Luxottica Group, the parent of Oakley, Ray-Ban and Sunglass Hut, reported sales in the third quarter were up 0.8 percent at constant exchange rates but slid 3.5 percent at current exchange rates as a result of the strong Euro appreciation against the main currencies.
In the first nine months of the year, revenues rose by 1.5 percent at constant exchange rates (+1.7 percent at current exchange rates). Quarterly sales performance showed dual speeds: growth acceleration in July and August compared to the first half of the year, followed by a drop in September due to extraordinary events that penalized the business mainly in North America. Globally, these events led to a closure of about 800 Group stores and the total loss of over 4,000 retail days.
Strong growth in Europe and Latin America and an improvement in Asia-Pacific led the Group’s quarterly sales. The restructuring of Oakley’s sport and retail channels and changes in the LensCrafters business still weighed on sales in North America.
Ray-Ban continues to grow as a most-loved and innovative brand, particularly among younger generations. Thanks to the integrated and increasingly consumer-centric management of sales channels, the brand grew by double digits in the wholesale channel in North America, on RayBan.com globally and through the mono-brand stores in China.
The Wholesale division, which showed improvement compared to the second quarter, recorded flat sales (-0.3 percent at constant exchange rates), thanks to the increase in the average unit price and the positive effect of “MAP policy” in North America. The Retail business grew 1.3 percent at constant exchange rates, benefiting from the contribution of new stores, OPSM’s excellent performance in Australia and Ray-Ban stores in China. The Group’s comparable store sales3 were down 5.1 percent due to extraordinary events and the evolution of LensCrafters’ business model.
“We are pleased with the results of July and August, where the Group’s businesses generated a solid growth. The unexpected events of September hurt sales for the period, impacting the results of our business in North America, Mexico and China. Nonetheless, and net of strong exchange rate volatility, we have closed a growing quarter,” commented Leonardo Del Vecchio, executive chairman, and Massimo Vian, CEO for product and operations of Luxottica. “The many initiatives taken in the last two years are bringing clear benefits, particularly the ‘MAP policy’ which in North America supported double-digit growth for Ray-Ban in the sun segment and online. The success of OPSM in Australia is another example of a strategic initiative undertaken by the Group with consistency and determination. In the same spirit, we are now leading the change in LensCrafters for the chain’s long-term success, with a new courageous commercial offering for the American market that is clear and transparent, free of a heavily promotional approach and focused on the quality of the products and services.”
“Thanks to a return to growth in the first weeks of October and the solid profitability and cash flow of the first nine months, we confirm the outlook for 2017. We are confident that the many initiatives that have been taken in the last two years can lead to acceleration of growth in 2018.”
In the third quarter, Europe continued to be a bright spot for the Group with sales increasing for the tenth consecutive quarter. Net sales were up 16 percent at constant exchange rates (+14.2 percent at current exchange rates), positive even net of the contribution of Salmoiraghi & Viganò and on top of the strong results in the previous two years.
Growth in the region was driven by Italy, Spain, France, the United Kingdom, Turkey and Eastern Europe thanks to the warm welcome of the latest spring-summer collections and the continuous improvement of service levels.
The Retail division benefited from the consolidation of the Salmoiraghi & Viganò stores in Italy and Sunglass Hut’s growth in continental Europe, with an excellent start to the sun season in the region and the contribution of new stores.
Third quarter sales in North America recorded a 3.7 percent drop at constant exchange rates (-9 percent at current exchange rates) due to the extraordinary events that affected the region during the period and changes introduced in retail, particularly in LensCrafters. Three devastating hurricanes hit Texas, Florida and Puerto Rico, leading to a closure of about 570 Group retail stores, most of them for over a week, and impacting thousands of wholesale customers.
The wholesale business, up 0.5 percent at constant exchange rates (-5.4 percent at current exchange rates), was driven by sales to the optical channel and department stores, which offset weakness in the sport channel. In the quarter, Ray-Ban sales were up double-digit in the sun segment thanks to the brand’s great vitality.
Asia-Pacific closed the third quarter with sales in line with the same period of the previous year (- 0.6 percent at constant exchange rates, -5.2 percent at current exchange rates), especially thanks to the positive contribution of Australia, Japan and the travel retail business in the Asian region. The Wholesale division is still impacted by the restructuring of distribution in Mainland China and the new commercial policies that are almost exclusively focused on direct sales to the final consumer.
The retail business drove the growth in the region, thanks to the excellent performance of the optical retail business and Ray-Ban stores in China, with over 60 new openings by the end of the year. The acceleration of OPSM sales in Australia were also a strong contributor.
Latin America, like Europe, helped to maintain the positive performance of the Group in the third quarter, with sales up 7.9 percent at constant exchange rates (+6.7 percent at current exchange rates). Brazil reported net sales accelerating in the quarter compared with the first half of the year, thanks to an improved macroeconomic environment and the consolidation in the Group’s perimeter of Óticas Carol.
Mexico continued to grow solidly but slowed down its pace due to the September earthquake that has led to the temporary closure of a quarter of the Group’s stores in the area. Within retail, Sunglass Hut continues to expand into the region with the opening of its first stores in Colombia and Argentina. GMO, after ten consecutive quarters of growth, was impacted by negotiations with trade unions that limited Chile’s network operations for a few days.
Luxottica makes eyewear under proprietary brands include 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. The company also has a retail network of approximately 9,000 stores, with LensCrafters and Pearle Vision in North America, OPSM and LensCrafters in Asia-Pacific, GMO and Óticas Carol in Latin America, Salmoiraghi & Viganò in Italy and Sunglass Hut worldwide.
Photo courtesy Oakley