MILAN — Luxottica Group SpA logged  another quarter of record results in the three months ended June 30, driven by growth across all brands and all markets, led by China and the U.S. Over the first half, the Italian eyewear firm has been further integrating its own Oakley brand, strengthened its organization in China and initiated a price harmonization program to address price differential throughout markets, in particular Asia.

After the close of trading Monday in Milan, where Luxottica is listed, the company said it saw net profits in the second quarter grow 25.3 percent to 295 million euros, or $324.5 million. This compares with 235 million euros, or $322 million, in the same period last year. Adjusted net profits, which do not take into account costs relating to the integration of Oakley, climbed 33.6 percent to 314 million euros, or $345.4 million.

Net revenues rose 19.3 percent to 2.45 billion euros, or $2.7 billion, compared with 2.06 billion euros, or $2.82 billion last year. Net of the exchange rate effects, sales grew 4.9 percent.  Adjusted sales grew 21.4 percent to 2.5 billion euros, or $2.75 billion.

Luxottica produces its own brands Ray-Ban and Oakley, as well as licensed brands Giorgio Armani, Chanel and Prada, among others.

 

In the period, operating profit rose 26.3 percent to 500 million euros, or $550 million.

Dollar figures were converted from the euro at average exchange rates for the periods to which they refer.

 

During a conference call with analysts, co-chief executive officer Adil Khan defined this “a record quarter, the best ever,” which “confirmed the momentum seen at the end of the first quarter.”
Co-ceo Massimo Vian said that also on the industrial front, the period “went really well, our structures performed better than planned, an astonishing performance.” He remarked on the integration of Oakley and the group’s investments in research, development and a leaner infrastructure to accelerate that business. The company is eyeing the 2016 Olympics to further boost that label. The integration is expected to be completed by the end of the year, and to generate synergies in the range of 100 million euros, or $110 million. Integration activities are estimated to cost around 50 million euros, or $55 million, in the second half of the year.

 

The executives mapped out plans to adjust pricing globally, to “give good value to consumers across the world.”

“It takes courage to go down with prices,” said Khan, adding that the group can “use this moment for more uniform and more global prices.” He said “the high-end range will be more impacted, in China and a little in the U.S.”  With the objective to continue to “build volume,” pricing, he said, is a topic that is “not that significant. We are taking most action in China, which is up 45 percent. If there are negative effects, they will be lost. If positive effects, you will see it.”

 

The Asia Pacific region in the quarter was up 18.2 percent, posting sales of 318 million euros, or $350 million, boosted by a 48 percent growth in China and a 34 percent gain in India. The area accounted for 13 percent of total sales. “We have not felt the pinch in China,” said Khan, saying Luxottica was performing “very strongly indeed,” and that it would be even more competitive in the second half. The wholesale channel was described as “very strong in China” and a driver behind the group’s double-digit growth there. “We are conquering the territory and there is a lot of China to conquer that can compensate for temporary issues,” said Khan.

 

Adjusted sales in North America grew 29.3 percent to 1.42 billion euros, or $ 1.56 billion, accounting for 57 percent of total revenues, boosted by both the retail and wholesale channels. “We are firing on all cylinders,” said Khan of the region.

 

Europe was up 9.1 percent, accounting for 21 percent of total, led by Germany, U.K., Nordic and Eastern countries at wholesale, and Sunglass Hut at retail.

Latin America was up 13.8 percent, representing 5 percent of total sales, driven by Brazil, Luxottica’s primary market in the region.

 

The wholesale division rose 14.3 percent to 1.1. billion euros , or $1.21 billion, while the retail division’s adjusted sales gained 27.3 percent to 1.4 billion euros, or $1.54 billion, also helped by the devaluation of the U.S. dollar.

 

In the period, the group generated free cash flow of 261 million euros, or $287.1 million, after a tax-related cash payment of 63 million euros, or $69.3 million.

 

Asked about mergers and acquisitions, Khan said “typically you talk after” the deals are done, but conceded Luxottica looks “at opportunities in emerging markets, retail chains and distributors that accelerate [growth], or smaller new technologies that can expand [the group]. We are active all the time and have significant cash.” The executive said one of the goals set was to double the size of the company in the next decade organically and that Luxottica did “not need to do acquisitions.”

 

After paying dividends of 690 million euros, or $759 million, during the second quarter, net debt stood at 1.44 billion euros, or $1.58 billion, as of June 30.

 

Vian said he was “very happy with the new product release,” presented in March, counting 700 new styles, “more decorations, finishings and metals.”

“There is new energy, we are ready,” said Vian, referring to the new products that will be in stores in September.

 

“We look at the second half of 2015 with confidence. The results of the first seven months of 2015, including July, came in strong and benefited from a good sun season, leading us to confirm our guidance for the full year,” said Khan.

 

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