NEW YORK — A small U.S.-dollar sales gain bolstered by favorable currency exchange rates allowed Luxottica Group SpA’s bottom line to grow by more than a third in the final quarter of the year.
For the three months ended Dec. 31, the Milan-based eyewear manufacturer and retailer posted a 36.2 percent spike in net income to $74.2 million, or 16 cents a diluted American depository share (ADS). That compares with last year’s earnings of $54.5 million, or 12 cents. A single ADS represents one ordinary share.
Sales for the period nudged up 2.9 percent to $667.4 million from $648.8 million a year ago. As is its practice, dollar figures have been converted by the company at a constant rate of exchange.
Chairman Leonardo Del Vecchio disclosed that the company currently is consolidating operations of its Cincinnati-based LensCrafters distribution center into that of its Atlanta-based Sunglass Hut facility.
The euro’s flirtation with U.S.-dollar parity over the quarter added to Luxottica’s net income and turned a sales decline into a gain. In euros, the company’s earnings increased a more modest 22.3 percent to 74.4 million euros from 60.8 million euros a year ago, while sales fell 7.7 percent to 668.6 million euros. By division, the manufacturing and wholesale business saw operating income remain flat in euros at 287.6 million euros. Sales declined by 1.6 percent to 1.13 billion euros, but grew 2.2 percent in dollars at constant exchange rates.
In the retail group, comprised of LensCrafters and Sunglass Hut International, operating income expanded 5.5 percent to $301.9 million from $286.1 million a year ago on essentially flat sales of $464.1 million. Same-store sales dipped 1.5 percent and operating margin was 14.8 percent.
"On the retail front, sales for the fourth quarter were below our expectations," said Del Vecchio. "Results were negatively affected by the continued decline in traffic in malls experienced throughout 2002, as well as disappointing Christmas season sales, which were below the level of the previous year."
Overall, for the full fiscal year, Luxottica’s net income swelled by almost a quarter, or 24.1 percent to $351.6 million, or 77 cents a diluted ADS. That compares with last year’s profits of $283.4 million, or 62 cents.Sales for the year increased 7.8 percent to $3 billion from $2.75 billion a year ago.
Del Vecchio warned: "As a result of the current uncertain economic scenario and weakness in the U.S. dollar, 2003 will be a year of transition for us, during which we expect to focus on pursuing interesting acquisition opportunities, mainly in retail. Consequently, we expect to return to growth in sales and earnings in 2004."
Del Vecchio reaffirmed the company’s previous guidance of 77 cents an ADS.
He didn’t reveal the number of employees potentially affected by the closure of the Cincinnati distribution center, and officials with the firm’s U.S investor relations office didn’t respond to requests for information about the timing and financial impact of the move, except to say that the Georgia facility is being expanded.
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