Bryan, Garnier & Co publishes a new Research Report on Consumer Durables
US: an emerging market?
In our first report on emerging Optics markets last December, we forgot to include one: the US! It is remarkable to note that all optics players consider the US as a genuine emerging market, both in prescription eyewear and sunglasses. This is another example of the outstanding growth potential harboured in the global Optics market. In this report, we have increased our Fair Values for Essilor (EUR96 vs. EUR85) and Luxottica (EUR44 vs. EUR41) after updating our market assumptions.
- The US market paradox: the leading global Optics market, but also an emerging market. Indeed, the US market remains under-penetrated in advanced technologies for corrective lenses (penetration rate for anti-reflection lenses: 37% vs. 95% in China!) due to technological delays at prescription laboratories which have not invested sufficiently in state-of-the-art equipment such as digital surfacing. The sunglasses market is also emergent in the US since 80% of sunglass purchases carry price tags of around USD50 (vs. EUR100 in Europe), given that distribution is dominated by mass retailing and customers are still fairly insensitive to brands.
- The US is set to become the largest contributor to growth at our groups alongside emerging markets. Although it is already the leading market for Essilor (~40% of sales) and above all, Luxottica (58% of sales), growth potential remains significant. Essilor is trying to catch up the technological lag by buying and then updating prescription labs in order for them to offer the latest innovations, while Luxottica is developing upscale retailing either via its own banners (LensCrafters, Sunglass Hut), or via department stores and travel retail. These strategies contribute to the value effect in the US market and to boosting growth levels at our groups.
- After a mixed Q1 13 in terms of sales performance, an acceleration is likely as of Q2 for Essilor and Luxottica. In addition to the demanding comparison with the year-earlier period that we were expecting, the two leaders also suffered from disadvantageous weather conditions and a negative calendar effect. In contrast, the two groups both confirmed a sharp recovery in April, confirming less demanding comparison and still very positive momentum in emerging markets. Essilor is also set to benefit from certain major innovations (Varilux S series, Crizal Prevencia…) whereas Luxottica can rely on Giorgio Armani and Oakley to ensure that 2013 is just as dynamic as 2012.
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