MILAN — Solid performances in North America and Europe, in addition to growth at Sunglass Hut and LensCrafters, contributed to gains in profitability and revenues at Luxottica Group SpA in the third quarter ended Sept. 30. Excluding costs related to the integration of the Oakley brand, the Italian eyewear group said after the close of trading Monday in Milan, where it is listed, that adjusted net profit climbed 20.6 percent to 209 million euros, or $231 million.
Luxottica produces its own brands Ray-Ban and Oakley, as well as licensed brands Giorgio Armani, Chanel and Prada, among others.
Adjusted sales rose 15.4 percent to 2.19 billion euros, or $2.42 billion. At constant exchange, sales would have risen 5.5 percent.
“It is really gratifying to see the group continue to grow in retail, wholesale and in key markets. There is vast opportunity across the board for our business,” said Adil Khan, co-chief executive officer with Massimo Vian. “Results achieved so far allow us to confidently confirm our 2015 outlook. We expect the positive trend of organic growth to carry into 2016, with earnings continuing to grow faster than sales. Looking forward, we believe the opportunities offered by the industry, coupled with our investment plan, allow us to confirm our objective of doubling sales over the next 10 years.” During a conference call with analysts, Vian said the company was “on track to confirm its outlook for 2015 with a midsingle-digit gain.”
The executives said during the call that this was the sixth year of a “rule of thumb” growth, meaning organic growth of sales, mid- to high-single digit, doubling operating and net profit. “The rule of thumb cannot be sustained forever, we stick to this year. We’ll see for next year, it’s too early to commit,” said Khan, in response to a question by an analyst. He characterized the month of October as “good globally.”
During the call, Khan said the integration of Oakley is now complete.
In the quarter, adjusted operating profit rose 18.6 percent to 351 million euros, or $388 million.
Adjusted net sales in North America, one of the key growth engines, rose 22.8 percent, or 4.5 percent at constant exchange.
Responding to an analyst’s question about U.S. trading conditions, Khan said that “many of our peers talked about a slowdown. It’s true on the traffic side for retailers, we saw lower traffic or flat versus a year ago in tourist areas, the downside of the strong dollar, in New York or Miami, which are tourist-driven. Therefore we are particularly pleased with our sales comps, which are a priority, a higher level of conversion in stores. There are not that many more people buying, but more purchases.”
Europe also showed strength, driven by the sun collections, gaining 8.9 percent overall and at a double-digit clip in Italy, Spain, Germany and the U.K. North America and Europe together accounted for 75 percent of total sales.
Asia-Pacific revenues were up 3.2 percent despite a temporary slowdown in China, due to a previously announced price harmonization and a negative economic environment in Hong Kong. China accounted for 3 percent of total sales. The executives were optimistic about the growth opportunities in China, expecting to “double” that figure. The company is leveraging on a planned expansion of the Sunglass Hut chain there with a network of 20 venues in the country and “new users.” Khan said that Luxottica adjusted its pricing in China before the devaluation of the local currency.
Latin America was down 1.4 percent but sales at constant exchange would have risen 13.6 percent.
Khan said Luxottica was working on a “more aggressive retail” strategy with a “revamp of LensCrafters stores and the opening of Sunglass Hut banners,” while noting he was “not sure this was at the expense of wholesale.”
The e-commerce division showed a 50 percent increase, but Khan said “we are not happy with this 50 percent gain, we want to accelerate. The advantage,” he continued, “is also that people have had the experience, they know how the [glasses] fit and they look.” He spoke of offering a different “experience on the site,” where customers can personalize eyewear, “build a unique piece, design online so that the products are different from what is available in the stores. We will continue to emphasize a different experience. The two are cumulative.”
Speaking of foreign exchange rates, Vian said that “currency help will continue to diminish in the last part of the year.”
Vian said Luxottica has “very ambitious plans,” in terms of “product innovation and process efficiency for 2016 and beyond.” He observed that 2016 is an “Olympics year, which is very, very relevant for Oakley.” He cited a “disciplined store-footprint expansion and improvement,” and said that Luxottica is starting a five-year investment plan for a total of 1 billion euros, or $1.1 billion. The company is boosting synergies between brick-and-mortar and online, and that it is growing “more and more integrated, with earnings growing faster than sales, and costs efficiencies balancing higher investments.”
In the quarter, net debt decreased to 1.05 billion euros, or $1.16 billion, compared with 1.44 billion euros, or $1.94 billion at the end of June.
Dollar figures were converted from the euro at average exchange rates for the periods to which they refer.
