Oakley Announces Structural Changes as Final Move by Luxottica’s Organizational Streamlining

Oakley

Oakley’s Marketing, Operations, & Retail Departments Move Out of Foothill Ranch HQ & Towards Consolidated Offices Under Luxottica’s Streamline Efforts

This morning–July 26, 2016–Oakley’s earnings call announced heavy structural changes impacting their Foothill Ranch, Calif. headquarters. Oakley’s parent company, Luxottica, announced stronger global integration with the eyewear brand’s distribution, retail, and marketing infrastructure. This high-level integration effort coincides with Luxottica’s new business model for Oakley called “Oakley Sport channel.” According to the call, Luxottica’s Ohio offices will be HQ for all of Oakley’s retail operations, while the New York office will own all wholesale, and marketing efforts will be consolidated out of the office in Milan, Italy. Oakley will share these services with Luxottica’s higher end brands like Ray-Ban, Dolce & Gabbana, and Oliver Peoples.

In addition to marketing and distribution consolidation, Oakley’s “O” stores will also report directly to Luxottica’s Ohio and New York offices. Massimo Vian, CEO of Product and Operations for Luxottica, said on the call that “brand activities will be more and more coordinated by our Milan main office," supporting Oakley’s marketing shift to Luxottica’s main headquarters.

Other takeaways include:

  • Oakley’s R&D and engineering departments will remain in Oakley’s Foothill Ranch office. Luxottica is looking at this Southern California office as Oakley’s “epicenter.” Infrastructure investments for the Foothill Ranch HQ have doubled in the past year. According to Vian, this makes the Oakley office the most advanced automated factory out of the Group.
  • The recoil of Oakley’s AFA business, including pulling back on the apparel, footwear, and accessories collections. "The apparel, footwear, and accessories product offering will be simplified. You will see immediate effects in Spring 2017 collections," said Vian.
  • Oakley will also institute a mandatory MAP (Minimum Advertised Price) policy under the streamline efforts, “a necessary action to protect the equity of Luxottica's proprietary brands." This MAP policy imposes restrictions on resellers trying to sell Oakley product at discounted costs. These “discount costs” must be approved by the Group.
  • Oakley will introduce two new product innovations at the Olympics in Rio next month–The RadarPace eyewear with sports tracking and voice-activated coaching capabilities, as well as their Green Fade sports eyewear collection.
  • Luxottica announced net income up in the first part of 2016 and a record free cash flow generation to €403 million.

According to Luxottica’s press release, below are the adjusted and reported figures as of July 25, 2016:

Adjusted figures

  • Group's  adjusted net sales +1.6% to approximately Euro 4,828 million at constant exchange rates  and -0.7% to Euro 4,719 million at current exchange rates
  • Adjusted operating income +1.5% to approximately Euro 892 million at constant exchange rates  and -2.5% to Euro 857 million at current exchange rates
  • Adjusted net income +5.6% to approximately Euro 554 million at constant exchange rates  and n+1.3% to Euro 532 million at current exchange rates

Reported figures

  • Group's  net sales +3.5% to approximately Euro 4,828 million at constant exchange rates  and +1.1% to Euro 4,719 million at current exchange rates
  • Operating income -4.1% to approximately Euro 823 million at constant exchange rates  and – 8.2% to Euro 788 million at current exchange rates
  • Net income -1.4% to approximately Euro 498 million at constant exchange rates  and -5.8% to Euro 476 million at current exchange rates

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