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Digital Daily issue 03/02/2017

MILAN — Italy’s Luxottica Group reported a healthy increase in net profits for 2016, following a year of record sales, and upped its full-year dividend.

This story first appeared in the March 2, 2017 issue of WWD. Subscribe Today.

In the 12 months ending Dec. 31, Luxottica said net profits increased 5.8 percent to 851 million euros, or $902.1 million, with a net margin of 9.4 percent; at constant exchange rates, the increase in income would have been 7.6 percent. The company raised the full-year dividend by 3.4 percent, to 0.92 euros, or 98 cents, a share.

Luxottica released the results following the close of trading Wednesday evening in Milan, where it is listed. The company said it expected 2017 to be “another year of growth and important investments for the group” and forecast that sales and profits would grow by low- to midsingle-digits.

Looking again at the 2016 results, the company said that adjusted net profits increased 3.3 percent at current exchange to 882 million euros, or $934.9 million, with a net margin of 9.7 percent. At constant exchange, the increase was 5 percent.

The adjusted figures include restructuring and reorganization costs over the year equivalent to some 69.5 million euros, or $73.7 million, and non-recurring expenses of 17.4 million euros, or $18.4 million, associated with the departure of former chief executive for markets Adil Mehboob-Khan, the company said.

Operating income for the full year decreased by 2.3 percent, to 1.35 billion euros, or $1.43 billion, following incremental investments over the year, the company said. The adjusted operating margin decreased about 20 basis points from 2015, reaching 15.8 percent of sales, dragged down in particular by the retail channel, where it dropped 100 basis points, to 13.7 percent, “mainly due to investments in digitization and retail expansion,” Luxottica reported. The wholesale operating margin, on the other hand, remained essentially stable, at 24.1 percent of sales, as the division was “beginning to benefit from the synergies of the Oakley integration and the organization’s efficiency.”

Revenues for the full year, which the company had already reported on Jan. 30, increased 2.8 percent, to 9.08 billion euros, or $9.88 billion, boosted by gains in the retail channel and e-commerce. At constant exchange rates, sales would have increased by 3.9 percent in the full year.

Overall, retail sales increased 3.4 percent, at constant currencies, thanks also to strong growth at Sunglass Hut in the sun segment and slight expansion in revenues at LensCrafters in North America. Wholesale revenues decreased in the full year, by 1.8 percent. The company said this was mainly due to the implementation of its “minimum advertised price” policy, which aims to “improve the quality of sales and protect the equity of its brands and the business of wholesale customers” through initiatives including harmonizing prices across different markets and reducing in-store and online promotions “sharply.”

In the fourth quarter, revenues accelerated, up 6.3 percent, showing particular improvement in North America. Leonardo Del Vecchio, the company’s founder and executive chairman, said this acceleration was particularly due to “the courageous decisions taken in the last two years, and all investments aimed to make our product and service offering more innovative and compelling.”

In addition to own brands like Ray Ban and Oakley, Luxottica produces under license for Giorgio Armani, Chanel, Prada and Versace, among others.

The company will hold a conference call about the results on Thursday morning, when analysts will likely seek out more details about the merger with French lens maker Essilor, revealed earlier in January. In its statement Wednesday evening, Del Vecchio was bullish on the eyewear giant’s prospects for the current year — with or without Essilor: “Regardless of our combination with Essilor, we can confirm that 2017 will be a year of further growth for the group.”

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