 .1 L u xo t t i c a g r o u p • p r o f i L e 11

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    ...50 years of experience - and its constant commitment to technological innovation, style and design, the study of changing lifestyles and the interpretation of fashion trends. Luxottica's long-term strategy is to continue to expand in the eyewear and eye care sectors by growing its various businesses...

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    ... and designers' interest in the emerging accessories industry led Luxottica to embark on its first collaboration with the fashion industry in 1988 by entering into a licensing agreement with Giorgio Armani. The Company followed LOGISTICS DISTRIBUTION WHOLESALE RETAIL CUSTOMERS QUALITY 13

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    2 0 14 A N N UA L R E V I E W Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod. 14

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    2 . 2 L u xo t t i c a g r o u p • M i s s i o n a n d s t r at e g y 15

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    ... (2007), Tiffany and Co. (2008), Tory Burch (2009), Coach (2012), Starck Eyes (2013), Armani (2013) and Michael Kors (2015). Moreover, in 1999 Luxottica acquired Ray-Ban, one of the world's best-known sunglasses brands. Through this acquisition the Company obtained crystal sun lens technology. In...

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    ... and distributing a new breed of eyewear for Google Glass and the multi-year R&D collaboration between Luxottica and Intel is aimed at fusing premium, luxury and sports eyewear with smart technology. Eyewear industry secular growth drivers The eyewear industry is a structurally growing market. It...

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    2.3 Over 50 years of excellence 19

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    ...1995 1998 1999 2000 2001 ACQUISITION OF PERSOL ACQUISITION OF RAY-BAN ENTRY INTO THE MANAGED VISION CARE BUSINESS IN US LISTING ON BORSA ITALIANA ENTRY INTO SUN RETAIL: SUNGLASS HUT ACQUISITION OF VOGUE LISTING ON NYSE ENTRY INTO OPTICAL RETAIL: LENSCRAFTERS ENTRY INTO AGREEMENTS WITH THE...

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    ... OF GLASSES.COM ACQUISITION OF ALAIN MIKLI SUNGLASS HUT EXPANSION IN SPAIN AND PORTUGAL STRENGTHENING LATIN ACQUISITION AMERICA OF TECNOL RETAIL IN BRAZIL: STARTING THE "MADE IN BRAZIL" JOURNEY FIRST STEP INTO RETAIL IN LATIN ACQUISITION AMERICA: OF OAKLEY GMO STARTING RETAIL EXPANSION IN CHINA...

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    .... During 2014, Luxottica added approximately 1,900 new styles to its eyewear collections. Each style is typically produced in two sizes and five colors. The design of the Group's products is the focal point where vision, technology and creativity converge. Each frame expresses Luxottica's two...

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    ... in Italy, China, India, the United States and Brazil, produced a combined total of approximately 83 million prescription frames and sunglasses. 1) mANUFACTURINg FOOTPRINT Six manufacturing facilities are located in Italy, which is at the center of Luxottica's luxury eyewear production, combining...

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    ... for this market. Between 2013 and 2014, the Company added the production of select Ray-Ban, Arnette and Oakley collections. In 2014, the Campinas plant produced approximately 50% of the eyewear sold by Luxottica in the Brazilian market. 2) TECHNOLOgY DIvERSIFICATION Over the years Luxottica has...

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    ...one in China, one in the United States and one in Brazil. Each lab is responsible for establishing and maintaining the quality standards in the region where it is located and supports activities in engineering, production and market feedback management. All of these labs conduct the same tests using...

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    ... then shipped to local customers. In addition, Sedico manages customized services, such as Ray-Ban Remix, providing direct global deliveries. The Dongguan hub was opened in 2006 and manages an average of 170,000 units per day. The growth in the Asia-Pacific region has made this hub a strategic part...

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    ... of thousands of counterfeit goods each year. Luxottica is a member of the major global anticounterfeiting organizations, including the International AntiCounterfeiting Coalition (IACC), the International Trademark Association (INTA) and the Quality Brands Protection Committee (QBPC). The Group...

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    ... distribution and direct retail operations supported by targeted advertising and experience in international markets, Luxottica's goal is to be the ideal partner for fashion houses and stylists seeking to translate their style and values into successful premium quality eyewear collections. Luxottica...

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    ... 2014 net sales. ray-Ban Lifestyle, authenticity and freedom of expression are the key values underpinning the philosophy of Ray-Ban, a leader in sun and prescription eyewear for generations. Debuting in 1937 with the Aviator model created for the American Air Force, Ray-Ban joined Luxottica's brand...

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    ...Luxottica's portfolio as measured by total sales. In 2014, sales realized through the Prada, Prada Linea Rossa and Miu Miu brand names together represented approximately 4% of total sales. Armani group Under license since 2013, the Armani Group includes the following collections: • gIORgIO ARmANI...

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    ... to become a leading American marketer of fine accessories and ready-to-wear for women and men. Under license since 2012, the Coach eyewear collection perfectly expresses the effortless New York style and authentic American heritage of the Coach brand. In 2013, the brand started its transformation...

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    2 0 14 A N N UA L R E V I E W Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod. 32

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    2 . 5 L u xo t t i c a g r o u p • B r a n d p o r t f o L i o 33

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    ... urban fashion", with modern design at accessible price. DKNY® is the perfect mix of style, quality and value, fashion and color. MICHAEL KORS Established in 1981, Michael Kors is an authentic contemporary fashion brand. Michael Kors eyewear, launched by Luxottica in 2015, offers a glamorous...

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    ... eyewear is an accessible expression of Ralph Lauren's spirit. Featuring the latest looks and trends in vibrant colors, as well as more classic looks, Ralph is all about young, fun, feminine style. STARCK EYES Starck Eyes, under license since 2013, joined Luxottica's licensed brand portfolio as part...

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    ... & CO. Founded in 1837 in New York City, Tiffany has a rich heritage filled with celebrated events, artists and milestones that live on today in legendary style. Luxottica was the first company licensed to produce Tiffany's eyewear collection, which takes inspiration from the most iconic jewelry...

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    2 . 5 L u xo t t i c a g r o u p • B r a n d p o r t f o L i o 37

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    ...- and post sale services to enhance their business. These services are designed to provide customers with the best products in the best possible time frame. Luxottica also maintains close contact with its distributors in order to monitor sales and the quality of the points of sale that display its...

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    ... eye care, eyewear and onsite labs to craft glasses in about an hour. Today, in terms of sales, LensCrafters is the largest optical retailer in North America. Most LensCrafters stores are located in high-traffic commercial malls and shopping centers. A wide array of premium prescription frames...

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    ...631 Prescription/Sun Prescription North America Prescription LensCrafters Pearle Vision (of which 380 are franchises) Sears Optical Target Optical Prescription/Sun Oliver Peoples (of which 1 is franchise) Alain Mikli The Optical Shop of Aspen ILORI Sun Sunglass Hut, Sunglass Icon Oakley "O" Stores...

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    ... franchises) 323 60 12 Asia-Pacific Prescription LensCrafters OPSM (of which 49 are franchises) Laubman & Pank (of which 16 are franchises) Prescription/Sun Oliver Peoples (all are franchises) Alain Mikli Sun Sunglass Hut (of which 66 are franchises) Oakley "O" Stores and Vaults (of which 19 are...

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    ...Ray-Ban and Vogue Eyewear. As of December 31, 2014, Luxottica operated 638 Sears Optical and 346 Target Optical locations throughout North America. opsM OPSM is a leading eye care and eyewear retailer in Australia and New Zealand with more than 80 years of history. Through its world-class technology...

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    ... an additional lab based in China dedicated to its North American optical retail. Leveraging the combined network capabilities, Luxottica lens operations reduce the time and cost to surface and finish lenses while improving the quality of service. All labs use state-of-the-art technologies to meet...

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    ... store location. As part of this strategy, the brand is investing in the digitalization of the "in-store" shopping experience, particularly in North America, Brazil, UK and Australia. As of December 31, 2014, Sunglass Hut operated a retail network of 3,008 stores worldwide, including 2,882 corporate...

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    ..., a premium optical retailer in Ireland and UK. The brand emphasizes service, quality and fashion. Its marketing is targeted to reinforce these brand values and build long-term relationships with customers. In addition to operating optical stores, David Clulow manages a number of designer sunglass...

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    2 0 14 A N N UA L R E V I E W 46

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    ...as important sales channels that complement Luxottica's retail operations and wholesale distribution. The websites drive brand awareness and allow consumers to purchase products efficiently, extending superior customer service into the digital space. Ray-Ban.com was launched in the United States in...

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    ... 13.3% Retail 61.2% 47,551 10,307 42,975 Asia-Pacific 22.7% 17,622 Corporate 0.6% 465 Europe 15.0% Operations 24.9% 19,441 11,670 Latin America 6.3% 4,907 Middle East & South Africa 0.7% 560 The elements on which the success of Luxottica and its Human Resource management strategy in 2014 were...

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    ... to provide and receive feedback and strengthen the Dialogue of Value culture. Among the different activities undertaken (ad hoc workshops, video tutorials, conversation cards to be used during manager-subordinate meetings, etc.), the Coaching Academy consists of an international training program...

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    3. Group trends in 2014 51

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    ... for Luxottica's brands and eyewear collections and supports the strength of the business in both traditional and new channels, such as department stores and e-commerce. The performance in Europe5 was positive overall, with increased net sales of 4.6% at constant exchange rates4 for the full year...

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    ...the year and Sunglass Hut's sustained growth worldwide. Operating income amounted to Euro 636 million, up by 9% from Euro 586 million in 2013, which translated into an operating margin of 14.1%2,3 (13.5% in 2013). In North America, total comparable store sales6 grew by 3.3% in 2014. LensCrafters, in...

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    ... I E W Adjusted operating income 2,3 by division (millions of Euro) 636 586 Sunglass Hut celebrated another sunny year with total sales up by 13.5% at constant exchange rates4 and global comparable store sales6 up by 7.4%, solidifying its position as the destination for luxury and premium/fashion...

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    ... year. For further information, please refer to the exchange rates table on page 144 of the Annual Report 2014 attached hereto as Annex 1. 5 At current exchange rates (i) net sales in Europe grew by 4.5% in 2014; (ii) net sales in emerging markets grew by 11.8% in 2014; (iii) net sales in China...

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    4. Other information 57

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    ...-2014 evolution of number of stores BRAND LensCrafters Pearle Vision Licensed Brands 2000 864 2001 868 2002 882 2003 877 2004 888 843 1,327 934 255 138 • • • Sears Optical Target Optical BJ's Optical The Optical Shop of Aspen Oliver Peoples (*) Sun North America (of which ILORI) "O" Stores...

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    ... n 2005 894 837 1,349 960 246 143 2006 902 840 1,358 941 264 153 2007 951 880 1,338 886 296 156 21 5 2008 966 809 1,204 879 325 24 6 1,719 16 98 4,826 540 210 141 16 907 161 244 70 39 8 2009 955 764 1,... 2013 958 596 1,061 726 335 17 1,934 18 163 4,729 453 349 30 832 379 237 122 37 679 36 2014 ...

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    ... 0 14 A N N UA L R E V I E W Share capital and dividend per share Number of shares authorized and issued as of December 31 1990 1991 1992 1993 1994 1995 1996 1997 1998 (2) 1999 2000 (2) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 45,050,000 45,050,000 45,050,000 45,050,000...

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    4 . L u xo t t i c a g r o u p • o t H e r i n f o r M at i o n 61

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    ...147 68,253 2000-2014 Luxottica share performance - MTA (Euro) Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Low 15.239 13....40.620 Closing 15.356 18.430 12.576 13.700 14.995 21.430 23.280 21.750 12.670 18.050 22.800 21.700 31.070 38.950 45.500 Year change 17.0%(3) 20...

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    ... ADS NYSE (USD) Dow Jones (rebased) S&P 500 (rebased) June 20, 2014 USD 60 58.73 55 50 45 40 35 30 25 20 15 10 November 7, 1990 USD 5 0.7938 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0 Ordinary share...

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    ... efficient distribution network, the ability to achieve and manage growth, the ability to negotiate and maintain favorable license agreements, the availability of correction alternatives to prescription eyeglasses, ï¬,uctuations in exchange rates, changes in local conditions, the ability to protect...

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    ... an eye exam and glasses. Since 1988, OneSight has partnered with local health organizations, governments, school districts, industry leaders, doctors and volunteers to help more than 9 million people in 41 countries. As OneSight's founding global sponsor, Luxottica provides annual operating support...

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    ... vision care for over one million people in 2014. The Gambia In the Gambia, OneSight has created four permanent Vision Centers, co-located in regional hospitals, as well as a central manufacturing lab in the capital of Banjul. For perspective, this West African nation previously had one optometrist...

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    ...based vision care program in the United States, giving year-round access to 30,000 students in Cincinnati Public Schools. In 2014, over 4,000 students received exams and 65% of those needed glasses. OneSight Collection by Luxottica The first OneSight Collection by Luxottica frames were distributed...

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    OneSight in 2014 USA Mexico Nicaragua Peru Brazil India Gambia South Africa 264,096 people helped in the world, changing their lives 75 programs in 13 countries

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    ... to have 10 locations open in 2016, following the success of the OneSight Vision Center at Oyler School, Ohio. • Use OneSight Collection by Luxottica frames for 85% of glasses dispensed. China Thailand Vietnam Indonesia Australia Permanent access to vision care for over 1 million people in 2014

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