Essilorluxottica sees glasses driving sales, profits to 2023 on growing demand

Growing demand for vision correction should boost sales of Ray Bans and other eyeglasses, EssilorLuxottica SA said on Wednesday, with profits also driven by cost cuts of up to 600 millions euros ($655.79 million) a year from 2022 following the merger of French lenses specialist Essilor and Italian spectacles maker Luxottica.

EssilorLuxottica is targeting mid-single digit sales growth at constant exchange rates for the next five years, it said in a presentation on the company website ahead of an investor day in London.

Investors and analysts including an activist U.S. hedge fund have been keen to learn how the company will achieve synergies and organize senior management after leadership battles hampered the 48 billion euro merger.

Adjusted net profit, which strips out acquisitions and other costs, would be equivalent to 1 to 1.5 times sales growth, the company said. In 2018, sales at EssilorLuxottica were up 3.2% at 16.1 billion euros.

EssilorLuxottica said it was “on track to achieve synergy targets”, putting forward some 160 dedicated projects involving more than 800 employees out of a global workforce of more than 150,000.

Supply chains of both companies are to be united while the network of laboratories are reshaped to improve efficiency. The company is also searching hire a CEO by 2020.

Synergies were at the core of the 48 billion euro merger of Essilor, known for its Varilux lenses, and Luxottica - the owner of brands such as Ray-Ban, Oakley or Persol.

The deal was presented in 2017 as a “merger of equals.” But the combination derailed into a row between Luxottica’s founder Leonardo Del Vecchio and Essilor’s Chief Executive Officer Hubert Sagnieres.

The sides reached a truce in May but the company still needs to find a new CEO. It has set a deadline for coming up with a name by the end of 2020, and must prove it can deliver on financial goals.

Another challenge lies ahead as the company signalled its intention in July to buy Dutch opticians group GrandVision for up to 7.2 billion euros in cash, a transaction expected to close by mid 2021.

Unhappy shareholders who argue that the corporate integration of Essilor and Luxottica is undermined by a “crisis of governance” could also voice concern in the months to come.

Reuters reported in August that Third Point, a U.S. hedge fund with some $15 billion in assets and known for pushing changes at companies where it invests money, had built a stake in EssilorLuxottica.