MILAN — Luxottica Group continued to grow profits and revenues in the first half as it heads toward closing its proposed merger with Essilor of France by the end of the year.
The Italian eyewear giant said Monday in regards to the merger that the two companies’ “shared objective in cooperation with the relevant authorities is to close the antitrust process around the end of the year.”
In the six months ended June 30, Luxottica’s net profits rose 18.1 percent to 562 million euros, compared with 476 million euros in the same period last year. Adjusted net profits rose 6.7 percent to 567 million euros, compared with 532 million euros.
Revenues in the first half grew 4.2 percent to 4.91 billion euros, compared with 4.72 billion euros in the same period last year. At constant exchange rates, revenues were up 1.8 percent. The retail division was up 6.8 percent to 2.93 billion euros, while the wholesale channel edged up 0.5 percent to 1.98 billion euros.
“We are very pleased with the results of the first six months. The new strategies and the reorganization of the group are already producing expected results: increased sales, accelerating profitability and strong cash generation,” stated Leonardo Del Vecchio, executive chairman, together with Massimo Vian, chief executive officer of products and operations. “We have abandoned any promotional approach by bringing the product and service quality, brand and purchasing experience to the core of our offer. It’s an investment that we made in the future of our retail and eyewear brands as well as the whole industry.
“Luxottica is becoming a fully digital company, able to develop in-house technologies and state-of-the-art solutions in the eyewear market. The feedback we have received so far from our consumers and customers is full of enthusiasm and appreciation. We continue to innovate our business models. The great work we are doing in North America and on our stores, the courage to redesign distribution in China, where we have declared war on the parallel market, and our investment to launch new Ray-Ban ophthalmic lenses all confirm the group’s commitment to innovation, quality and customer satisfaction as our path to growth. In light of the results of the first six months, we confirm the outlook for 2017.”
The group produces and distributes collections for brands ranging from Giorgio Armani and Chanel to Michael Kors and Prada and owns labels including Ray-Ban and Oakley.
In the first six months, the company launched new collections and debuted the Ray-Ban ophthalmic lenses. It reduced discounts across all sales channels, and launched key collaborations such as Ray-Ban with Ferrari, Gigi Hadid for Vogue Eyewear and Oakley with Dorna for the Italian Grand Prix at Mugello. New stores, a favorable price mix and cost discipline positively contributed to the results of the period.
“We are committed to product innovation,” said Vian during a conference call with analysts. Innovation drove the growth of proprietary e-commerce platforms and, in particular, of ray-ban.com, with new user experiences, and the launch of exclusive collections online. Vian said the company continues to make “strong investments” in e-commerce and remarked on a new service that will be offered in stores, “a wall that will replicate a smartphone where you will be able to virtually try on” models. Customers still like to “touch and feel” eyewear designs, but are “ready to buy from digital,” he said. The company is also investing in its physical stores for “a more agile footprint” in areas such as the Far East and Latin America.
In the six months, the group’s operating profit rose 10.1 percent to 868 million euros. Adjusted operating income grew 4.9 percent to 899 million euros.
The organizational simplification and restructuring of certain business areas resulted in extraordinary costs of about 31 million euros for the first half of the year at operating income level.
In the first half, cash generation reached a record level of 535 million euros.
In North America, sales in the first half rose 1.9 percent to 2.8 billion euros. Revenues in Europe climbed 13 percent to 1.14 billion euros, lifted by Germany, Italy, Spain, Portugal and Eastern Europe. Vian said the second quarter improved compared with the first quarter in the region as sales rose 2.7 percent to 1.42 billion euros.
The performance in Asia-Pacific, while down 2.1 percent to 595 million euros, “is the result of a series of commercial decisions designed to propel future growth in an area of the world that is increasingly key to the company’s business strategies.”
“In China, we are increasing our direct-to-consumer bypassing distributors,” Vian said. “We want a strong business to consumer strategy.” The positive effects of this action are already visible in the retail and online business, which is growing also due to the success of over more than Ray-Ban stores in China. These results do not yet wholly compensate for the decline in net sales from the termination of business relationships with numerous wholesale customers.
In other key geographies, Japan was positive, South Korea was still affected by the contraction of Chinese tourism and India was impacted by a new goods and services tax.
Latin America continued to grow, posting a 13.5 percent increase in sales to 288 million euros, with the positive contribution of all countries. Brazil benefited from the favorable trend in exchange rates. At the beginning of July, Luxottica completed the acquisition of Óticas Carol, entering into the Brazilian optical retail market and confirming the group’s growth strategy in the country.
Mexico, which was defined as one of the most vital markets for Luxottica, maintained its double-digit growth trend, also thanks to the strong contribution of Sunglass Hut, which saw a further expansion of its retail network to more than 200 stores.
As of June 30, net debt stood at 1.11 billion euros, down 1.2 percent compared to the same period last year.