Lux closing plant in Italy??

[Joann Raytar]

Today our Luxottica rep said they were closing down their plant in Italy. I wondered if anyone else has heard this or if I just mis-heard her.

[st.peter]

I am a securities analyst and know Lux quite well. they have 4 main production sites in Italy and their problem at the moment is capacity. I think you misheard.

[John R]

Originally posted by st.peter
They have 4 main production sites in Italy and their problem at the moment is capacity.

Is that under or over capacity though ?

And welcome to the board St.peter

[st.peter]

As far as I am aware capacity is becoming an issue (not enough of it). They remain the lowest cost producers in Europe but once Ray Ban manufacturing shifted to Italy they had to step up production in China for LensCrafters (you know, the product lines with fancy Italian-sounding names .....). Lux are looking for margin not topline growth at present and a market slowdown would actually benefit them in the medium-term. I sympathise with your US colleagues but they have to understand that LUX aims for 20% retail market share in the US - and they will get there.

[John R]

Peter, what sort of market share do they have here in the UK ?


Can you explain how the slow down will benefit them ? as the only thing i can see is, that if demand is out stripping supply so much at present that they are having to source from outside thus incuring more costs and the slow down would result in not having to do this.

[st.peter]

Exactly - available capacity is better utilised for Ray Ban and Persol than for the cheaper unbranded frames. Most of these are sourced in their Chinese plant anyway so a slowdown buys them time to decrease the product they still buy in. A buoyant market is clearly the better option but a stagnant one will lift their market share further quickly (economies of scale, ability to finance independent retailers, more aggressive pricing etc). The key here is vertical integration: just think what the margin on a pair of Ray Bans sold at Sunglass Hut will be !
I am not sure about their UK market share - I have heard 10-15% although this will grow quite a bit with Sunglass Hut. I know they have around 35% share in italy but only 3-5% in Germany.:bbg:

[John R]

Originally posted by st.peter
just think what the margin on a pair of Ray Bans sold at Sunglass Hut will be !

I dread to think, but a guess would be at least 2000% if not higher:D but i wont even look in their stores..