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

11 May '09

6 min read

The Board of Directors of Luxottica Group S.p.A., a global leader in the design, manufacturing and distribution of fashion, luxury and sports eyewear, approved its consolidated financial results for the three-month period ended March 31, 2009 in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) and with International Financial Reporting Standards (IFRS).

Performance overview for the first quarter of 2009
The first quarter of 2009 was a particularly challenging period for the eyewear market, due to the structural changes that it is currently undergoing. Demand and the market in general were affected by three main factors: consumer attitudes, rapid reduction in inventories by clients in all geographical areas and the slowdown in the global economy. At the same time, it should be noted that some positive signals are now being seen on all three of these fronts.

"After the first four months of 2009, we are already seeing a clear difference between the January to February and March to April periods," said Andrea Guerra, Chief Executive Officer of Luxottica Group. "In fact, in March and April our results have stabilized in North America, while improving in nearly all other markets. April ended with sales results ahead of last year. In fact consolidated sales year-to-date were down by only 3% compared to the same period last year."

The impact from the reduction in inventory levels by clients was particularly evident in the results of the Wholesale division, where sales were down by 19.0% after 20 consecutive quarters of growth.

For the first quarter of 2009, Luxottica posted sales of Euro 1,312.3 million, compared to Euro 1,398.7 million for the first quarter of 2008 (down by 6.2% at current exchange rates and by 11.6% at constant exchange rates). The first quarter of the year was also characterized by the continuation of the initiatives and ongoing activities launched seven to eight months ago to optimize the Group's equity structure and rapidly adjust its cost structure to changing needs, the results of which are already being felt.

During the first quarter of 2009, Luxottica maintained a high level of cash flow, with free cash flow generation of nearly Euro 80 million (historically, cash flow generation for the first quarter is negative due to seasonality); it completed adjustments to manufacturing capacity and logistics, which resulted in strong inventory reductions; and it continued projects to improve efficiency that are scheduled to be completed by June 2009.

The second quarter will be critical in terms of achieving results for the full year and it has already begun more positively than the trend of the last few months. The macro-economic environment is still not positive, but it is improving. Luxottica's approach remains unchanged with a strong focus on all the levers that the Group controls, with the speed and flexibility to ensure the long-term success of its brand portfolio.

Consolidated results for the first quarter
Consolidated sales were Euro 1,312.3 million, compared to Euro 1,398.7 million for the first quarter of 2008 (down by 6.2% at current exchange rates and by 11.6% at constant exchange rates).

Consolidated EBITDA was down year-over-year by 16.6% to Euro 229.6 million from Euro 275.3 million. Consolidated EBITDA margin for the period declined to 17.5% from 19.7% for the first quarter of 2008.

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