Luxottica: 2003 results

Luxottica Group today announced results for the three-month and the twelve-month period ended December 31, 2003. Results of the Opsm operations, the retail chain leader in the Australian market, were consolidated into the Group's results for the three- and twelve-month periods from August 1, 2003.

In the fourth quarter, consolidated net sales confirmed the reversal in the trend experienced in the third quarter when compared to the first part of 2003. Consolidated net sales for the quarter increased year-over-year by 5.9 percent to Eur 718.1 million. Assuming constant exchange rates, consolidated net sales for the quarter would have increased by 18.2 percent.

Consolidated operating income for the quarter was Eur 99.1 million and consolidated operating margin for the quarter was 13.8 percent. Consolidated net income for the quarter was Eur 59.6 million and consolidated net margin for the quarter was 8.3 percent. Earnings per share or American Depositary Share (Ads) (one Ads represents one ordinary share) for the quarter were Eur 0.13 or US$ 0.16.

Consolidated net sales for the Fiscal year 2003 declined year-over-year by 11.2 percent to Eur 2,824.0 million. Assuming constant exchange rates, consolidated net sales for fiscal year 2003 would have risen by 1.4 percent.

Consolidated operating income for the year was Eur 431.8 million and consolidated operating margin for 2003 was 15.3 percent. Consolidated net income for the year was Eur 267.3 million. Consolidated net margin for the fiscal year was 9.5 percent. Earnings per share or American Depositary Share (Ads) for the fiscal year were Eur 0.60 or US$ 0.67.

Consolidated net outstanding debt as of December 31, 2003 was Eur 1,470,4 million which includes the Opsm acquisition of Eur 285 million which was paid in September.

In the fourth quarter, year-over-year Retail Division sales increased by 13.1 percent to Eur 531.2 million. Assuming constant exchange rates, retail sales for the quarter would have risen by 29.6 percent. Excluding Opsm, same store sales in U.S. Dollars for the quarter increased by 2.9 percent compared to the same period last year, an improvement when compared to the decline of 2.3 percent in the first nine months of 2003. Retail operating income for the quarter was Eur 59.5 million. In U.S. Dollars, it increased by 46.9 percent. Retail operating margin was 11.3 percent.

In 2003, retail sales declined year-over-year by 9.2 percent to Eur 2,001.7 million. Assuming constant exchange rates, retail sales for the fiscal year would have increased by 6.7 percent. Excluding Opsm, same store sales in U.S. Dollars for the year declined year-over-year by 1.1 percent. Retail operating income for the year was Eur 269.8 million, resulting in an operating margin of 13.5 percent.

Leonardo Del Vecchio, chairman of Luxottica Group commented on the results of the Retail division: 'Traditionally, one of the weakest quarters in our retail division, the fourth quarter was indeed satisfactory. Same store sales actually increased by 2.9 percent with the first signs of economic improvement in North America, interrupting the negative trend begun in the fourth quarter of 2001. This positive result was also attributable to the good sales performance during the holiday season especially at Sunglass Hut International. We expect this improving trend to continue into 2004'.

The Group's manufacturing/wholesale sales for the fourth quarter declined year-over-year by 7.6 percent to Eur 221.2 million. Assuming constant exchange rates manufacturing/wholesale sales for the period would have declined 2.8 percent.

The Group's manufacturing/wholesale sales for fiscal 2003 declined year-over-year by 11.8 percent to Eur 995.1 million. Assuming constant exchange rates manufacturing/wholesale sales for the year would have declined 4.9 percent. Manufacturing/wholesale operating income for 2003 was Eur 191.1 million, reflecting an operating margin of 19.2 percent.

Mr. Del Vecchio added: '2003 was a challenging year for our Group due to factors which negatively affected both our overall business and the worldwide economy. The decrease by Eur 105 million in net income was partly due to the 16.4 percent devaluation of the U.S. Dollar against the Euro, which reduced net income by Eur 65 million. I am optimistic about 2004, especially because of the investments we made in 2003. We launched three new brands: Prada, Versace and Ray-Ban ophthalmic. We consolidated our market share in Australia through the acquisition of OPSM. Finally during 2003, we started negotiations with Cole National which a few days ago led to the signing of a merger agreement, adding to the list of acquisitions made and self-financed in the past ten years. In fact, the Group's ability to generate significant cash flow before dividend, expected to be in the range of Eur 300-400 million per year in the next few years, will allow us to repay for these acquisitions in a limited number of years'.

'2004 presents new opportunities which make us optimistic in the future of our Group', Del Vecchio concluded. 'Excluding the currency impact, we can confirm that we expect approximately 15 percent growth in net income. With a Euro/U.S. Dollars exchange rate of Eur 1.00 = US$ 1.25 we expect to post earnings per share (Eps) for fiscal year 2004 of Euro 0.63, or Epads of US$ 0.79'.