Luxottica Group S.p.A. reported that third quarter consolidated net sales experienced a reversal in the trend when compared to the first half of 2003, declining year-over-year by 6.3% to 694.5 million ($782.5 million). In constant currency, consolidated net sales for the quarter would have increased by 3.4%, compared to the decline of 5.9% in the first half of 2003.
Luxottica acquired OPSM, the retail chain leader in the
Australian market, during the quarter. Results of the OPSM operations were consolidated into the Group's results for the three- and nine-month periods from August 1, 2003.
Consolidated operating income for the quarter was 109.4 million ($123.3 million), yielding an operating margin of 15.8% for the quarter. Consolidated net income for the quarter was 74.4 million ($83.8 million) and consolidated net margin for the quarter was 10.7%. Earnings per share or American Depositary Share (ADS) (one ADS represents one ordinary share) for the quarter were 0.17, or 19 cents U.S.
Consolidated net sales for the nine-month period declined year-over-year by 15.8% to 2.1 billion. Assuming constant exchange rates, consolidated net sales for the nine months would have declined by 3.1%.
Consolidated operating income for the nine months was 332.7 million and consolidated operating margin for the nine-month period was 15.8%. Consolidated net income for the nine-month period was 207.7 million and consolidated net margin for the period was 9.9%.
Earnings per share or American Depositary Share (ADS) for the nine-month period were 0.46. In U.S. Dollars, earnings per share or, ADS for the period were US$ 0.51.
Retail Division
In the third quarter, year-over-year retail sales declined by 4.7% to 530.4 million ($597.6 million). Assuming constant exchange rates, retail sales for the quarter would have increased by 7.0%. Excluding OPSM, same store sales in U.S. Dollars for the quarter remained unchanged compared to the same period last year, posting an improvement when compared to the decline of 3.4% in the first half of 2003.
Retail operating income for the quarter was 88.4 million ($99.6 million). In U.S. Dollars, operating income increased by 4.7%. Retail operating margin was 16.6%.
In the nine-month period, retail sales declined year-over-year by 15.3% to 1.47 billion. Assuming constant exchange rates, retail sales for the nine months would have declined by 0.6%. Excluding OPSM, same store sales in U.S. Dollars for the nine-month period declined year-over-year by 2.3%.
Retail operating income for the nine-month period was 210.3 million, resulting in an operating margin of 14.3%.
Leonardo Del Vecchio, chairman of Luxottica Group commented on the results of the Retail division: “In the third quarter, the retail division improved performance when compared to the first half of the year. This improvement is primarily due to better economic conditions in North America.
In addition, even with flat same store sales, when compared to the third quarter of 2002, we experienced a considerable recovery in retail profitability. This was the result of improved efficiencies in the management
of store personnel and other effective measures put in place by management to better control costs.
This improving trend is further confirmed from the performance of the division during October.”
Manufacturing/Wholesale Division
The Group's manufacturing/wholesale sales for the nine-month period declined year-over-year by 13.0% to 773.9 million ($871.9 million). Assuming constant exchange rates manufacturing/wholesale sales for the nine months
would have declined 5.5%.
Manufacturing/wholesale operating income for the nine-month period was 153.4 million ($172.8 million), reflecting an operating margin of 19.8%.
Mr. Del Vecchio, continued: “I'm pleased to report to you that we are experiencing a reversal in the negative sales trend. Since the beginning of September, sales of the new collections were approximately equal to the Armani
revenues. Therefore, the third quarter was the last quarter in which revenues were negatively impacted by the expiration of the Armani license.
This improving trend is further confirmed by our orders, which in October exceeded last year's level, as we started introducing the Prada and Miu Miu eyewear collections. This recovery gives us renewed confidence in the performance of wholesale sales going forward.
During the quarter, wholesale profitability was impacted by the end of the Armani license, as well as the devaluation of the U.S. Dollar. In fact, the decrease in operating margin is primarily due to the high level of returns of Armani eyewear which were concentrated in this quarter.
In summary, I'm confident that beginning in 2004, and excluding the negative exchange rate effect, the wholesale division will return to normal levels of profitability.”
Mr. Del Vecchio concluded: “Worldwide economic conditions remain difficult and the U.S. Dollar is weak and volatile, but, as expected, the impact of these factors which negatively affected first half results is progressively
lessening.
The adverse exchange rate effect resulting from the devaluation of the U.S. Dollar against the Euro decreased from 18.7% in the first six months of 2003 to 12.5% in the third quarter.
In addition, there are encouraging signs of an economic recovery in the U.S., which leads us to expect a gradual and progressive improvement in same store sales going forward.
Finally, the introduction and marketing of the Versace, Prada, Miu Miu and Ray-Ban ophthalmic collections are making up for the expiration of the Armani license from the beginning of September.
Third quarter performance make us optimistic in the future of our Group. We can therefore, confirm our previous guidance for 2003 and 2004, a year in which we expect to return to approximately 15% growth in sales and
earnings as a result of the significantly strengthened brand portfolio, both house brands and designer lines, and the OPSM acquisition.
During the quarter, we completed the OPSM acquisition. This acquisition has given the Group the leadership position in the prescription business, and substantially strengthened our leadership position in the sunglass business in the Australian and New Zealand markets, while at the same time presented us with new and promising growth opportunities in this area.”
LUXOTTICA GROUP
CONSOLIDATED FINANCIAL HIGHLIGHTS
FOR THE THREE-MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002
KEY FIGURES IN THOUSANDS OF EURO (4)
2003 2002 (5) % Change
NET SALES 694,452 740,897 -6.3%
NET INCOME 74,449 85,370 -12.8%
EARNINGS PER SHARE (ADS) (2) 0.17 0.19
FULLY DILUTED EARNINGS
PER SHARE (ADS) (3) 0.17 0.19
KEY FIGURES IN THOUSANDS OF U.S. DOLLARS (1) (4)
2003 2002 (5) % Change
NET SALES 781,119 728,895 7.2%
NET INCOME 83,740 83,987 -0.3%
EARNINGS PER SHARE (ADS) (2) 0.19 0.19
FULLY DILUTED EARNINGS
PER SHARE (ADS) (3) 0.19 0.18
Notes: 2003 2002
(1) Average exchange rate (in
U.S. Dollars per Euro) 1.1248 0.9838
(2) Weighted average number of
outstanding shares 447,895,530 453,596,246
(3) Fully diluted average number
of shares 449,686,763 455,259,086
(4) Except earnings per share (ADS), which are expressed in Euro and
U.S. Dollars, respectively
(5) Certain amounts presented in the prior year financial statements
have been reclassified to conform with the current year presentation.
Among them was a reclassification of certain revenue items of the
retail division which were recorded in prior year as a reduction in
the related costs and are now reflected as gross revenues and gross
costs. The effect of this reclassification is an increase in sales
for the three-month period ended September 30, 2002 of U.S. Dollars
11.1 million, and an offsetting increase in costs for the same
amounts
LUXOTTICA GROUP
CONSOLIDATED FINANCIAL HIGHLIGHTS
FOR THE NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002
KEY FIGURES IN THOUSANDS OF EURO (4)
2003 2002 (5) % Change
NET SALES 2,105,954 2,500,387 -15.8%
NET INCOME 207,731 297,724 -30.2%
EARNINGS PER SHARE (ADS) (2) 0.46 0.66
FULLY DILUTED EARNINGS
PER SHARE (ADS) (3) 0.46 0.65
KEY FIGURES IN THOUSANDS OF U.S. DOLLARS (1) (4)
2003 2002 (5) % Change
NET SALES 2,341,189 2,319,609 0.9%
NET INCOME 230,935 276,199 -16.4%
EARNINGS PER SHARE (ADS) (2) 0.51 0.61
FULLY DILUTED EARNINGS
PER SHARE (ADS) (3) 0.51 0.61
Notes: 2003 2002
(1) Average exchange rate (in
U.S. Dollars per Euro) 1.1117 0.9277
(2) Weighted average number of
outstanding shares 448,891,864 452,957,731
(3) Fully diluted average number
of shares 450,258,813 455,377,201
(4) Except earnings per share (ADS), which are expressed in Euro and
U.S. Dollars, respectively
(5) Certain amounts presented in the prior year financial statements
have been reclassified to conform with the current year presentation.
Among them was a reclassification of certain revenue items of the
retail division which were recorded in prior year as a reduction in
the related costs and are now reflected as gross revenues and gross
costs. The effect of this reclassification is an increase in sales
for the nine-month period ended September 30, 2002 of U.S. Dollars
34.1 million, and an offsetting increase in costs for the same
amounts
LUXOTTICA GROUP
CONSOLIDATED INCOME STATEMENT
FOR THE THREE-MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002
In thousands of Euro (1) 2003 2002 (2) % Change
NET SALES 694,452 740,897 -6.3%
COST OF SALES (219,757) (215,334)
GROSS PROFIT 474,695 525,563 -9.7%
OPERATING EXPENSES:
SELLING EXPENSES (246,539) (256,511)
ROYALTIES (5,716) (12,254)
ADVERTISING EXPENSES (41,856) (44,703)
GENERAL AND ADMINISTRATIVE EXPENSES (61,600) (60,972)
TRADEMARK AMORTIZATION (9,555) (8,747)
TOTAL (365,266) (383,187)
OPERATING INCOME 109,429 142,376 -23.1%
OTHER INCOME (EXPENSE):
INTEREST EXPENSES (12,235) (13,804)
INTEREST INCOME 1,396 862
OTHER - NET 8,705 (6,369)
OTHER INCOME (EXPENSES) NET (2,134) (19,311)
INCOME BEFORE PROVISION FOR INCOME
TAXES 107,295 123,065 -12.8%
PROVISION FOR INCOME TAXES (32,147) (36,919)
INCOME BEFORE MINORITY INTEREST IN
INCOME OF CONSOLIDATED SUBSIDIARIES 75,148 86,146
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARIES (699) (775)
NET INCOME 74,449 85,370 -12.8%
EARNINGS PER SHARE (ADS) (1) 0.17 0.19
FULLY DILUTED EARNINGS PER SHARE
(ADS) (1) 0.17 0.19
