Second quarter will be critical in terms of achieving results - Luxottica

11 May '09

6 min read

Consolidated operating income for the quarter was Euro 156.7 million, compared to Euro 207.1 million (down by 24.3%) for the first quarter of 2008. Consolidated operating margin was 11.9% for the quarter while it was 14.8% for the same period last year, thanks to particularly strong results by the Wholesale Division for that period.

Consolidated net income was Euro 80.4 million for the quarter, compared to Euro 103.7 million (down by 22.5%) for the same period last year. This result reflected earnings per share (EPS) of Euro 0.18 (at an average Euro/U.S. Dollar exchange rate of approximately 1.30). In terms of EPS in Euro before trademark amortization, the decrease would have been limited to 20.1%.

Thanks to strong control over working capital, the Group's cash flow generation for the quarter was significant. However, due to the impact of exchange rate fluctuations, at March 31, 2009, Luxottica's net debt position was Euro 2,963.4 million (compared to Euro 2,949.5 million at the end of 2008), while the ratio of net debt to EBITDA was 3.1x (3.0x net of currency exchange effects), compared to 2.9x at December 31, 2008.

Wholesale Division
The positive sales performance in all markets by Oakley and the success of Ray-Ban's optical collections only enabled the Group to partially offset the effects of the challenging macro-economic environment, which triggered strong measures by clients to cut inventory levels.

Wholesale sales for the period were Euro 501.6 million, compared to Euro 619.6 million (down by 19.0% at current exchange rates and by 19.8% at constant exchange rates). Regarding sales in key geographical regions, Luxottica's performance was substantially positive in Continental Europe and South America, while sales were down in Southern Europe, North America and the Far East.

In March and April, wholesale orders trended positively, reflecting recovery in Europe. May, June and July will be key months for determining the trend for the year.

Operating income for the Wholesale Division was Euro 105.3 million for the first quarter of 2009, (down by 32.8% from Euro 156.7 million for the first quarter of 2008, in which the performance of the division was particularly strong, while still representing an improvement over the final two quarters of last year. The Wholesale Division's operating margin was 21.0% for the quarter, compared to 25.3% for the first quarter in 2008.

Retail Division
Sales for the Retail Division improved to Euro 810.8 million for the first quarter of 2009, from Euro 779.1 million for the same period in 2008 (up by 4.1% at current exchange rates, down by 5.0% at constant exchange rates). Thanks to cost control initiatives, the Retail Division's operating income was substantially in line with the same quarter in the previous year (Euro 83.6 million compared to Euro 84.5 million for last year's first quarter, reflecting a decline of 1.1%). Consequently, the Retail Division's operating margin for the first quarter of 2009 declined to 10.3%, from 10.8% for the first quarter of 2008.

In terms of comparable store sales, the optical business in North America saw a decline (by 4.6%) during the first quarter of 2009, notwithstanding the excellent results by Pearle Vision, Sears Optical and Target Optical. In Australia, the trend in comparable store sales was positive once again (up by 1.5%).

Sunglass Hut, the Group's sun specialty chain that operates across several geographic regions, reported overall comparable store sales down by 10.3% in the first quarter of 2009 compared to the same period last year, with highly positive trends in Australia and New Zealand, South Africa and the UK but again negative in North America.

Luxottica Group S.p.A.

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