Luxottica to Step up Retail Expansion
Company wants to sustain strong profit growth.
Italy’s Luxottica, the world’s largest eyewear group, reported a 19 percent rise in underlying operating profits on Monday due to robust sales in North America and Europe and said it plans to step up investments to keep the growth coming. The maker of Ray Ban and Oakley sunglasses expects to meet its full-year forecast of a mid- to high-single-digit percentage rise in revenue and double that rate for operating and net income, co-Chief Executive Massimo Vian told Reuters.
Luxottica has consistently met these rates of growth – what it calls its ‘rule of thumb’ – since 2010 but whether this will prove to be the case next year depends on the speed at which it expands its retail operations, Vian said.«As for the future, our revenues will certainly continue to grow and profitability will grow even faster. How fast though will be decided over the next few months depending on our investment plans,» he said in a telephone interview . «Our plan is to invest in ourselves to make sure we deliver those results we keep advertising,» he added.
With North America accounting for 62 percent of sales, the euro’s weakness against the dollar has helped boost revenues and as a result taken Luxottica’s share price to record highs this year. But while exchange rates can only have a short term impact the company is aiming to have nearly doubled revenues by 2024 to 15 billion euros, up from 7.65 billion euros last year. Vian said Luxottica would invest in expanding its retail chains Lens Crafters and Sunglass Hut and «significantly increase» outlets for Oakley, the Californian brand bought in 2007. It also wants to invest in its logistical infrastructure.
A new business plan will be presented early next year, Vian said, detailing the strategy being pursued by the two chief executives that have led the group since January. Luxottica switched to a dual-CEO structure after the departure, in close succession, of long-time boss Andrea Guerra and his replacement late last year amid rifts with founder and key shareholder Leonardo Del Vecchio. Vian, an engineer and former chief operating officer, was appointed co-CEO next to Adil Mehboob-Khan, a former top executive at Procter & Gamble who oversees markets.
The strong dollar helped drive up Luxottica’s sales in North America by 23 percent in the third quarter, while a hot summer in Europe helped push sales up there by 9 percent. Overall sales rose 15.4 percent in the period – or 5.5 percent at constant currencies – to 2.2 billion euros ($2.4 billion), meeting analysts’ expectations. The figure is adjusted for the impact of accounting changes at a unit.
Third-quarter operating profit rose to 351 million euros before extraordinary costs from the integration of Oakley’s operations into Luxottica, in line with a consensus of seven analyst forecasts gathered by Reuters of 353 million euros. Lower exchange rates hit Luxottica’s sales in Latin America while sales in China, which accounts for only 3 percent of group sales, suffered due to the company’s decision to cut by 10-15 percent the prices of luxury eyewear to align prices globally and offset the strength of the yuan.