The global eyewear industry is likely to contract by around 10 per cent, according to eyewear manufacturer Luxottica.
It announced a series of measures to drive sales and reduce costs including a 10 per cent reduction in the entry prices of its luxury and premium frames.Cost-cutting action will include making manufacturing reductions, closing stores, eliminating brands and makingcuts to advertising.
A company statement to analysts said that what the industry was seeing was 'not a temporary crisis, not a drastic and definitive change, but a global structural reset of the relevant market resulting in resizing by 10 per cent'.
Luxottica's announcement follows a drop in net income for the fiscal year 2008 of 17.6 per cent to €395m as well as a fourth-quarter decline in net income of 44.2 per cent to €54.1m, (see News, February 11, 2009).
The consequences for Luxottica's wholesale business will include a 15 per cent reduction in its eyewear manufacturing volume as well as the dropping of three low-performing brands and a reduction in the number of frame styles. The new strategy of releasing 'fewer but edgier styles' will include the release of Ray-Ban Tech, a new carbon fibre collection with a monoblock hinge.
Luxottica intends to reduce its capital expenditure by €100m from €300min 2008 to €200m in 2009.
Other cost reduction measures include the closure of 117 stores in North America and the franchising of another 56 stores. A further 110 retail units are also 'under review' according to Luxottica's chief executive officer, Andrea Guerra, who reported that the company is planning a 2-3 per cent reduction in its global store count.