Luxottica Group S.p.A. confirmed its previously announced earnings per share (EPS) guidance for fiscal year 2008.


In a conference call with analysts, management discussed the Group's different seasonality and wholesale/retail mix resulting from the acquisition of U.S. performance eyewear maker Oakley.

 

The addition of Oakley to Luxottica's  stand-alone business shifted more weight to the wholesale segment, given that the size of Oakley's wholesale business for the most recent full year was over three times the size of its retail business in terms of sales. Due to the much higher proportion of Oakley's sun business compared with its optical business, its net sales and especially its operating income have historically been concentrated in the two quarters when the sun business is strongest: the second and third quarters of each year.

Wholesale Guidance
    Operating Margin                              1Q             FY
    2007 Luxottica stand-alone              27.5%          26.5%
    2007 Luxottica and Oakley pro forma  23.3%          23.0%
                                                           vs. 2007    2008 Guidance                    +75/+100bps      +100/+125bps   pro forma



  • Synergies and one-time restructuring charges. In fiscal year 2008,  synergies resulting from the Oakley acquisition are expected to grow progressively quarter after quarter. At the same time, the related restructuring charges will be more heavily weighted in the first six months of the year, with the second half of the year expected to receive the greatest net benefit from the Oakley integration.
  • Retail profitability. Profitability of the retail segment is expected to improve in the second half of the current fiscal year due to the already-discussed synergies resulting from the Oakley transaction, the postponement of certain capital investments beyond 2008 and cost control projects put in place as of the beginning of the year. Current retail performance within the Group's North American operations are in line with that of the fourth quarter of 2007.

Retail Guidance


   Operating Margin                   1Q              FY

    2007 Luxottica stand-alone        12.2%           11.2%
    2007 Luxottica and Oakley pro
     forma                                    11.8%           11.1%


    2008 guidance with +0%/+2% comp vs. 2007  sales(1)                          -250/-200bps     +25/+50bps    pro forma


    Sensitivity at -2%/0% comp  vs. 2007 sales(1)                     –                                300/-250bps     flat/+25bps   pro forma



(1) Comparable store sales reflects the change in sales from one period to another that, for comparison purposes, includes in the calculation only stores open in the more recent period that also were open during the comparable prior period, and applies to both periods the average exchange rate for the prior period and the same geographic area.


Overall profitability. The impact on profitability of the different seasonality of the wholesale business of the new Group, the opposite trends of synergies and one-time restructuring charges as well as the above-mentioned expectations for retail profitability in the second half of this year were already fully reflected in the previously announced guidance for the current fiscal year, which was confirmed today.


    See table below for details discussed during today's conference call.


With respect to EPS guidance for fiscal year 2008, the following table was made available during today's conference call.

EPS Guidance


    EPS before trademark amortization(1)       1Q             FY

    2007 Luxottica (2)                              0.30           1.14
            euro/US$ exchange rate              1.31           1.37


    2008 Guidance


          at constant exchange rates             0.30 – 0.31    1.29 – 1.32


             at euro 1 = US$1.45                 0.27 – 0.28    1.22 – 1.25


    Sensitivity at euro 1 = US$1.50              0.26 – 0.27        n.a.


(1) Historical and forecasted EPS before trademark amortization are non-U.S. GAAP measures. For additional disclosure regarding non-U.S. GAAP measures and reconciliation to U.S. GAAP measures, see Appendix
        below.
(2) Excluding a non-recurring gain related to the sale of a real estate property in 2007. The impact of the sale was approximately euro 20 million before taxes or approximately euro 13 million after taxes, equivalent to euro 0.03 at EPS level.