Luxottica’s Q2 Profits Climb 30% on Robust Sales Gains

Luxottica SpA  said net profit in the second quarter rose 30% on strong sales of its Ray-Ban and Oakley brands, the rebounding U.S. market and improved profitability in both wholesale and retail channels.

The Milan-based company said net profit climbed to €150.1 million ($194.2 million) from €115.3 million in the same period a year earlier. Sales rose 14% to €1.60 billion ($2.1 billion). Sales in U.S. dollars rose 8% despite cautious consumer behavior in the
country, while Ray-Ban and Oakley continued to record double-digit
percentage growth.

For Luxottica, the second quarter reflected the strongest results in the Group's history. For the first time ever, quarterly net sales approached €1.6 billion, with net income reaching €150 million. Both Divisions contributed to the achievement of this excellent result, successfully reaping the benefits of the extraordinary work carried out during recent quarters and confirming the strength of the Group's brands while strengthening our market position.

“We are particularly proud of the results achieved by Luxottica this quarter,” commented Andrea Guerra, Chief Executive Officer of Luxottica. “We have successfully invested in the right markets and embarked on actions that are resulting in very positive results indeed. We have launched collections and special projects that have proven to be particularly well-received in the market and we have been able to achieve growth wherever we identified opportunities.

“Our brand portfolio has once again proven to be our strength: Ray-Ban and Oakley continued to record double-digit percentage growth and our premium and luxury brands also had positive improvement. We should also mention the performance recorded in North America, a key region for Luxottica: despite the fact that the US consumer is still cautious, our sales in US dollars were up by 8%, rewarding the efforts made by our Wholesale Division, Sunglass Hut and LensCrafters, as well as the growing synergies we are developing between our Divisions.

“These results provide an excellent basis for us to look with confidence to the second half of the year. Once again, we are aware that it will be important to remain determined and seize opportunities from wherever they come.”

In the second quarter of the year, Luxottica achieved positive performances in most geographic regions where it is present. The Wholesale Division recorded its best sales performance in the Group's history. Emerging markets made a key contribution to this performance, boasting an increase in Wholesale sales by approximately 30% compared to the same period last year, along with the United States and Europe, which enjoyed a particularly positive 'sun' season. 

The results posted by Sunglass Hut were also very solid, with net sales benefiting from the major store-opening plan within US department store Macy's, allowing record sales to be recorded in June. Strong results were also posted by the two recently-opened flagship stores.

Consolidated results

In the second quarter of 2010, net sales rose by 13.8% at current exchange rates and by +6.5% at constant exchange rates(2), to €1,595.1 million from €1,401.6 million. During the half-year period, net sales rose by 10.1% to €2,986.8 million from €2,714.0 million in the first half of 2009.

EBITDA(3) grew over the previous year by +22.2% to €335.4 million for the second quarter, from €274.5 million in the second quarter of 2009. For the first half of the year, EBITDA(3) grew to €578.0 million from the €501.5 million posted for the first half of 2009.

Operating income was €258.3 million for the second quarter (€203.3 million for the same period last year, +27.1%), while the Group's operating margin improved from 14.5% in the second quarter of 2009 to 16.2% in the second quarter of 2010. In the first half of the year, operating income amounted to euro 429.6 million, up 20.2% from the €357.5 million posted for the same period last year.

Net income for the second quarter of 2010 increased to €150.1 million (up by 30.1% from €115.3 million for 2009), resulting in earnings per share (EPS) of €0.33 (at an average Euro/Dollar exchange rate of 1.2708).

For the second quarter of 2010, once again the Group generated excellent positive free cash flow(3) (€160 million): however, because of the exchange rate effect after having paid dividends during the quarter of more than €160 million and having acquired the remaining 35.16% of our Turkish subsidiary for approximately €60 million, consolidated net debt as of June 30, 2010 amounted to €2,646 million (€2,337 million at the end of 2009), with a ratio of net debt to EBITDA(3) of 2.8X, compared with 2.7X at the end of 2009 (net of the exchange rate effect, the ratio of net debt to EBITDA(3) as of June 30, 2010 would have been 2.6X, down from 2.8X as of December 31, 2009).

Overview of performance at the Wholesale Division

The excellent trend of all Group brands, with Ray-Ban and Oakley having stable double-digit growth, the positive performance of our luxury brands (also up by double digits), the continuous success of our commercial policies and the STARS program made it possible for the Wholesale Division to achieve positive quarterly results.

The Division's sales rose to €651.2 million in the second quarter from euro 575.4 million in the second quarter of 2009 (+13.2% at current exchange rates and +7.8% at constant exchange rates(2)). For the half-year, net sales were €1,204.7 million, up 11.9% from the €1,077.0 million recorded for the first half of 2009 (+8.4% at constant exchange rates(2)). In terms of sales performance in the main geographic areas, Luxottica saw positive results in emerging markets, particularly in Brazil, China, India, Korea and Eastern Europe.

Operating income for the Wholesale Division in the second quarter amounted to €157.2 million, up by 21.5% compared with €129.3 million for the second quarter of 2009. The operating margin rose to 24.1%, from 22.5% for the second quarter of 2009, confirming the effectiveness of the measures taken to recover margins. In the first half of the year, the operating margin was 23.0% (compared to 21.8% in the first half of 2009).

Overview of performance at the Retail Division

Net sales for the Retail Division rose to €944.0 million in the second quarter from €826.2 million in the second quarter of 2009 (+14.3% at current exchange rates, +5.6% at constant exchange rates(2)). During the half-year period, net sales were €1,782.1 million, rising by 8.9% from €1,637.0 million for the first half of 2009 (+5.6 at constant exchange rates(2)).

In terms of comparable store sales(4), the “prescription” business in North America made good progress (+4.1%), with LensCrafters posting solid growth in comparable store sales despite less focus on promotions when compared to the same period last year and continuing to benefit from the measures initiated over the last few months. Positive comparable store sales were also achieved by Sears Optical and Target Optical.

In contrast, comparable sales trends in Australia were negative, in a market where the effects of the structural adjustment of the global economy are being felt in 2010. However, this has not caused Luxottica to slow investments in the area, as confirmed by the recent opening of the first OPSM eye hub, an innovative concept store that marks a new era in the retail field.

Sunglass Hut, the Group's sun specialty chain that operates in a number of geographic areas, also posted positive results in terms of margins, with overall comparable store sales(4) up 4.6%, due mainly to positive results achieved in the United States (+5.5%) and the UK.

The Division's operating income grew by +19.4% to €136.6 million in the second quarter from €114.4 million in the second quarter of 2009. The operating margin rose to 14.5% from 13.8%. On a half-yearly basis, the operating margin was 12.6% (compared to 12.0% in the first half of 2009).