Italy’s Luxottica Group SPA is looking for a big payoff from its $2.1 billion buy of Foothill Ranch-based Oakley Inc. in November.
Luxottica, a seller of upscale glasses with $6.8 billion in 2007 sales, is looking to Oakley to help drive it to $8.7 billion in sales in 2009.
The forecast factors in growth for Oakley, which had about $1 billion in sales last year.
The expectations come as some company watchers worry about a slowdown at Luxottica amid a falloff in U.S. consumer spending. The company makes Ray-Ban sunglasses and runs the LensCrafters, Pearle Vision and Sunglasses Hut chains.
For the fourth quarter, Luxottica saw operating income fall 8% to $236 million, driven in part by a drop in retail sales before factoring in exchange rates.
“We have been experiencing some instability and for sure, some slowdown across North America,” Luxottica Chief Executive Andrea Guerra said at a February investors’ conference at Oakley’s Foothill Ranch headquarters.
Luxottica’s size and Oakley’s iconic brand should help the company, said Claire Armstrong Gallacher, an analyst with Caris & Co.
Oakley should be able to boost sales with the added backing of Luxottica for research and development and marketing, she said.
“Luxottica has deeper pockets,” Gallacher said. “They can help Oakley grow faster.”
Oakley, which makes sunglasses, glasses, goggles and clothes, is looking to come out with more men’s and women’s products, open more stores and expand its offering of custom glasses.
“We continue to build on initiatives that are already working,” Chief Executive Scott Olivet said at the investor conference.
Areas of Growth
Olivet, a former Nike Inc. executive who joined Oakley in 2005, helped the company expand beyond its trademark macho jock sunglasses by appealing to the more fashion savvy,particularly women.
Under Olivet, the company bought Los Angeles-based Oliver Peoples and Optical Shop of Aspen in Aliso Viejo.
“We kept the brand buzz,” Olivet said. “We drove excessive quarterly growth rates.”
In the third quarter, Oakley’s last as an independent company, it saw sales of $264 million, up 25% from a year earlier. Net income rose 37% to $23.7 million.
Oakley expects to see double-digit revenue growth this year, according to Olivet.
The company plans to come out with seven styles of sports glasses for men.
Glasses and clothes for women, a relatively new area for Oakley, should continue to grow, Olivet said.
Frames for prescription lenses are another big push,and a market that’s eight to 10 times larger than the sunglasses business, according to Olivet.
Oakley also plans to open 28 to 35 of its Oakley O stores and remodel about 13.
The company now has 83 U.S. stores and 38 shops abroad. About a quarter of Oakley’s sales are from its O stores, Olivet said.
Oakley also is looking to grow sales of custom glasses, where wearers pick the lenses, frames, sizes, logos and styles.
“We are living in a world where people want to make things their own and this is a way,” Olivet said.
To cut costs, Oakley plans to move manufacturing for Eye Safety Systems Inc.,a maker of goggles for soldiers and firefighters it acquired last year,to Foothill Ranch.
Warehousing and shipping for the line will move to Ontario.
