Sep 2, 2014
Luxottica overhauls management as CEO Guerra steps down
Sep 2, 2014
MILAN, Italy - Italy's Luxottica overhauled its top management structure on Monday after Chief Executive Andrea Guerra left due to rifts with Chairman Leonardo Del Vecchio, now set to play a more active role at the eyewear group.
The 79-year-old Del Vecchio, who owns 61 percent of the company he founded in 1961, should help ensure a smooth transition after Guerra's successful 10-year-long mandate. But investors say management succession needs to be addressed.
The maker of Ray-Ban sunglasses named 53-year-old Enrico Cavatorta, current chief financial officer and general manager, as co-chief executive. It is recruiting externally for another co-CEO who Cavatorta said could be in place by year end.
The co-CEOs will be part of an executive committee that will be led by the chairman and include, at least initially, a senior executive in charge mainly of production.
Some analysts are wary of this more complex governance model though there are examples, such as Swiss luxury group Richemont , of companies successfully managed by two co-CEOs.
"While we believe that Enrico Cavatorta is a manager of quality second to none, we remain nonetheless sceptical that this new structure will enhance corporate governance at Luxottica," Citi analysts said in a note.
"We doubt that three chiefs will be better than one, as eventually someone has to make the strategic decisions."
Cavatorta, who has been CFO since 1999 when he arrived from scooter maker Piaggio, said Del Vecchio's role was to make sure any differences of opinion between the two CEOs did not paralyse the company.
"If the two get along well of course his presence will be less and less necessary," Cavatorta told a press conference.
Under Guerra, 49, sales at Luxottica more than doubled to 7.3 billion euros, boosted in part by acquisitions, making it the world's biggest eyewear group. He will net 11.4 million euros on top of the regular severance pay, the group said.
Cavatorta told a press conference the strategy would not change and acquisitions, especially in emerging markets, would continue to be on the agenda. However, there would be a stronger focus on cost cuts and profit margins.
"The company will continue to be what it has always been. We hope for a solid (revenue) growth of at least 7 percent per year," Del Vecchio told reporters.
He added his ideas on Luxottica's future had clashed with those of Guerra. "I have some projects, he had other projects. Clearly we did not share the same view," he said.
Rumours that Guerra was leaving after falling out with Del Vecchio surfaced two weeks ago, and Luxottica said then the two had been debating the group's future strategy for some time.
Shares initially fell but have since recovered with analysts forecasting a strong second half for Luxottica as a weaker U.S. dollar will boost sales in North America, which account for 56 percent of the total.
"The dollar is finally helping and this is reason enough to hold onto the stock," said Roberto Lottici, a fund manager at Ifigest.
"Del Vecchio founded the group, knows it and cares about it. The succession issue is very clear to him and it wouldn't surprise me if recent events were setting the stage for this problem to be sorted out in one way or another," he added.
A source familiar with Del Vecchio's thinking said it should not be ruled out that in the future his eldest son could replace him as chairman of Luxottica.
Claudio Del Vecchio, 57, one of Del Vecchio's six children, is currently chief executive of U.S. clothing group Brooks Brothers and non-executive board member at Luxottica.
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