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| ANDREA GUERRA |
In a conference call with financial analysts to discuss the company’s first quarter results, Guerra said Luxottica saw signs of improvement in both its retail and wholesale segments during April and in the early days of May. But he was quick to add that “‘stabilization’ means business is not going down further. I’m absolutely not saying we’re back to our wonderful growth of the past—we’re still in a structural reset.”
Guerra’s comments came after Luxottica reported net income of €80.4 million in 2009’s first quarter, down 22.5 percent from the same period last year. The group’s consolidated revenues fell 6.2 percent in Q1 (down 11.6 percent at constant currency rates) to €1,312.3 million.
Luxottica’s worldwide retail sales rose 4.1 percent in the quarter, to €810.8 million; worldwide comparable-store sales were down 5 percent, however. In North America, optical comp-store sales fell 4.6 percent. Guerra said that while Pearle Vision and the company’s Licensed Brands stores had “excellent results” in the first quarter, LensCrafters’ revenues were impacted by a 19 percent drop in multiple-pair sales and by increased usage of managed vision benefits in the period.
Sunglass Hut’s comp-store sales in the U.S. fell 15 percent in Q1, but were down only 10 percent in April—another sign of “stabilization,” according to Guerra.
On the wholesale side, Luxottica’s revenues dropped 19 percent (down 19.8 percent at constant currency rates) in Q1 to €501.6 million. Star performers for the wholesale segment were the Ray-Ban and Oakley brands, Guerra said; Oakley’s total sales rose 7 percent in U.S. dollars in the quarter.
Looking ahead, the Luxottica CEO said the company’s performance in the second quarter will be critical in determining the direction of 2009 as a whole, in part because of the beginning of the key sunglass season. So far, Luxottica saw a 9 percent increase in consolidated sales in April, aided by a jump in retailers’ restocking levels as the weather improved. Also, “consumers’ attitudes have improved in the past month, with more wishing to go back to the mall and make purchases,” Guerra noted.
“Does this mean every problem is over?” he asked rhetorically. “No, not at all, but we feel a little bit better today.”
Guerra said Luxottica began to see the benefits of its moves toward greater efficiency during Q1, predicting the balance of those efforts—including a 10 percent to 15 percent reduction in inventory levels so far compared to last year—would be realized by the end of the second quarter. In Q1 the company’s Italian factories manufactured 25 percent less merchandise than a year earlier, and will cut second-quarter production by 10 percent compared to the same period in 2008.
He expects Luxottica Retail’s performance to be helped by the new LensCrafters ad campaign that kicked off in mid-April--noting, “We’re quite brave to launch during this period”—and by a shift in ad mix toward more TV spots, although overall ad spending is down compared to last year.
The company is proceeding with its plan to franchise additional Pearle Vision stores, with existing Pearle franchisees having been given first crack at the stores now up for franchising. Luxottica has also closed 35 Sunglass Hut stores since the first of the year, and is continuing to review unprofitable Licensed Brands locations.
—Cathy Ciccolella
