Luxottica's management reshuffle raises questions over succession plan

Fri Aug 29, 2014 10:00am EDT

* CEO Guerra to leave group after 10 years - sources

* Board meeting called on Monday on CEO, management structure

* Team headed by current CFO seen replacing CEO

* Stronger chairman role seen as short-term guarantee

By Valentina Za and Sabina Suzzi

MILAN, Aug 29 (Reuters) - Luxottica's 79-year-old Chairman Leonardo Del Vecchio is set to return to a more active role at the Italian eyewear maker after the likely exit of its chief executive, a move which could raise questions about its management in the longer term.

The board of the maker of Ray-Ban and Persol sunglasses meets on Monday and is expected to agree the departure of CEO Andrea Guerra after a successful 10-year tenure following disagreements over strategy with del Vecchio.

Guerra is set to be replaced by Chief Financial Officer Enrico Cavatorta as part of an enlarged top management team that will include a head of operations, picked internally, and a head of markets, hired from the outside, two sources close to the matter have told Reuters.

Del Vecchio, who had taken a back seat at the family-controlled company after hiring Guerra in 2004, will decide over strategic matters, the sources said, indicating a decision-making structure that could reassure investors about how any differences of opinion among the three top executives would be resolved.

Luxottica declined comment.

Under Guerra, 49, sales at Luxottica more than doubled to 7.3 billion euros, making it the world's biggest eyewear group and pushing its stock market value to more than 19 billion euros($25 billion).

Some analysts said his sudden exit was likely to have little short-term impact as he leaves behind a strong management team. Cavatorta, 53, knows Luxottica inside out and Del Vecchio's oversight of the top triumvirate could ensure the group keeps thriving.

"It's a more complex governance structure that can work well provided that, among other things, somebody has the last say," said Guido Corbetta, a corporate strategy professor at Milan's Bocconi University.

SUCCESSION ISSUE

Analysts cited a possible parallel in Swiss luxury goods group Richemont, which is being successfully managed by two co-chief executives.

"The role of the chairman is a sufficient guarantee," Corbetta said. "The real issue, given Del Vecchio's age, is that of his succession."

Del Vecchio founded Luxottica in 1961 and owns 61 percent of the group which he turned into a global player by buying coveted brands such as Ray-Ban. Guerra's arrival was a rare case of an Italian patriarch picking an outsider to run a family company.

News last week that Guerra was set to step down initially hurt Luxottica's shares, but they have since recovered. They were trading up 1.4 percent at 40.61 euros by 1345, not far off a record 43.30 euros set earlier this year.

While Del Vecchio may play a bigger role, the lack of a clearly spelled-out succession plan needs addressing, a problem similar to that of other successful Italian businesses such as fashion house Giorgio Armani and Nutella-maker Ferrero.

"In the short term, we see little impact," Citi analysts wrote in a note. "We expect a strong third-quarter and an even stronger fourth-quarter."

But "unless the reported changes to management are temporary, we don't think it would improve the current (successful) structure and might make the transition even more difficult when ... Mr. Del Vecchio does retire." (1 US dollar = 0.7590 euro) (Editing by Silvia Aloisi and David Holmes)