Marked by a resumption of growth in the second quarter, Luxottica Group S.p.A. reported sales in the North America region rose 1.9 percent in the first half, to €2.8 billion ($3.3 bn). Sales on a currency-neutral basis were down 1.0 percent.
In the second quarter, sales in North America rose 2.7 percent to €1.43 billion ($1.67 bn) and picked up 0.4 percent on a currency-neutral basis.
In the Wholesale business, sales rose 3.5 percent in the half to €578 million ($673.2 mm) and grew 0.5 percent on a currency-neutral basis. Wholesale sales in North America in the second quarter rose 6.8 percent to €289 million ($336.6 mm) and grew 4.6 percent on a currency-neutral basis.
On a conference call with analysts, Stefano Grassi, CFO, said the gains were driven by sales to independent opticians and key accounts that more than offset the weakness of the department store and sports channels.
Luxottica’s more-stringent MAP policy in the region continued to have an impact on sales to online operators, but over the course of the year it has resulted in a sharp reduction in the average discount applied by third-party e-commerce platforms and supported the growth of the optical business.
“Note that we haven’t anniversaries yet MAP, the growth in this part of the world was actually driven by independent channel and specialty retail chains that are largely offsetting the deceleration of the e-commerce which is clearly impacted by MAP, as well as our department stores,” said Grassi. “So on a year-to-date basis it was slightly a touch behind our full year guidance but we do expect an acceleration in wholesale North America during the second half of the year, so that we are going to fully make our guidance in that part of the world.”
The wholesale business includes proprietary brands such as Ray-Ban, Oakley, Vogue Eyewear, Persol, Oliver Peoples and Alain Mikli, as well as licensed brands including Giorgio Armani, Burberry, Bulgari, Chanel, Coach, Dolce & Gabbana, Ferrari, Michael Kors, Prada, Ralph Lauren, Tiffany & Co., Valentino and Versace.
In the Retail division, revenues were up 1.5 percent in the half in North America to €2.22 billion ($2.59 bn) but was down 1.4 percent on a currency-neutral basis. Retail sales in the second quarter increased 1.8 percent to €1.14 billion ($1.33 bn) and but eased 0.6 percent on a currency-neutral basis.
Grassi said that while the 0.6 percent constant-currency decline in the quarter marks an improvement in top line versus the first quarter, “there is no doubt that the cut in promotional activity still has an impact on our retail results.”
LensCrafters’ second quarter comps were down 1 percent , improving versus the negative 3 percent in the first quarter of 2017.
“The hard, heavy lift work on LensCrafters is not over yet but tangible progress has been made there,” said Grassi. “We continue our journey in making the consumer experience in LensCrafters a more exciting one, leveraging the technology of our equipment, delivering the state of the art quality lensing and making our store more productive than before.”
Sunglass Hut North America’s comps are still negative but have also improved versus the first quarter trend, thanks to a better price mix driven by discounts reduction as a consequence of a decision to pullout from major promotional activity and targeting more brand equity message. Said Grassi, “Things so far are progressing as we planned.”
Companywide, Luxottica’s net sales grew by 4.2 percent in the first half to €4.92 billion ($5.73 bn) and gained 1.8 percent at constant exchange rates. Adjusted net income rose 6.7 percent to €567 million ($660.0 mm) and added 3.5 percent on a currency-neutral basis. Reported net income climbed 18.1 percent to €562 million ($654.5 mm) and gained 14.7 percent on a currency-neutral basis.
Photo courtesy Oakley
