MILAN — Italian eyewear giant Luxottica Group SpA forecast a 16 percent drop in 2008 earnings after revenues slowed in the fourth quarter, and anticipates a challenging year.
Luxottica, which has licenses with Chanel, Dolce & Gabbana, Prada and Versace, among others, said Thursday it expected net profits in 2008 of about 400 million euros, or $588.5 million, and cut its earnings-per-share forecast to 0.88 euros, or $1.14, from previous guidance of between 0.96 euros, or $1.24, and 0.98 euros, or $1.27. Both estimates exclude extraordinary items tied to a real estate transfer and the sale of a minor business, respectively.
Dollar figures were converted at average exchange rates for the periods to which they refer.
For the three months ended Dec. 31, consolidated net sales gained 4 percent to 1.24 billion euros, or $1.64 billion, after growing 7.1 percent in the same period a year earlier. Full-year revenues rose 4.7 percent to 5.2 billion euros, or $7.65 billion, which the company attributed to the inclusion of Oakley sales. The figures were short of analyst expectations.
“Global markets are now experiencing not a crisis so much as a structural readjustment….Now we must be as responsive and flexible as ever in adapting to the new scenario and continue on our path of growth in anticipation of a 2009 that will certainly be challenging for all,” chief executive officer Andrea Guerra said.
He added that the company was focused on optimizing its working capital and balance sheet “with the clear objective of continuing to generate strong cash flow…. We are working on our cost structure to make it even leaner,” Guerra said.
Luxottica shuttered its six manufacturing plants in Italy for two days in January and plans similar measures this month.
The company estimated that its net debt to EBITDA ratio as of Dec. 31, 2008, would be “substantially in line” with the same ratio on Sept. 30, 2008, or around 2.8 times. As of Sept. 30, Luxottica had net debts of 2.91 billion euros, or $3.77 billion.
Luxottica said it had maintained operating margins at similar levels to previous years in the first nine months of 2008 but that a significant contraction in fourth-quarter demand contributed to an erosion in the group’s margins at wholesale and retail.
Fourth-quarter sales at the wholesale division gained 3.1 percent to 459.7 million euros, or $606.3 million, driven by Oakley, which Luxottica acquired in 2007, and helped by the dollar paring losses against the euro. However, sales were dented by “massive reductions” in client inventories, the company said.
Retail revenues for the period gained 4.6 percent to 776.8 million euros, or $1.02 billion, despite a drop in same-store sales at the LensCrafters, Pearle Vision and Sunglass Hut chains in North America, Luxottica’s biggest market.
Luxottica released the sales figures after the close of the Milan Bourse, where the eyewear firm’s stock gained 1.6 percent to 11.13 euros, or $14.41.