EssilorLuxottica Posts Solid Gains in 1Q 2019

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CHARENTON-LE-PONT, France—EssilorLuxottica (Reuters: ESLX.PA) posted a solid first quarter financial performance, despite the battle over governance being fought among its top management which has lowered its stock price and has raised questions about the company’s management structure. Yesterday, EssilorLuxottica reported consolidated revenue for the first quarter ending March 31, 2019 totaling €4,210 million, representing a year-on-year increase of 7.5 percent compared to Q1 2018 pro forma revenue (+3.7 percent at constant exchange rates).

“I am very satisfied with the results of the first quarter of EssilorLuxottica, with all its business areas growing. Luxottica contributed with an excellent performance that recorded accelerating sales, confirming the power of the strategic choices and the commercial policies undertaken. In the near future, we will continue to build our success on the strength of our brands, operational excellence and ever-increasing digitalization of the Group,” commented Leonardo Del Vecchio, executive chairman of EssilorLuxottica.

Hubert Sagnieres, executive vice chairman of EssilorLuxottica said, “2019 is off to a good start and Essilor’s contribution has been robust in terms of business, new product developments and acquisitions as well as in the ramp-up of the first synergy work streams with Luxottica. Joint integration work is now solidly underway in many key areas such as the complete pair, leveraging the company’s own retail, cross-selling in wholesale, optimizing the supply chain, enhancing efficiency and growing the market. Together, this should help us to improve the company’s performance further in the next few quarters and to fulfill our common mission: Helping people to see more, be more and live life to its fullest.”

Every division of the EssilorLuxottica contributed to growth, led by Essilor’s lenses and optical instruments (+7.8 percent) and Luxottica’s retail (+10.7 percent), as well as every region, with the largest gains in North America (+9.1 percent), Asia-Oceania-Africa (+8.0 percent) and Latin America (+8.1 percent). Essilor’s robust sales growth of 7.6 percent (+4.3 percent at constant exchange rates) was driven by 3.3 percent like-for-like growth. Luxottica delivered solid growth of 7.5 percent (+3.2 percent at constant exchange rates), showing an acceleration versus last year and recent quarters. Sales results were led by the Luxottica’s retail division, the company said.

Lenses and optical instruments sales rose 7.8 percent to €1,674 million (+4.6 percent at constant exchange rates), 3.6 percent of which in like-for-like terms. Online sales growth remained at double digit levels, EssilorLuxottica said. Fast-growing countries delivered close to 10 percent growth in like-for-like terms, buoyed by China and Latin America, where the division’s retail networks performed especially well. Developed markets showed strong momentum in Europe and a steadier performance in North America ahead of major product launches in the next few quarters, especially for the Transitions brand.

EssilorLuxottica’s sunglasses and readers division posted revenue of €200 million, up by 1.7 percent at constant exchange rates. Strong gains at Xiamen Yarui Optical (Bolon) in China and in the European businesses offset a lackluster performance in the U.S., marked by a slower start to the sunwear season for Costa and the impact of a demanding comparison basis on FGX International, the company said.

Equipment sales rose by 10.2 percent to €44 million (+4.9 percent at constant exchange rates), of which 5.0 percent in like-for-like terms, as surfacing solutions saw more robust sales growth than coating machines.

Retail sales accelerated in the first quarter and grew 10.7 percent to €1,454 million (+4.7 percent at constant exchange rates). This was driven by the optical retail business in North America, notably a strong performance by LensCrafters and Target Optical.

Luxottica’s wholesale division showed solid growth compared to the prior year, partly resulting from a recent commercial policy realignment and the impact of STARS, a modular assortment project that offers consumers a higher level of product customization. E-commerce was up mid-single digit, driven by Ray-Ban.com and SunglassHut.com. As of March 31, 2019, Luxottica's retail network consisted of 9,052 stores, of which 7,066 are directly operated by the company.

In North America, EssilorLuxottica’s revenue grew by 9.1 percent (+1.2 percent at constant exchange rates) in the first quarter. The relative strength of Essilor’s U.S. lens and e-commerce businesses was temporarily offset by mixed factors elsewhere. U.S. lens revenue showed modest improvement, the company said.