MILAN — Luxottica Group SpA is shaking up its management structure based on a co-chief executive officer model, with chairman Leonardo Del Vecchio returning to take on a more active role as the company takes steps to increase profitability.
Ceo Andrea Guerra is leaving the company after 10 years, as was first rumored several weeks ago, and will be succeeded by two executives, one focused on the markets and the other dedicated to corporate functions.
Enrico Cavatorta, currently general manager and chief financial officer of the Italian eyewear firm, has been appointed ceo of corporate functions and interim ceo of markets, pending the appointment of a permanent executive to that position. Operations, led by Massimo Vian, will temporarily report to Del Vecchio.
“There is no right answer in terms of an organizational model, a single ceo or a co-ceo. One can both work well. It depends on the people and if they are suited to the role,” explained Cavatorta during a conference call with analysts on Monday. “Though not so common, a co-ceo model can work with the right people and if they join forces. Not all people are suited to work this way.”
Cavatorta described Guerra as “an excellent manager as a single ceo.” He said Luxottica and Del Vecchio needed a change to continue the group’s strategy, and, “given the complexity of the company, the previous model was no longer suited.”
Cavatorta was born in Treviso, Italy, in 1961, and, prior to joining Luxottica in 1991, was group controller at motorcycle firm Piaggio SpA. Before that, he was a consultant with McKinsey & Co., having joined the firm from Procter & Gamble Italy.
Candidates for the co-ceo role are external, said Cavatorta. A new cfo will also be appointed in the short-term from a pool of “very valid internal candidates,” said Cavatorta.
An executive committee, led by Del Vecchio, will be created to support management during the transition. Del Vecchio will also be a guarantee against any potential discord between the two ceo’s. “Del Vecchio will have a more active role but will not manage operations on a daily basis,” said Cavatorta. “He will not be an executional manager.”
“I thank Andrea Guerra for the contribution he has made over the years to the growth of Luxottica,” said Del Vecchio. “At the end of this 10-year journey, the company is now ready to face up to a new chapter in its history thanks to a management team of great strength and experience. This new phase starting today will see the group retain its strong focus on sales and profitability, and ensure it is ready to seize opportunities and face the challenges of the market.”
During the call, Cavatorta said the company will start working in the coming weeks on an operating plan for 2015. While not straying from the strategies put in motion by Guerra, he underscored the company will renew its focus on a return on investments. “There are areas we will look at with renewed scrutiny. I am not saying a bad job had been done in the past,” he said, pointing to the potential improvement in the cost of operations, to geographical expansion, and to the exploitation of opportunities in different business divisions. “We have grown by acquisition in the past, and mergers and acquisitions will remain as part of our strategy,” said Cavatorta, noting, however, an increased level of attention on return on investments and more focus on efficiency.
“There were areas and geographies that were diluted in profit margin. This can be acceptable if short-term but if the dilution becomes long-term, we can no longer tolerate it,” he said. Cavatorta also said 70 percent of group sales derive from its own brands, including Ray-Ban, Oakley and Persol, and 30 percent from its licenses and that the company plans to maintain these percentages. The eyewear maker produces under license for names including the Giorgio Armani Group, Bulgari, Burberry, Chanel, Coach, Prada and Versace.
While not going into detail about the reasons for Guerra’s exit, Luxottica cited “a period of debate” between Del Vecchio and Guerra over the group’s future strategy and direction. Asked by analysts about the reasons for the separation, following reports about a disagreement over a deal with giant lens manufacturer Essilor, Cavatorta said the group had explored an agreement a year-and-a-half ago, but that there had been “a common thinking between Del Vecchio, Guerra, me and the board that there were not the right conditions. It was an opportunity but it’s not on the table today.”
However, a well-placed source told WWD that the first and main clash that arose between Del Vecchio and Guerra revolved around that deal. Guerra firmly vetoed the potential deal, which Del Vecchio strongly backed. “Guerra was against it because over 10 years he had promoted a strategy to build Luxottica viewing eyewear as a fashion accessory and not a functional one,” the source said.
Cavatorta also dismissed rumors about disagreements over the Google Glass deal, under which Luxottica will produce eyewear using the Internet giant’s technology. “This is not one of the reasons of disagreements, we are committed and will continue our journey [with Google],” said Cavatorta.
The executive confirmed a target of a 7 percent long-term growth in revenues.
Armando Branchini, deputy chairman at Milan-based consultancy InterCorporate, credited Guerra with helping to develop Luxottica internationally, transforming the “eyewear culture from function to fashion” and continuing to build the group’s pool of licenses — a strategy first initiated by Del Vecchio — with the addition of the acquisition of its own branded lines.
Branchini had no doubts Luxottica would continue to grow, following the strategies implemented by Guerra, and that the executive will soon reemerge in a new position. “He is young and talented,” said Branchini. Italy’s prime minister Matteo Renzi reportedly tried to woe Guerra to become part of his government earlier this year.