This year’s economic slump could shine a harsh light on dysfunctional
governance at the company behind Ray-Ban, Oakley and other sunglasses
brands. But shareholders will struggle to do much about it.Get more news
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EssilorLuxottica
said Tuesday that sales in the first quarter of 2020 fell by 11% at
constant exchange rates compared with the same period a year
earlier—weaker than analysts were expecting.
That said, it is
clearer than ever why French lensmaker Essilor and Italian sunglasses
business Luxottica, which struck a troubled merger in 2017, are better
off together. The prescription lenses division that generates 70% of
group revenue is more defensive than the sunglasses unit, which tends to
shine when the economy is strong. Delivery of cost savings from the
combination also looks to be on track.
A power struggle between
Luxottica’s formidable founder, Leonardo Del Vecchio, and Essilor
Chairman Hubert Sagnières rumbles on, however. The departure of
EssilorLuxottica’s co-CEO and co-CFO in March was the perfect
opportunity to simplify the management team. Instead, EssilorLuxottica
will stick with its cumbersome setup of two chairmen, two chief
executives and two finance bosses.
Uncertainty about who is really in
charge is unhelpful given the challenges ahead. The second quarter will
be more difficult than the first. EssilorLuxottica makes just 5% of
group sales in China, according to Bernstein estimates. Low exposure to
the world’s most important market for luxury goods means it won’t get
much benefit from any recovery in Chinese spending. With travel flows
depressed, the airport-dependent sunglasses business could remain a drag
for years.
The Wall