A German national with an international upbringing and a successful career in European retail, Stephan Borchert became GrandVision CEO in early 2018. Today, as he looks back on his first year at the helm, Stephan pays tribute to GrandVision’s robust performance while urging the business to accelerate its response to evolving consumer trends.
Stephan, how would you qualify 2018 for GrandVision? What did we get right and where is there room for improvement?
I’d say it was a good year overall. Our revenues grew by 10.3% at constant exchange rates and our financial performance was strong, with EBITDA up by 6.2%.
We also know our customers appreciate us more than ever before, as reflected in our average Net Promoter Score (NPS) which increased to 60+. Our strategic priorities are sharper than before and are helping us to drive further growth and long-term value creation for our stakeholders. We also recently entered the FTSE4Good Index. I’m immensely proud of these achievements.
But it’s also true to say the year was one of significant change. After joining the company in the beginning of the last year, we took a fresh look at our strategy, especially in light of changing market and consumer trends. What we see around us are trends such as digitalization and the growing relevance of global fashion trends in eye wear that require us to work together even more strongly as a global GrandVision team. This is certainly one of my priorities in the coming years.
In order to capture these opportunities, we have sharpened our strategy and also undertaken several organizational changes to make sure our structure and people are deployed in the right way. Also, GrandVision has grown very rapidly over the years and through many acquisitions, so we will now make sure we take full advantage of our additional economies of scale.
Describe how the global optical retail market developed in 2018. What regional variations did you see?
Overall, we're pleased with the progress we've made in our markets, which has led to an acceleration of comparable growth in all three segments.
In the G4 segment, we achieved 7.9% revenue growth. This was driven, on the one hand, by an improvement in the French market environment following changes to local insurance reimbursement schemes in 2017. We continued to increase our market share and achieved 2.4% comparable growth. Our performance there really demonstrates the resilience of our model, which is key in an environment that continues to change. As part of our core commercial proposition, we advocate for price
transparency and thus, markets in which affordability has become more important to customers remain a true opportunity for us.
We also had a strong year in Germany, where we launched a successful commercial campaign in the summer in which customers could temporarily purchase multifocal spectacles for the price of single vision glasses. It drove both market share gains and EBITDA margin expansion.
In the Other Europe segment, we had 15.8% revenue growth, due to the addition of the Swiss Visilab business and solid organic growth in most markets. While we continued to see strong organic growth in Eastern Europe, the Italian market remained below our expectations. We're starting to make progress in that market, but still aren't satisfied with the performance, especially EBITDA margin, when you consider the potential in terms of the size of the market and the scale of our business.
Finally, we probably saw the strongest ever performance in the Americas & Asia segment, both in terms of comparable growth and EBITDA margin progression. We achieved 8.8% revenue growth and comparable growth was even at 9.4%. EBITDA almost doubled and reached 20 million, and this was achieved across the board. Despite the currency headwinds in Turkey, revenue remained stable during the year and EBITDA expanded resulting in margin growth.
We also made some progress in the United States, even though we are not satisfied yet with the pace of the turnaround. We continue to further improve the business and are actively working on preparing a platform for further growth for GrandVision in the US.
At the Capital Markets Day you outlined GrandVision's new strategy and re-confirmed the medium-term objectives. What's changed since the previous strategy?
First of all, I reconfirmed the basic pillars of the GrandVision strategy of driving comparable growth, strengthening and deploying our global capabilities, optimizing our store network and expanding in current and new markets.
However, over the past few years, we have seen a number of external developments that are having an impact on our business.
I specifically want to mention the increasing tendency towards consolidation and the strong digital developments in all areas of our business. Particularly the latter has led to increased pressure to improve the customer journey at each and every touchpoint. It has also led to an emergence of new brands, and new digital and physical shop formats in our industry.
The world around us keeps evolving and I urge the entire GrandVision organization to be even more agile in increasing the relevance of our services, products, stores and online platforms to consumers.
It all starts with an even stronger customer focus in everything we do at GrandVision. Turning customers into fans and increasing their lifetime value is our predominant objective. In order to stay relevant to existing, but especially also new customer segments, we need to accelerate a leading digital proposition and ultimately boost e-commerce growth. In addition to this, we want to continue growing our global market share through strategic acquisitions.
Are you satisfied with our global expansion in the year? Are there markets where you feel our progress was notable?
Our expansion generally progressed well in our focus markets. Of course, there are years in which we acquire more companies or enter new geographies than in other years. The focus during the year was to integrate the businesses we acquired at the end of 2017. For example, we integrated the Tesco Opticians stores in the United Kingdom and rebranded them to Vision Express. Through this acquisition we now have a bigger and stronger business in the UK and have much higher proximity to our customers. We also integrated the Visilab business in Switzerland.
In the Americas & Asia segment, we significantly improved our profitability. Over the past few years, we built up scale in important growth markets like Mexico and Turkey and already saw improvements in our margins in these markets. This year, our focus was on improving the effectiveness of our operations and the quality of our store network, for example by closing underperforming stores in a few markets. Overall, we now have a stronger business in the region with improved margins.
We pride ourselves in understanding the dynamics that drive trends in our markets. How well are we differentiating and how strong do you see our position?
I’d say we’re in a position that is entirely unique. We’re successfully tapping the enormous potential in some of the world’s best structural growth markets by leveraging our size, global reach and capabilities. We’re also benefiting from the advantages of having a high share of Exclusive Brands and products and we’re well geared to capture higher growth rates in the sunglass and contact lenses categories through our digital capabilities.
From a customer viewpoint, our current, and most importantly, our future omni-channel strengths are another highly distinctive feature of what our retail brands can offer.
One of our main differentiators is in our core commercial proposition. We are still quite unique on a global scale in providing full price transparency to our customers regardless of whether they're buying our products in our stores or online at every stage in the customer journey. In traditional optical retail, customers won't know until the end of the sales process what price they have to pay. In a world of 24/7 access to global information and data, consumers increasingly demand simple, transparent and honest propositions of high quality products at affordable prices.
In addition, we regard full price transparency as key to running a successful omni-channel business.
GrandVision’s evolving digital capabilities are becoming central to our customer proposition and this is an area you’ve had a lot of experience with previously. How do you qualify our efforts so far?
The omni-channel route to market isn’t new for GrandVision – we have been investing in this area for some time. In some parts of our business we already see over 50% of our sales being supported by digital elements of the customer journey. We are talking here about our online appointment booking tools, our extensive websites with Virtual Try Ons and product pre-selectors.
In 2018 we sharpened our digital strategy with a clear and accelerated roadmap for our omni-channel as well as for the pure play e-commerce business. Digital strategy is not one size fits all, and some product categories, such as contact lenses and plain sunglasses, are more suitable for purchase through pure online channels than for example the spectacles category. That’s why you’ve seen us strengthening our e-commerce activities through the acquisition of Linsenmax in Switzerland and the launch of Lenstore in Germany.
This is just the start. Our goal for 2023 is that e-commerce will grow to more than 10% of total sales.
What can customers expect from GrandVision’s digital proposition in the years ahead?
The future digital proposition has the clear ambition of being at the forefront of our industry and to grant our customers best-in-class 360 degree access to our offer – this is what they expect from a global market leader.
We are basically working on all three frontiers: strengthening our omni-channel proposition which is linked to our successful brick & mortar operations worldwide, evolving all digital tools to further enhance the customer experience and continuing to invest in pure play e-commerce.
What are your views on sustainability, and how will you drive our performance and reporting in this area?
It’s gratifying to have joined an organization that sees sustainability not just as a reporting imperative, but as an integral part of a business strategy.
As optical retailers we know what our responsibilities are
towards society in terms of helping more people have access to high quality eye care, but also with regards to the environment, which means reducing our footprint as we've done in recent years, by centralizing our production and managing our utilities in a more efficient way.
However, as a young company, we are still in the early stages of developing our sustainability strategy. We have now taken the important steps of combining our sustainability reporting and financial reporting for the first time ever, which makes perfect sense, as this is how we want to approach it in our business.
What are the biggest challenges and opportunities you see for GrandVision in 2019?
Overall, unfortunately, we will continue to see more and more political instability which will have a direct impact on consumer sentiment. This will not only pose some challenges on short-term business goals, but even more on companies to provide security and motivation to their staff.
I feel GrandVision is well prepared to continue working and delivering on its long-term value creation strategy while achieving its short-to medium-term targets. A key priority for me is to attract and retain the best people. As I said before, we see the world changing at a faster pace going forward. For GrandVision this means we face the challenge of evolving from a pure physical business model to a stronger omni-channel model.
Is there any message you'd like to give to your external stakeholders and employees?
2018 was my first year as GrandVision's CEO… and it was a transitional year!
We made a number of strategic and organizational changes and also had to deal with a couple of issues from the past. But first and foremost, we have embarked on the exciting journey to evolve GrandVision to a new phase of growth, in physical store terms as well as a stronger digital offering. We have already made good progress, and this would not have been possible without the great support and engagement of the global GrandVision staff, for which I want to express my sincere gratitude to the entire team.
The trust of our shareholders was a vital support for us on our journey last year. For this I want to explicitly thank you on behalf of the entire GrandVision management team.