As a result of Covid-19 and the following retail lockdowns, many investors are currently taking a cautious approach to consumer goods in general. The eyewear industry however is a good example to show that investors should look at each consumer vertical separately and understand the underlying market dynamics.
Due to the resilience of the sector as well as a strong and positive macro-outlook Livingstones eyewear client Inspecs Plc for instance was not only able to IPO successfully shortly before the first lockdown but also to successfully finance the acquisition of the leading German eyewear group Eschenbach by raising close to EUR 95 million in equity and debt and thereby turning itself into the sixth largest eyewear group in the world during the global pandemic.
Working side by side with Inspecs nominated UK stock market advisor on this project we witnessed first-hand that institutional investors are in particular attracted to the sector for the following reasons:
- An aging population with progressing correction needs and eye diseases has a growing need for vision aids – not only frames and lenses but also readers, magnifiers and protective glasses, a market segment in which for instance Eschenbach is particularly strong. According to German market research firm GfK, eyewear sales quickly re-bounced after the first lockdown in spring 2020 due to the underlying medical needs which frequently cannot be put off by consumers. Furthermore, in various countries opticians are allowed to stay open during the current lockdown, underlining their status as providers of essential products.
- Among younger demographics regular spectacles as well as sunglasses have become a key fashion item representing a statement of individual style and the ultimate finishing element of an outfit. Accordingly, there is a growing tendency towards replacing glasses faster, owning more than one pair and buying more expensive brands.
- Technological innovation in lenses and frames is additionally driving market growth. Examples include polarization of lenses and the use of lightweight, indestructible, and eco-friendly materials for frames. Going forward, mass customization and personalization of frames is expected to become another important innovation driver as 3D printers are becoming more and more affordable. Especially for the Asian markets this is expected to have substantial impact as consumer needs regarding fit and design of eyewear differ from the western standards.
All of this clearly has helped to drive the valuations of listed eyewear and eyecare makers and retailers as the development of Livingstone’s global eyewear and eyecare index1 shows:
1 Included are Carl Zeiss Medtec, EssilorLuxotica, Fielmann, Gran Vision, Hoya, Inspecs, Italia Independent, JINS, National Vision, Safilo, Sunny Optical, The Cooper Companies; index is weighted and caculated on the basis of enterprise values
However, also for investors preferring non-public equities the eyewear industry offers many attractive opportunities:
- The eyewear market is far from being completely dominated by its market leaders such as Essilor Luxotica, Safilo, Marcolin and Marchon. Rather due to the high relevance of design and marketing, independent eyewear makers were able to constantly build attractive market positions based on superior design and a certain creative edge for decades. Good examples in this respect nowadays are well known brands such as Lindberg, Barton Perreira, Garret Leight or Etnia Barcelona as well as the former clients of Livingstone and the author IC! Berlin and MYKITA, who are all able to realize substantial premiums for their products. Their common successes are the facts that their products have a story to tell and that they clearly set their owners apart from the masses. In recent years this has also created substantial private equity interest in the sector. As a matter of fact, both the Inspecs IPO and the Eschenbach sale were private equity exits, while the MYKITA and the IC! Berlin transactions were private investor entries. Apart from the attractive market environment, a key driver of private equity interest in eyewear is also an attractive exit prospect, as larger eyewear groups have a strong tendency to grow by acquiring successful independent brands and thereby reducing their dependence on licensed brands.
- Technology firms are also changing the face of the eyewear industry fundamentally. Examples include vendors of face recognition and design software solutions such as Synopsys and LAMBDA, providers of 3D printing solutions such as Luxexcel and Formlabs, eyewear e-tailers such as Mister Spex and Framesdirect, supply chain solution providers such as TrueCommerce, makers of smart and adaptive glasses such as Vuzix and Everysight, among others. In particular for growth capital investors and VCs these firms offer interesting opportunities as they seek to scale their businesses.
If you are interested to learn more about investment opportunities in eyewear and eyecare please do not hesitate to approach. We are happy to help you sharpen your view on the industry.