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Luxottica Becomes 'Neutral' for the Analysts

December 17 2002

Analisi Mercati Finanziari Radiocor (financial market analysts) has altered its assessment of Luxottica from Market performer to Neutral. After the divorce from Armani, analysts prefer to revise their judgment until they get a wider view of ongoing projects regarding negotiations with leading brands and the acquisition of a retail sales network. The change involved a new assessment of the group using the discounted cash flow method, which gave a target price of 16.54 euros (19.04 euros in the previous report) but nonetheless a higher figure compared to the latest quotations.

Desirable brands include Prada and Louis Vuitton, both in the De Rigo portfolio today. Despite denials by the two companies, this is the reason Luxottica's interest in the company owned by brothers Ennio and Walter still stands. Bertelli and De Rigo signed a joint venture for the production and sale of Prada eyewear. But the results of this shared project (called Eyewear International Distribution) appear to be lower than expected; in the first nine months of 2002 EID's total revenue fell by 15.7 percent to 20.9 million euros. Bertelli did not pick up the option of a 15% share in De Rigo.

Luxottica's more efficient and widespread distribution at global level could be exactly what's needed to tempt Prada and Lvhm. "We are very attractive on this level", pointed out Luxottica's CEO, Roberto Chemello, "in addition, the licenses market even for big names is certainly not stationary. We are looking at various dossiers, some concerning the acquisition of new licenses and others the expansion of the retail side".

Del Vecchio is also looking with interest at the retail sales market. Agordo's free cash flow is 350 million euros a year. In 2001 Luxottica acquired the Sunglass Hut chain (1900 outlets specializing in sunglasses), which joined LensCrafter taken over in 1996 and leader of the frames for reading glasses sector. The two companies represent almost 15 percent of the North American retail market and are also present in Great Britain and Australia (where 80 new openings are planned for 2003).

(Source: Il Sole 24 Ore)

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