Last quarter, EssilorLuxottica (XPAR:EL, Financial)faced a one-two punch of temporary eyewear store closures and a large manufacturing base in Italy, which was especially hard hit by COVID-19. We believe EssilorLuxottica is one of the best integrated consumer franchises in the world and expect that when the two companies are fully merged and its promise of manufacturing and retailing both lenses and frames is realized, it should be the dominant global eyewear business. This will be even more likely when its boardroom issues are resolved. When economic activity returns to some semblance of normalcy, sales should prove to be resilient given the significant exposure to non-discretionary vision correction products. We expect significant share gains given the company’s unique consumer proposition (frames plus lenses) and superior financial strength relative to its fragmented competitor base. Finally, we think the turmoil will create a greater sense of urgency within the organization to capture the promised synergies between the two businesses. The sharp sell-off gave us the opportunity to make some modest purchases near the lows, reflecting our confidence in EssilorLuxottica’s recovery.
From Daniel Loeb (Trades, Portfolio)'s Third Point first-quarter 2020 shareholder letter.
