Luxottica Group’s first quarter net sales in US dollars grew by 6.1%, mainly
due to the solid performance of LensCrafters and Sunglass Hut, where
comparable store sales for the quarter rose by 6.6% and 10.8%,
respectively. Significant results were also achieved in emerging
markets, with net sales up year-over-year by over 30%.
“The first quarter results are a solid and promising start to the year,” stated Andrea Guerra, Chief Executive Officer of Luxottica. “2010 is looking like it will be a normal year, which for Luxottica first and foremost means growth. Oakley has confirmed its status as an exceptional brand and the Group’s performance in emerging markets is the result of the investments made in these regions. During the period we also saw solid performance in the US market, where during the rest of the year we will be able to take advantage of further opportunities, as well as in Europe and the Far East.
“Both our divisions posted solid results, thereby confirming the success of our business model and the proactive and decisive steps taken. Net sales for the quarter at the Wholesale Division grew by over 10%, while operating margin increased in both Wholesale and Retail.
“The results obtained in the first quarter and specifically in March, a pivotal month for the Wholesale Division, are an excellent starting point for 2010. We look to this year with confidence, aware that the recovery will likely be more selective and that it will be important to take straight-forward and swift action to seize the opportunities that come our way, relying on the strength of our brands, our broad geographic presence and our strong balance sheet.”
Consolidated results for the first quarter
In the first quarter of 2010, net sales rose by 7.0% at constant exchange rates(2) and by 6.0% at current exchange rates, to Euro 1,391.7 million (US $1,924.5 million) from Euro 1,312.3 million (US $1,814.7) in the first quarter of 2009.
Considering operating performance, EBITDA(4) increased over the previous year by 6.9% to Euro 242.6 million (US $335.4 million) , from Euro 227.0 million (US $315.7 million) in the first quarter of 2009.
Operating income was Euro 171.2 million (US $236.7 million) for the first quarter of 2010, compared with Euro 154.2 million (US $213.2 million) for the same period the previous year (+11.1%), while operating margin rose to 12.3%, from 11.7% in the first quarter of 2009.
Net income for the first three months of 2010 grew to Euro 95.1 million (US $131.5 million), a 20.8% increase from Euro 78.8 million for the first three months of 2009, resulting in earnings per share (EPS) of Euro 0.21 (at an average US Dollar/Euro exchange rate of 1.3829). Net income expressed in US Dollars grew by 28.2% to $131.5 million ($102.6 million in the first quarter of 2009), resulting in EPS of US$0.29.
By carefully controlling working capital, the Group generated a positive free cash flow (over Euro 40 million or US $55.3 million) in a quarter that traditionally sees a negative trend. However, because of the exchange rate effect, consolidated net debt at March 31, 2010 was Euro 2,421 million ((US $3,348.0) (Euro 2,337 million at the end of 2009)), and the ratio of net debt to EBITDA(4) was 2.8X, compared with 2.7X at December 31, 2009). Net of the exchange rate effect, the ratio would have been 2.7X.
Overview of performance at the Wholesale Division
The continuous, across-the-market success of Oakley, up by roughly 20% in the quarter, and Ray-Ban, together with the positive performance of certain lines of our premium and luxury brands, the success of commercial policies and the STARS program, made it possible for the Group to achieve positive first quarter results.
The Division’s net sales rose to Euro 553.5 million (US $765.4) from Euro 501.6 million (US $693.6) in the first quarter of 2009 (+10.4% at current exchange rates and +9.1% at constant exchange rates(2)). In terms of sales performance in the key geographical areas, Luxottica saw positive results in emerging markets, Europe and the Middle East.
Operating income for the Wholesale Division amounted to Euro 120.1 million (US $166.1 million), a 14.4% increase compared with Euro 105.0 million (US $207.4 million) for the first quarter of 2009. Operating income as a percentage of sales rose to 21.7% from 20.9% for the first quarter of 2009, confirming the effectiveness of the measures taken to recover margins.
Overview of performance at the Retail Division
Net sales for the Retail Division rose to Euro 838.2 million (US $1,159.1 million)from Euro 810.8 million (US $1,121.2) in the first quarter of 2009 (+3.4% at current exchange rates, +5.6% at constant exchange rates(2)).
In terms of comparable store sales(3), the “optical prescription” business in North America made solid progress (+3.4%), driven by the results posted by LensCrafters (+6.6%), which benefited from the measures initiated over the last few months; positive comparable store sales were also achieved by Sears Optical and Target Optical. Comparable store sales in Australia were down compared to a particularly positive first quarter of 2009.
Thanks to the efforts of the new management structure, Sunglass Hut, the Group’s sun specialty chain that operates in a number of geographical areas, saw overall comparable store sales(3) increase by 8.1%, with strong performances in the United States (+10.8%), South Africa and the UK, while Australia and New Zealand had negative results.
As part of its expansion strategy, Sunglass Hut recently unveiled two flagship stores in New York and London that convey to consumers the brand’s values and offer an unparalleled shopping experience.
The Division’s operating income for the quarter grew more than proportionally with respect to net sales, amounting to Euro 88.0 million ((US $121.6 million) (a 6.8% increase from Euro 82.4 million (US $114.0 million) in the first quarter of 2009)); operating margin rose to 10.5% from 10.2% in the first quarter of 2009.
Strong results were seen in North America (+13%) and achieved by Sunglass Hut, also thanks to the efficiency measures taken; the performance of Australia, however, was negative, in part offset by one-time contributions.
The Annual General Meeting of Shareholders took place today. Shareholders approved the Company’s IAS/IFRS financial statements for fiscal year 2009 and the distribution of a cash dividend of Euro 0.35 (US $0.29) per ordinary share, reflecting a year-over-year 59% increase. The aggregate dividend amount is approximately Euro 160 million (US $221.3 million).
