Despite the markets’ volatility and a comparison with a strong first quarter last year with a peak in demand for the first Michael Kors collection in North America, Luxottica Group SpA said sales rose 2.5 percent to 2.26 billion euros, or $2.48 billion, in the first quarter of the year. At constant exchange rates, revenues gained 3.8 percent.
In light of legislative changes in Italy that became effective in March, the Italian eyewear giant said it would no longer publish its first-quarter and third-quarter earnings but only its sales. The changes implement the amendments to the European Union’s Transparency Directive, which removes the obligation for quarterly financial reporting. Luxottica said this will allow the group “to put a greater focus on its long-term strategy and execution” and “to better represent the evolution and health of its business.”
In the three months ended March 31, the retail division was up 4.8 percent to 1.33 billion euros, or $1.46 billion, while the wholesale division decreased 0.6 percent to 935 million euros, or $1.03 billion. At constant exchange, the wholesale channel grew 2.1 percent.
“We are pleased with the results of the first four months of 2016, in line with our expectations, and the quality of our growth. It is growth achieved in a more volatile and uncertain macroeconomic environment and in a phase of deep transformation for the group’s commercial approach. We’ve had some initial sacrifices due to the harmonization of prices in major geographical areas, the implementation of strict trade policies towards online operators and the clean-up of some of our clients’ inventories,” said executive chairman Leonardo Del Vecchio, together with Massimo Vian, chief executive officer for product and operations. “Therefore, these results, compared with those of our best quarter in 2015, do not reflect the activities and initiatives we are implementing to strengthen our competitive position and lay the foundation for healthy and sustainable growth for the long-term.”
The group continues to grow in North America and Europe as well as in emerging markets, excluding the negative impact of exchange rates, particularly in Latin America.
“We are watching with great interest the optical business results, which drove growth in major markets early in the year. The sun segment, typically slower in the first quarter, showed some uncertainty mainly due to the slowdown in tourism in the United States and Hong Kong,” continued Del Vecchio. “While we suffered more than expected in certain markets such as Hong Kong and the Middle East as well as in Oakley’s sport channel, we expect sales to rebound in the coming months due to the launch of innovative new collections and our new digital marketing strategies. Moreover, we are confident and confirm our guidance for the full year.”
The group, which produces and distributes collections for brands ranging from Giorgio Armani and Burberry to Prada and Versace and owns labels including Ray-Ban and Oakley, is also aiming at a greater price alignment around the world.
Adjusted sales in North America were up 2.8 percent. In both the retail and wholesale divisions, the optical business registered solid sales growth, while the sun business was flat.
Europe gained 2.3 percent. Italy, Spain, Turkey and Eastern Europe were the best performers, all in double-digit territory.
Sales in Asia-Pacific were down 5.5 percent, showing mixed trends in the region. Mainland China and Japan posted a double-digit growth. The realignment of prices in China, which started in the second half of 2015, contributed to the strong gain. Conversely, Hong Kong and Macau saw a sharp slowdown, “penalized by a progressive deterioration of the macroeconomic environment.”
Sales in Latin America were down 7.5 percent due to the steep depreciation of the Brazilian real, the Mexican peso and other local currencies against the euro.
In 2015, Luxottica worked on improving efficiency and integration and in 2016 the company “is considering a simplification of its corporate structure in regional markets around the world as well as an evolution of the marketing function that would put more emphasis on digital communication.”
Luxottica has an ambitious plan to open more than 1,000 stores in 24 months with the help of “a new organizational structure” that will provide “smoother coordination.” The company has also started construction on three new laboratories for the production of ophthalmic lenses using advanced technology and sophisticated automation systems.