MILAN — Luxottica Group SpA — one of Italy’s corporate jewels that has for decades relied on stable management under the majority ownership of chairman Leonardo Del Vecchio — is suddenly seeing a revolving door of executives.
The latest had Del Vecchio, who continues to own a majority of the eyewear giant, assuming the role of interim chief executive officer until a pair of co-ceo’s can be appointed. He is assuming the role after the departure of Enrico Cavatorta, who was appointed ceo of corporate functions and interim ceo of markets only last month. Luxottica admitted Cavatorta was leaving “following disagreements on the current governance structure” while Roger Abravanel has resigned from the group’s board for the same reasons.
Luxottica revealed the new management structure — or at least its temporary one — late Monday night after an arduous board meeting. Earlier in the day, the group’s shares plunged 9.2 percent to close at 37.29 euros, or $47.09, at the end of trading on the Italian Stock Exchange.
Del Vecchio will serve as interim ceo until Luxottica can find a co-ceo of markets to succeed Cavatorta. When that person is appointed, Massimo Vian will become co-ceo of operations and product, the company said Monday.
The statement scuttled speculation earlier Monday that Vian, currently chief operations officer, might succeed Cavatorta, who submitted his resignation Sunday.
“In light of the solid results achieved also in the third quarter, Luxottica is in a position to take the necessary time to execute this search, in order to ensure that the best decision is made for the company,” the firm said ahead of the board meeting. Del Vecchio said then that his holding company Delfin Sarl, which controls Luxottica, is being reorganized “with the aim of improving its governance and further separating ownership from the management of its portfolio companies.”
In an attempt to dispel ongoing speculation about his family’s increasing role in the company, Del Vecchio said the appointment of his son Leonardo Maria Del Vecchio to the board “has never been considered” and that current director Claudio Del Vecchio, who is also chairman and ceo of Brooks Brothers, “will not be reappointed following the natural expiration of his mandate to give consistency and coherence to the positions of all members of the family.”
A prelude to Cavatorta’s departure was seen in his recent sale of 550,000 Luxottica shares to Delfin for more than 22.3 million euros, or $28.2 million at current exchange.
Sources say Cavatorta’s decision might have been triggered by disagreements with Leonardo Del Vecchio and his wife, Nicoletta Zampillo, who is vying for more power on the company’s board and who has been lobbying for outside consultant Francesco Milleri, a longtime friend of the family. Milleri is said to have little experience in the eyewear sector, and sources said he clashed with Cavatorta on a number of issues.
Looming behind these executive changes is the future of the company’s share-holding structure. Leonardo Del Vecchio, who is 79 and controls around 61 percent of the group, has six children from three different women. The issue of a generational shift is coming to light for several Italian fashion companies looking at different options to solve intricate family succession — such as Salvatore Ferragamo, which went for an initial public offering, or Loro Piana, which sold a majority stake to LVMH Moët Hennessy Louis Vuitton last year.
The shake-up at Luxottica is taking the industry by surprise, after years of stability and international growth. Last month, Luxottica reshaped its management structure based on a co-ceo model, with Leonardo Del Vecchio returning to take on a more active role. Ceo Andrea Guerra left the firm after 10 years, and was to be succeeded by two executives, one focused on the markets and the other dedicated to corporate functions — a management model that left analysts skeptical.
On Sept. 1, Cavatorta, previously general manager and chief financial officer of the firm, was appointed ceo of corporate functions and interim ceo of markets, pending the appointment of a permanent executive to that position. Operations, led by Vian, temporarily reported to Leonardo Del Vecchio.
The eyewear maker produces under license for names including the Giorgio Armani Group, Bulgari, Burberry, Chanel, Coach, Prada and Versace, and also has a number of owned brands, such as Ray-Ban, Oakley and Persol.
In a report on Monday, Citi analysts Thomas Chauvet and Mauro Baragiola warned that Luxottica “may struggle to attract strong candidates with an international background for the, as yet unfilled, role of co-ceo.”
Citi downgraded the stock to “neutral” from “buy” with a new target price of 38.50 euros, or $48.61, from 47 euros, or $59.35, at current exchange. “We also reduced our long-term growth to 2 percent (from 3 percent), as we expect the departure of two highly respected managers to affect the company’s medium-term strategies.…Mr. Del Vecchio might have some room to reshape management, strategies and governance, but to attract long-term investors we believe he needs to embrace a stronger corporate governance culture.”
In its own report, Barclays defined Luxottica’s corporate governance as “a concern,” but rated the shares overweight as he believes the company “is in a very strong position in a long-term secular growth market with excellent cash flows.” Luxottica’s long-term plan to achieve around 7 percent organic revenue growth and “double this in EBIT [earnings before interest and taxes] from operating leverage should not be affected by these changes in the short term, so long as the high-quality divisional management remain in charge. However, from an investor perspective, the interference of a majority shareholder in a highly regarded management team raises questions on corporate governance, which will likely affect valuation.”
In the first half of the year, Luxottica’s net profit rose 5.8 percent to 393 million euros, or $538.4 million.
Revenues rose 0.5 percent to 3.9 billion euros, or $5.34 billion, compared with 3.88 billion euros, or $5.08 billion. At constant exchange, sales would have risen 5.6 percent.
Dollar amounts have been converted at average exchange for the periods to which they refer.