Let the sun into your portfolio with Luxottica

Most people will probably not have heard of the Italian listed Luxottica but it’s exactly the kind of company I like. It’s got a competitive advantage both in product as way of delivering it to their customers. I’m sure you will have heard of some of their brands. Luxottica is the market leader in optical glasses and especially sunglasses.

They sell through their own store formats (mainly Lenscrafters and Sunglass Hut) and also through wholesale.

Their own brand glasses include the famous Ray-Ban and Oakley brands as well as lesser known brands such as Persol, Vogue and Olivers Peoples. They hold the license to such brands as Chanel, Coach, Burberry, Tiffany, Prada, Versace, Stella Mcartney, Ralph Lauren and DKNY. They also have a letter of intent to start licensing Armani group brands from 2013.

By having such a large range of brands they are able to provide a wide offering to their retail outlets as well as to wholesale partners. Retail wise they own more than 6000 stores mainly under the Sunglass Hutt and Lenscrafters facias. They are the number 1 optical retailer in the US and Australia and they are also building a significant presence in China and Latin America where they have recently purchased a chain of 400 stores.

Financially it’s not cheap with a p/e of 20 on 2010 figures at the moment but I believe this company has great long term potential. There are plenty of growth channels especially in emerging markets. It also has a market leading position especially in the Sunglass sector. As the consumer class in the emerging markets opens up it will provide a big new market.