MILAN — Luxottica Group SpA kicked off the year with higher profits.
This story first appeared in the May 3, 2010 issue of WWD. Subscribe Today.
Leveraging growth in the U.S. and in emerging markets, the Italian eyewear company in the first quarter ended March 31 posted a 20.8 percent rise in net profits, which reached 95.1 million euros, or $131.2 million, compared with 78.8 million, or $102.4 million, in the same period last year. Sales gained 6 percent to 1.39 billion euros, or $1.92 billion, compared with 1.31 billion euros, or $1.7 billion, in the first quarter of 2009.
Dollar amounts have been converted at average exchange rates for the periods to which they refer.
Luxottica, which produces eyewear for brands such as Bulgari, Burberry, Chanel, Dolce & Gabbana, Donna Karan, Polo Ralph Lauren, Prada, Salvatore Ferragamo, Tiffany and Versace, said in a statement that its success in the period was attributable to “the proven effectiveness of [its] integrated business model.” It also mentioned “four key pillars”: its own Oakley brand, whose sales grew 20 percent in the first quarter; both the U.S. and emerging markets, and its efficiency.
While the group achieved growth across all geographical markets, Luxottica sales in the U.S. advanced 6.1 percent, thanks to the performance of retail chains LensCrafters and Sunglass Hut, where comparable-store sales for the quarter rose by 6.6 and 10.8 percent, respectively. Sales in emerging markets climbed more than 30 percent.
“The first-quarter results are a solid and promising start to the year,” said chief executive officer Andrea Guerra, adding that 2010 appears to be shaping up to be a “normal” year, “which for Luxottica, first and foremost, means growth.”
Guerra said both the wholesale and the retail division showed “solid results, thereby confirming the success of our business model and the proactive and decisive steps taken.”
Wholesale sales increased 10.4 percent to 553.5 million euros, or $763.8 million. Retail sales rose 3.4 percent to 838.2 million euros, or $1.15 billion.
With a new management structure, Luxottica’s specialty chain, Sunglass Hut, posted an 8.1 percent rise in comparable-store sales, showing a strong performance in the U.S., where it gained 10.8 percent, and in South Africa and the U.K., while there were declines in Australia and New Zealand. As part of its expansion strategy, Sunglass Hut unveiled two flagships in New York and London this week with innovative layouts and an accent on customer interaction.
“We look to this year with confidence, aware that the recovery will likely be more selective and that it will be important to take straightforward and swift action to seize the opportunities that come our way, relying on the strength of our brands, our broad geographic presence and our strong balance sheet,” Guerra said.
Earnings before interest, taxes, depreciation and amortization grew 6.9 percent to 242.6 million euros, or $334.7 million, during the quarter. Operating income rose 11.1 percent to 171.2 million euros, or $236.2 million.
The group generated a positive free cash flow of more than 40 million euros, or $55.2 million. As of March 31, net debt stood at 2.42 billion euros, or $3.34 billion, compared with 2.33 billion euros, or $3.03 billion at the end of March 2009, which the company attributed to “the exchange rate effect.”