Luxottica sales rise on Ray Ban but like-for-like dips

The Italian group Luxottica, the world leader in luxury eyeglasses and in the midst of a merger with French lens manufacturer Essilor, announced Friday an increase of 5.2% in sales in the first quarter to 2.38 billion euros, and confirmed its outlook for 2017

 
This growth was driven by "the Group's strong performance in Europe and Latin America, a favorable exchange rate and the excellent performance of the Ray Ban brand," Luxottica said in a statement. Factoring in the impact of currency moves, sales rose 1.9%

However, like-for-like sales fell 3.5 percent in the first quarter, hit by a recently introduced policy of reducing discounts and promotions online and across its retail network.  The fall compared with a 0.5 percent increase in the last quarter of 2016 and a 1.6 percent rise in January-March last year.

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North America remains the Group's main market, which generated 60% of its sales, followed by Europe (20%) and Asia-Pacific (13%).

Luxottica's executive chairman, Leonardo Del Vecchio, and its managing director, Massimo Vian, welcomed these "positive results" marked by "an increase in online sales and improved margins". Thanks to the changes made over the last 12 months, especially in terms of organization, "Luxottica is an even stronger and more competitive company," they added.

The group confirmed its targets for 2017, low to mid-digit growth in sales at constant exchange rates.

But analysts were not as impressed. "This is not a particularly good set of results," said Luca Solca, an analyst at Exane BNP Paribas. "Overall top line growth is in line with expectations - but this result is supported by perimeter (Salmoiraghi) and store openings," he said, referring to Luxottica's move to acquire full ownership of optical chain Salmoiraghi & Vigano in late 2016.

Luxottica's revenues have suffered in recent quarters as the group introduced a new policy aimed at curbing online discounts of its biggest brand Ray Ban and cut ties with several independent distributors in China.

Chief Financial Officer Stefano Grassi told a conference call with analysts the new strategy had actually had a smaller impact on first-quarter revenues than initially expected by the company. He said like-for-like sales were expected to improve during 2017.

Luxottica is expected to merge with Essilor by the end of 2017, the world leader in ophthalmic lenses, to become the world’s largest eyewear company with a market capitalization of more than 50 billion euros.

After the merger, the company will be headquartered in the Paris suburb of Charenton-le-Pont (Val-de-Marne), where the current offices of Essilor are already located. Together, the two companies will form an eyewear powerhouse, accounting for more than 15 billion euros in sales and 140,000 employees worldwide.

Luxottica's soft start to the year compares with a 7 percent rise in first-quarter revenue reported by France's Essilor earlier this week, net of currency moves.

Luxottica and Essilor expect to complete their merger, announced in January, by the end of the year after receiving a green light from various antitrust authorities.

With additional reporting by Reuters