Luxottica: 3rd quarter results
Luxottica Group today announced results for the three-month period and the nine-month period ended September 30, 2003. During the third quarter the company acquired Opsm, the retail chain leader in the Australian market, whose operations results were consolidated into the Group's results for the three- and nine-month periods from August 1, 2003.
In the third quarter, consolidated net sales experienced a reversal in the trend when compared to the first half of 2003. In fact, consolidated net sales for the quarter declined year-over-year by 6.3 percent to Eur 694.5 million, while assuming constant exchange rates, consolidated net sales for the quarter would have increased by 3.4 percent, compared to the decline of 5.9 percent in the first half of 2003.
Consolidated operating income for the quarter was Eur 109.4 million. Consolidated operating margin for the quarter was 15.8 percent. Consolidated net income for the quarter was Eur 74.4 million and consolidated net margin for the quarter was 10.7 percent. Earnings per share or American Depositary Share (Ads) for the quarter were Eur 0.17 or US$ 0.19.
Consolidated net sales for the nine-month period declined year-over-year by 15.8 percent to Eur 2,106.0 million. Assuming constant exchange rates, consolidated net sales for the nine months would have declined by 3.1 percent.
Consolidated operating income for the nine months was Eur 332.7 million and consolidated operating margin for the nine-month period was 15.8 percent. Consolidated net income for the nine-month period was Eur 207.7 million and consolidated net margin for the period was 9.9 percent. Earnings per share or American Depositary Share (Ads) for the nine-month period were Eur 0.46 or US$ 0.51.
In the third quarter, year-over-year retail sales declined by 4.7 percent to Eur 530.4 million. Assuming constant exchange rates, retail sales for the quarter would have increased by 7.0 percent. 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 percent in the first half of 2003.
Retail operating income for the quarter was Eur 88.4 million. In U.S. Dollars, it increased by 4.7 percent. Retail operating margin was 16.6 percent.
In the nine-month period, retail sales declined year-over-year by 15.3 percent to Eur 1,470.5 million. Assuming constant exchange rates, retail sales for the nine months would have declined by 0.6 percent. Excluding Opsm, same store sales in U.S. Dollars for the nine-month period declined year-over-year by 2.3 percent. Retail operating income for the nine-month period was Eur 210.3 million, resulting in an operating margin of 14.3 percent.
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'.
The Group's manufacturing/wholesale sales for the nine-month period declined year-over-year by 13.0 percent to Eur 773.9 million. Assuming constant exchange rates manufacturing/wholesale sales for the nine months would have declined 5.5 percent. Manufacturing/wholesale operating income for the nine-month period was Eur 153.4 million, reflecting an operating margin of 19.8 percent.
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 percent in the first six months of 2003 to 12.5 percent 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 percent 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'.
