Luxottica and Essilor Confident of Deal Approval Soon, Luxottica Reports Strong Sales

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MILAN—Against the backdrop of its first half earnings, Luxottica Group said yesterday, regarding the proposed combination between Luxottica and Essilor, that the two companies are “finalizing discussions with the Chinese competition authority and remain confident to obtain its approval by the end of the month.” And, the company added, “In parallel with that, the two firms are also finalizing their discussions with the Turkish antitrust authority and evaluating the timing for the closing of the transaction.”

Overall, Luxottica Group S.p.A. (MTA: LUX) reported strong consolidated net sales for the second quarter and preliminary results for the six months ended June 30, citing strong wholesale sales particularly in North America and Asia-Pacific, a tougher climate in Europe, and stronger retail sales overall, with Sunglass Hut’s strength notable and improved performance at LensCrafters. The group also acknowledged the strength of its growing e-commerce business.

In the first six months of 2018, Group revenues reached €4,553 million (+0.3 percent at constant exchange rates, minus 7.7 percent at current exchange rates.)

Wholesale division sales were €1,731 million, down 3.6 percent at constant exchange rates, minus 9.6 percent at current exchange rates, with the strong growth in North America partially offsetting the temporary slowdown in Europe due to the new commercial policies and unseasonal weather conditions, the statement said.

The Group's adjusted operating income, substantially in line with the first half of 2017 at constant exchange rates (with an adjusted operating margin slightly improving at 18.3 percent), was €781 million at current exchange rates. Adjusted operating income excluded organizational simplification and restructuring costs for certain business areas as well as non-recurring costs for a total of approximately €19 million.

In the second quarter, North America net sales grew by 3.4 percent at constant exchange rates and accelerated compared to the performance of the first three months of the year in both divisions. Wholesale business sales increased by 5.5 percent at constant exchange rates with the positive contribution from all sales channels, in particular department stores and key accounts.

The positive results of the retail division, with sales up 2.9 percent at constant exchange rates, were driven by Sunglass Hut, which in the quarter opened approximately 170 shop-in-shops in Bass Pro and Cabela's locations, in addition to contributions from Target Optical and Ray-Ban.com. LensCrafters reported positive net sales, at plus 2.0 percent at constant exchange rates, and an improvement in comparable stores sales.

Stated Leonardo Del Vecchio, executive chairman, “I’m pleased with the very good group results. The growth in the markets where we completed the new commercial strategy, including North America and Asia, confirms the value and effectiveness of the initiatives undertaken. We look with confidence at Europe’s prospects, the region where we are reorganizing our distribution strategy.” He affirmed the company’s outlook, “Considering the positive trends we are also seeing in July, we confirm our outlook for 2018.”

He noted, “We are continuing to invest in product excellence and innovation. Our ‘made in Japan’ manufacturing capability and Barberini’s lenses further expand our luxury portfolio.” (Luxottica announced the acquisition of the glass lens company late last month, as VMAIL reported.

Del Vecchio said, “The group’s digital evolution is ongoing. Our e-commerce business is more and more important in our strategy and our communication is now focused on digital and social media.”

For the second quarter of 2018, Luxottica’s net sales accelerated, growing by 1.4 percent at constant exchange rates (minus 4.9 percent at current exchange rates). The results were driven by the strong performance of the Luxottica Group retail division and e-commerce platforms as well as solid growth in North America and Asia-Pacific. This allowed the Group to close the first half of the year with sales slightly up 0.3 percent at constant exchange rates (minus 7.7 percent at current exchange rates) and strong profitability, with record net margins.

Luxottica’s wholesale division’s net sales in the second quarter were down overall 3.1 percent at constant exchange rates (minus 8.2 percent at current exchange rates) impacted by a temporary slowdown in Europe due to new commercial policies and a delayed sun season. On the other hand, North America and Asia-Pacific each reported strong performance following the restructuring of their distribution network.

In the second quarter, the retail division’s net sales grew by 4.3 percent at constant exchange rates (minus 2.8 percent at current exchange rates) and comparable store sales were up by 1.3 percent, an acceleration compared to the first quarter of the year. This confirmed the effectiveness of strategic initiatives aimed at improving the operating model and the ability of the Group’s retail brands to execute them, the company said. For the third consecutive quarter, Sunglass Hut, with sales up 5.5 percent at constant exchange rates, grew in its main geographies. Retail brands in China, including Ray-Ban stores, and Australia confirmed a strong increase in sales. In North America, LensCrafters’ sales were back to growth, with improving comparable store sales even if still slightly negative.

The net sales from Luxottica Group’s e-commerce platforms in the second quarter were up by 16 percent at constant exchange rates and Ray-Ban.com was confirmed by the company as the main driver of the group’s digital business, benefiting in the quarter from the exclusive launch online of special collections, such as Ray-Ban Reloaded, and the new campaign for Ray-Ban Studios, which strengthened the link between the brand, music and Millennials, the company pointed out.

Also in the financial announcement, Luxottica said it had renewed the license agreement for design, production and worldwide distribution of prescription frames and sunglasses for the Philippe Starck and Starck Eyes brands. The agreement has a duration of five years and is automatically renewable for a further five years.