PARIS — EssilorLuxottica Friday indicated that coronavirus-linked disruptions have been limited for the company, with a negative impact from the coronavirus on business in Greater China where production is slightly down but rapidly returning to normal, and a slight impact on revenue in other regions.
The eyewear giant had reported a 9.2 percent rise in annual adjusted net profit to 1.94 billion euros lifted by revenue growth in all divisions and said benefits from synergies of its merger are meeting its expectations.
“A solid set of results,” said analysts at Bernstein while RBC Europe called the earnings healthy and noted that full-year guidance should reassure investors.
The company’s projected synergies and financial targets, which include 3 to 5 percent sales growth, are based on the assumption that the COVID-19 outbreak will ease up over the next few months.
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Synergies are expected to have a net impact on adjusted operating profit of between 300 and 350 million euros in the three-year period starting in 2019, as the company sells Essilor lenses in the group’s retail networks, merges technology platforms, and integrated prescription laboratories.
Asked about business disruption related to the virus, executives told analysts in a conference call that most of the impact came from a decline in traffic in malls in Mainland China and Hong Kong, down at a double-digit rate, percentage-wise.
Greater China accounts for around 5 percent of consolidated revenue, the company said.
Retail business in Italy, too, was affected, but in North America, the company’s largest market, executives expressed satisfaction with its recent performance.
“So far, no reason to raise concern in North America — clearly it’s a situation we all have to look at on a day-to-day basis,” noted one executive on the call, speaking of the Luxottica business. LensCrafters was continuing along the same, positive trend as over the fourth quarter, he added.
Production plants in China, meanwhile, had been operating at slightly lower levels, but were returning to normal, and running at full capacity in Italy.
In other news, the company named David Wielemans co-chief financial officer, replacing Hilary Halper, whose departure was announced on Monday. The eyewear giant is continuing to search for a chief executive officer, a position it intends to fill by the end of the year, and is now also considering internal candidates. In other appointments, Ariel Bauer has been named co-head of investor relations, replacing Véronique Gillet.
The company reported annual revenues rose 7.4 percent to reach 17.39 billion euros, with a hefty currency boost from the strengthening of the dollar against the euro and fueled by growth in its largest division, lenses and optical instruments, up 8.1 percent.
“In its first full year, EssilorLuxottica delivered a solid performance,” said Laurent Vacherot, ceo of Essilor.
Revenue over the fourth quarter reached 4.3 billion euros, up 4.5 percent at constant rates, lifted by a 5.2 percent increase in Essilor’s lenses and optical instruments division and a 4.6 percent rise in Luxottica’s retail division, which includes LensCrafters. Lower traffic in tourist locations and an unfavorable holiday calendar weighed on sales at Sunglass Hut stores but this was offset by an increase in business online, the company said.
Target Optical and EyeMed grew soundly over the quarter while Sears “continued to be a heavy drag,” the company said.
Formed in 2018 by the combination of France-based Essilor and Italy’s Luxottica, the 46-billion-euro merger has been fraught with challenges, including disputes between top managers of the French and Italian factions of the company in early stages of integration.
Adding to integration challenges, in December it uncovered fraudulent financial activities in one of its plants in Thailand, estimating the impact at up to 190 million euros on its full-year operating result.
Earlier this month, the European Commission opened an in-depth investigation into EssilorLuxottica’s proposed acquisition of Dutch optical retailer GrandVision, citing concerns that the merger would lead to higher prices and reduced choices for consumers.