In unrelenting pursuit of double digit EPS growth for fiscal year 2007, it was announced Friday March 23, that Luxottica Group (NYSE:LUX) had acquired two South African eye wear chains. The reported total expenditure for the dual purchases was $13.4 million. Luxottica says the acquisition fits snugly into the company's strategy of maintaining market dominance, increasing cash flow generation and staying ahead of the eye wear industry growth curve.
Andrea Guerra, Luxottica Group's chief executive officer said that nearly two thirds of the world's population is just beginning to explore the fashion eye wear market. The drivers in the market can be divided into: 1) People attempting to express individuality through choices made in fashion eye wear has never been stronger. 2) As people in emerging economies come to realize the simplicity of vision enhancement through eye wear, they are also coming to grasp the realities of personal expression that fashion eye wear choices can make. 3) As baby-boomers age, there is an ever increasing pool of new clients who are visiting fashion eye wear stores for the very first time.
The South African acquisitions by Luxottica take a step directly into one other aspect of these market trends. South Africa is coming to be recognized as an increasingly desirable travel destination. The Luxottica purchase of some 65 sun eye wear stores there places it at the pole position for addressing this burgeoning growth sector. This is one more reason why Luxottica guidance is pointing towards another record year.
On Friday, Luxottica shares closed at $31.97 against a 52-week high of $32.88 and a 52-week low of $24.17. Analysts rate Luxottica a strong buy. P/E stands at 25.99x trailing earnings, which is admittedly quite high. If I were to take a position in Luxottica right now, it would definitely be for an intended long term. I see profitability written all over this company and I like the way it focuses and presents itself. I see only moderate risk and tremendous growth potential here.
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