EssilorLuxottica : Good resistance for the first quarter with
revenue down 10%, Taking measures to control costs and preserve
cash & Preparing for recovery and delivering on our
responsibilities to all
Good resistance for the first quarter
with revenue down 10%Taking measures to
control costs and preserve cashPreparing
for recovery and delivering on our
responsibilities to all
- Solid growth up to February, followed by material
declines in March due to COVID-19
- Optical business less affected, Online sales up double
digits
- Robust balance sheet and liquidity with Euro 4.9
billion in cash and short-term investments
- Positioned for recovery with strong product pipeline
and go to market strategy
- Enhanced corporate citizenship to support communities,
employees and customers
Charenton-le-Pont, France (May 5, 2020 –
7:00am) – EssilorLuxottica today announced that
consolidated revenue for the first quarter of 2020 totalled Euro
3,784 million, representing a year-on-year decline of 10.1%
compared to Q1 2019 revenue (-10.9% at constant exchange rates1),
revealing good resistance in the current unprecedented global
crisis.
“The market is going through an unprecedented
crisis and we have answered the call as a leader with a
responsibility to everyone whose lives we touch. Leading by example
during the COVID-19 pandemic, we are working hard to keep our
employees and their families safe, provide essential vision care
for emergency workers on the front lines and do our part to support
the customers and partners who make up the lifeblood of our
business.
While we are adapting the organization for the
few months ahead, early experience from the first countries to open
is encouraging. When the crisis fades, the resilient demand for
better vision will be visible again and we will be ready to serve
it.
The digitally powered network that we have
worked hard to build, connecting more than 400,000 optical stores
and labs, can now guarantee the best support to our customers and
an open door for all consumers even in the most difficult
times.
This combination of social and business
leadership will strongly help EssilorLuxottica and the entire
industry when a wider recovery materializes. Until then, we
continue to sharpen our digital assets, feed our consumers’ love
for brands and build on our talents”, commented Francesco Milleri,
CEO and Deputy Chairman of Luxottica, and Paul du Saillant, CEO of
Essilor.
Update on the COVID-19
crisis
EssilorLuxottica entered the COVID-19 crisis
with the advantage of a balanced market exposure spanning multiple
products, channels, price points and geographies as well as about
70% of revenue exposed to resilient optical prescription needs. Its
recent digital transformation has allowed the Company to strengthen
its customer and consumer relationships during this downturn
through CRM, e-commerce, online learning and social media.
In responding to the crisis, EssilorLuxottica’s
priority has been to ensure the health and safety of its employees.
It swiftly leveraged its strong IT capabilities to implement remote
connections with employees, customers and consumers and deliver a
functional and productive work-from-home strategy. It launched a
Euro 100 million fund to support employees and their families in
need and activated emergency pay for its most vulnerable employee
population in factories and retail stores. The Company also honored
its commitment to social responsibility by donating over two
million pieces of personal protective equipment including safety
goggles, protective eyewear and face masks to hospitals, public
institutions, employees and partners wherever it has local
roots.
EssilorLuxottica implemented strict measures to
secure business continuity, control costs and preserve cash in
order to position itself for a successful future:
- The Company relied on its diverse and flexible manufacturing,
logistics and optical lab footprint to provide business continuity
despite closures required by government guidelines and adapted the
capacity utilization to current demand.
- Costs were quickly controlled through employee furloughs,
reductions or deferrals of manager compensation, suspension of
marketing expenses and negotiations with suppliers and
landlords.
- Cash was preserved thanks to the cessation of share buybacks,
the decision not to propose a dividend distribution to the Annual
Shareholders’ Meeting and the suspension of all non-crucial
investments.
- New acquisitions and partnerships were put on hold until the
economy stabilizes.
Although group revenue has declined further in
April, worldwide needs for better vision are structural and likely
to fuel pent-up demand when the crisis fades, leading optical to be
one of the first essential categories to restart. For instance,
online sales staged an acceleration since March, when they reached
7% of group revenue versus 5% for the quarter, and they increased
further in April. In the first countries to reopen, domestic sales
of prescription products have regained momentum since the end of
March. In China, domestic sales of prescription lenses returned to
year-on-year growth since the end of April, even though total sales
were still down. The Company is prepared for wider recovery with a
pipeline of innovative branded products well suited to the new
environment.
The first quarter of 2020 was marked by solid
trends until March, followed by a rapid decline in most markets due
to store closures related to the COVID-19 pandemic. Given the
Company’s reliance on eye exam activity and retail traffic,
activity slowed across all divisions and geographies where social
distancing measures were enacted.
First-quarter 2020 revenue by operating
segment
In millions of Euros |
1Q 2020 |
1Q 2019* |
Change at constant rates1 |
Currency effect |
Change (reported) |
Lenses &
Optical Instruments |
1,589 |
1,674 |
-5.8% |
0.7% |
-5.1% |
Sunglasses &
Readers |
134 |
167 |
-20.5% |
1.2% |
-19.3% |
Equipment |
38 |
44 |
-14.4% |
1.5% |
-12.9% |
Essilor revenue |
1,762 |
1,885 |
-7.3% |
0.8% |
-6.5% |
Wholesale |
695 |
867 |
-19.8% |
0.0% |
-19.8% |
Retail |
1,327 |
1,458 |
-10.3% |
1.3% |
-9.0% |
Luxottica revenue |
2,023 |
2,325 |
-13.8% |
0.8% |
-13.0% |
Total
revenue |
3,784 |
4,210 |
-10.9% |
0.8% |
-10.1% |
* The breakdown of 2019 revenue has been
restated following the integration of Costa into Luxottica’s brand
portfolio.
Lenses & Optical
Instruments
The Lenses & Optical Instruments division
saw revenue decline by 5.1% (-5.8% at constant exchange rates1).
This resilient performance was adversely affected by closures of
optical retail outlets across North America, Latin America, Europe
and Asia, most of which have continued in April. However, market
activity started a gradual recovery from early March in China as
reopening began. E-commerce activity has strengthened since March
as consumers have continued to complete optical purchases of both
eyeglasses and contact lenses online. The global roll-out of
innovation from the Company’s product pipeline was postponed but is
ready to resume upon broader market reopening, including
Transitions Signature GEN 8, AVA lenses for better accuracy and the
successful Vision-R 800 measuring instrument.
Sunglasses & Readers
The Sunglasses & Readers division reported
revenue down 19.3% (-20.5% at constant exchange rates1). The
current scope includes Xiamen Yarui Optical (Bolon) and MJS, which
operate mainly in China, and FGX, which operates primarily in North
America.While the year started well for all three businesses,
Xiamen Yarui Optical (Bolon) and MJS were impacted by the COVID-19
related lockdowns in China from late January. Their decrease
gradually subsided from mid-March with the optical prescription
category outperforming sun, which has been much slower so far in
the recovery. FGX was impacted by the lockdowns in Europe and the
United States from March. Online sales for the division posted
double-digit growth in the first quarter.
Equipment
The Equipment division reported a decrease of
12.9% in revenue (-14.4% at constant exchange rates1). First
quarter dynamics carried over from 2019 in most markets ahead of
the COVID-19 impact. In response to the crisis customers took steps
to shore up near term supplies, which positively impacted
consumable sales, and postponed new orders of machine equipment
pending a stabilization in market conditions.
Wholesale
In the first quarter of the year, Luxottica
Wholesale posted Euro 695 million revenue, with a 19.8% decline
versus the same period of last year at both current and constant
exchange rates1. The division’s performance sharply deteriorated in
March, when more than two thirds of the Company’s customers shut
down stores worldwide and foot traffic in the remaining locations
collapsed. In the quarter, all the regions were equally down and
the positive price mix, the consolidation of Barberini and the
integration of Costa into Luxottica’s brand portfolio (included in
2019 revenue on a restated basis) could not materially offset the
sales decline due to COVID-19. In terms of mix, the prescription
business proved to be more resilient than sunglasses. Third-party
e-commerce platforms recorded solid growth, in particular in North
America where sales were up double digit.
Retail
Luxottica Retail recorded Euro 1,327 million
revenue, down year-on-year 9.0% at current and 10.3% at constant
exchange rates1. The division posted a strong start to the year in
January-February with sales up 8.0% (+5.5% at constant exchange
rates1) and then experienced a visible contraction in March as the
lockdown measures and mobility restrictions introduced in most of
the countries took effect. These restrictions forced the Company to
enact massive store closures and caused material traffic decline in
the locations that were still operating. The unprecedented
situation led to the closure of approximately one third of
Luxottica’s retail optical stores and most of the sun locations on
a global scale at the end of the quarter. Retail optical in North
America and Australia-New Zealand proved to be relatively less
affected, down low-to-mid single digit in sales at constant
exchange rates1 in the quarter after a strong performance in
January-February. This was due to a later emergence of COVID-19 in
those regions as well as the continued essential eyecare the
optical networks provided to their clients in need. Luxottica’s
direct e-commerce was up 14% in the first quarter, with all the
major proprietary platforms posting solid growth.
First-quarter 2020 revenue by geographical
area
In millions of Euros |
1Q 2020 |
1Q 2019* |
Change at constant rates1 |
Currency effect |
Change (reported) |
North
America |
2,070 |
2,188 |
-8.1% |
2.7% |
-5.4% |
Europe |
906 |
1,056 |
-14.1% |
-0.2% |
-14.3% |
Asia, Oceania and
Africa |
587 |
705 |
-16.4% |
-0.4% |
-16.8% |
Latin
America |
222 |
261 |
-6.8% |
-8.1% |
-14.9% |
Total |
3,784 |
4,210 |
-10.9% |
0.8% |
-10.1% |
* The geographical breakdown of 2019 revenue has
been revised to reflect a reclassification of certain geographic
markets, which the Group considers immaterial.
North America
In North America revenue decreased by 5.4%
(-8.1% at constant exchange rates1).
Essilor revenue proved resilient in this context
with a decline of 4.7% at constant exchange rates1. The Lenses
& Optical Instruments division experienced steady trends across
the US and Canada until the middle of March, after which it was
negatively impacted by store closures. In response to the crisis,
the division rapidly adjusted its cost base and supply chain and
has leveraged its alliance network to provide support for
independent eyecare professionals, while getting ready for the
recovery when it comes.Online sales continued to expand with
eyeglasses and contact lenses driving the performance. EyeBuyDirect
and Clearly saw record sales growth in April with a strong inflow
of new customers.
Sunglasses & Readers sales were down
mid-single digit for the quarter despite a strong start to the
year. FGX declined sharply in the second half of March with readers
proving more resilient than sunglasses in the downturn.
The Equipment division saw a slightly later
onset of COVID-19 related weakness as its primary customers began
to reduce activity along a different timeline.
For Luxottica, North America had a solid start
in January-February, with sales up 7% at constant exchange rates1,
in further acceleration versus the strong trend of the fourth
quarter 2019. Business deterioration started in March when the
COVID-19 outbreak reverted the trend.Wholesale had a promising
start to the year driven by independents and key accounts as well
as the strong performance of Oakley, then stalled in March when
most customers began to close their doors due to the pandemic.
Retail turned negative as well, as one-third of
the group’s optical retail stores and all Sunglass Hut and Oakley
locations shut down from mid-March and traffic into open stores was
drying up. Strong signs of business health in January-February,
with LensCrafters and the overall retail optical network up mid- to
high-single digit in sales, were erased by the sharp contraction of
March. Luxottica’s directly operated e-commerce platforms were up
double digit, mostly thanks to Ray-Ban.com and SunglassHut.com
performance.
The sound trajectory of the optical retail
business in North America before the COVID-19 outbreak in the
region is a source of confidence for the Company. When the economy
stabilizes and restarts, given optical retail’s nature of primary
non-discretionary service, it will be ready to serve the wide
pent-up demand.
Europe
In Europe revenue decreased by 14.3% (-14.1% at
constant exchange rates1).
Essilor revenues were down 6.7% at constant
exchange rates1. In Lenses and Optical instruments, the business
was boosted by the successful launch of Transitions Signature GEN 8
in Italy, Spain and the UK in the earlier part of the year. In
March, Italy, France and Spain were among the most impacted
countries whereas Eastern Europe resisted better. Online sales
delivered double-digit growth driven by contact lenses and
prescription solutions throughout the first quarter, with a visible
acceleration in March. Vision Direct, Europe’s largest online
contact lens supplier, experienced a surge in spontaneous new
buyers in March with no additional client acquisition cost.
Instruments followed the same trend as the lens business but
interest for new products such as the Vision-R 800 phoropter
remained strong.
Sunglasses & Readers sales started the year
with double-digit growth but were severely impacted in March,
especially in Italy and the UK.
The Equipment division started to see a decline
in sales at the beginning of March. Demand for consumables
benefitted from pre-lockdown inventory build-ups. Demand for
surfacing and coating machines stabilised at a subdued level.
For Luxottica, Europe was the most affected
region by the COVID-19 outbreak, with negative trends similarly
affecting both Retail and Wholesale. The weakness of the region was
worsened by a difficult year-on-year comparison for both the
divisions.With the exception of Germany, Turkey and Russia, the
Wholesale division suffered from material slowdown in sales in
every market, as business conditions progressively worsened in
March, severely hitting key markets like Italy, Spain and France
(where the new reimbursement regulation introduced at the beginning
of this year also weighed heavily).
The marked decrease in Retail sales was
attributable to the social distancing measures progressively
implemented by the European countries in March. At the end of the
quarter, in Italy, most Salmoiraghi & Viganò stores were
operating with ample limitations in terms of opening hours, while
all Sunglass Hut locations in Europe were closed.
Asia, Oceania and Africa
In Asia, Oceania and Africa, consolidated
revenue contracted by 16.8% (-16.4% at constant exchange
rates1).
After a strong first few weeks of the year,
Essilor’s Lenses and Optical Instruments division saw a swift
contraction in revenue at the end of January, as the region was the
first one to be hit by the COVID-19 pandemic. Revenue in China
troughed in mid-February with high double-digit declines as the
country’s lockdown took its toll, before starting a gradual
recovery from March. Domestic sales of prescription lenses have
returned to year-on-year growth since the end of April.
Anti-fatigue and blue-cut products proved more resilient in this
volatile environment, boosted by home working and increased screen
time. The launch of Transitions Signature GEN 8 in China was
postponed to the second quarter. Revenue in the rest of the region
started to deteriorate markedly in March with South East Asia,
India and South Korea particularly affected while Japan and
Australia proved more resilient. The Sunglasses & Readers
division experienced a sharp decline in revenue from end of
January. At the peak of the Chinese lockdowns in mid-February,
sales were down by high double-digit percentages. Since then, a
gradual recovery has materialized, with prescription activities
outperforming sun and wholesale outperforming retail. Within
retail, although most stores have reopened, post COVID-19 consumers
have shown a preference for high-street shopping over shopping
malls. These trends have led Xiamen Yarui Optical (Bolon) to fare
better than MJS in the recovery so far.
For Luxottica too, Asia, Oceania and Africa was
the first region to experience a contraction in both the Wholesale
and Retail divisions. Trends progressively deteriorated towards the
end of the quarter, with all countries in negative territory in
March.The Wholesale division experienced weak trends in Greater
China and Japan for most of the quarter, while trading conditions
in South Korea, Southeast Asia and Middle East worsened at the end
of the quarter.
In the Retail division, store closures peaked in
Greater China around mid-February, while locations in Australia,
New Zealand, South East Asia and South Africa were partly affected
by shutdown measures starting from the second half of March. In
terms of sales trends, Australia and New Zealand started the year
on a positive note, with a nice progression in January-February. On
the other hand, sales in Greater China posted sequential
improvement, remaining subdued even after lockdowns were
lifted.
Latin America
In Latin America, sales decreased by 14.9%
(-6.8% at constant exchange rates1).
At Essilor, sales in the region finished the
quarter up by 1.9% at constant exchange rates1 thanks to brisk
activity in Mexico, Chile, Costa Rica, Brazil and others ahead of
COVID-19 related closings. These highly positive trends were
disrupted in mid to late March as stores closed and retail traffic
slowed significantly. Recovery efforts are underway to develop
consumer outreach programs to encourage a return to optical stores,
drive additional myopia solutions enabled by the recent Miraflex
acquisition and support lab and retail partners.
For Luxottica, the Latin America region
experienced an overall positive trend in January-February, enduring
the negative impacts of lockdown measures only towards the end of
the quarter.The Wholesale division suffered from adverse trends in
both Brazil and Mexico, challenged further by a difficult
comparison base in particular for Brazil.
As for Retail, the division drove the overall
business expansion in the region during the first two months of the
year, which were double-digit positive in sales. Trading conditions
progressively worsened towards the end of March, with almost all
the retail locations in the region closed at the end of the
quarter, Mexico being the only market with a store base partially
operating.
Eliminating poor vision around the
world
EssilorLuxottica expanded its efforts to create
sustainable access to vision care reaching over 345 million
people. During the first quarter alone, it helped
deliver vision solutions to over 1.9 million wearers at the base of
the pyramid through its efforts to eliminate poor vision from the
world by 2050.
While the COVID-19 situation has slowed progress
through the suspension of its inclusive business expansion and
charitable clinics, Essilor has tapped into the influence of its
rural network of primary vision care providers to raise awareness
among their communities about social distancing, hand washing and
keeping safe during the pandemic.
Before the virus outbreak, Essilor signed an
official partnership with hiring company Truck Lagbe enabling truck
drivers in Bangladesh to visit Eye Mitras or attend screening
events to get eye tests and glasses at affordable rates. Essilor
also announced, together with The Fred Hollows Foundation and other
partners, the expansion of the “See Now” campaign in Uttar Pradesh,
India, in February. “See Now” will reach 200 million people with
messaging around eye health and offer free eyecare to 400,000
people in Uttar Pradesh. In China, Essilor drove discussions on
myopia with government officials, academics and other key opinion
leaders, and unveiled the China findings of its “Eliminating Poor
Vision in a Generation” report at a leading national health forum.
As a result of these efforts and more, Essilor was recognized by
change makers at the World Economic Forum in Davos through several
feature stories and reports.
In the first quarter, Luxottica, through its
support for OneSight, an independent non-profit organization of
which the group is the founding sponsor, served over 8,800
patients across 7 charitable clinics and 177 sustainable
centers around the world. OneSight ran clinics in locations
such as Bangladesh, Australia, New Zealand and the United States
and opened 7 new sustainable vision centers in Rwanda in Q1.
Finally, EssilorLuxottica took the 4th spot in
the Impak French 40 ranking, which rates CAC 40 companies according
to their impact on society and the environment.
Eyewear license renewals
In the first quarter of the year, Luxottica
announced the early ten-year renewal of exclusive license
agreements with Dolce & Gabbana and Versace, for the
development, production and worldwide distribution of sunglasses
and prescription frames under the Dolce & Gabbana and Versace
brands, respectively. Both agreements are scheduled to expire on
December 31, 2029.
Synergies and integration
Many integration projects continued unabated
during the crisis, including the creation of a single IT platform
and of a single network of prescription laboratories across the
Company. A few revenue synergy projects were temporarily delayed,
such as the penetration of Essilor lenses within the Company’s own
retail networks or the availability of prescription products under
the Ray-Ban brand. However, the environment also created
opportunities for deeper cooperation between Essilor and Luxottica
on a range of topics from procurement to joint key account
programs, joint sales protocols and deeper online integration.
Liquidity
The Company ended the quarter with Euro 4.9
billion in cash and short-term investments and a net debt of Euro
4.8 billion (including IFRS 16 – Leases liabilities). In addition,
the Company has undrawn credit facilities of Euro 5.2 billion.
Dividend
The Board of Directors decided not to submit any
dividend distribution proposal to the Annual Shareholders’ Meeting
of June 25, 2020. It will further assess the state of the business
in the second half of the year and the efficacy of all the measures
undertaken to face the COVID-19 outbreak. If the recovery is solid
enough, the Board of Directors may propose a special dividend
payment before the end of 2020.
Outlook
As announced on March 27, 2020 the Company’s
outlook for 2020, initially published on March 6, 2020 is no longer
valid. At present, the Company has insufficient visibility to
provide an assessment of the full impact of COVID-19 on its future
activity, as the situation remains volatile. It is however likely
that second quarter revenue and profitability will still be
negatively impacted by the crisis, and more severely so than in the
first quarter.
Conference call
No conference call will be held following the
first quarter trading update.Management is closely monitoring the
evolution of the business conditions, in order to assess the impact
of the COVID-19 on the next months. As soon as visibility improves,
the Company will share its view with the financial market.
Forthcoming investor events
- June 25, 2020: Annual Shareholders' Meeting
- July 31, 2020: H1 2020 results and conference call
- November 3, 2020: Q3 2020 sales and conference call
Notes 1 Figures at
constant exchange rates have been calculated using the
average exchange rates in effect for the corresponding period in
the previous year.
EssilorLuxottica is a global leader in the
design, manufacture and distribution of ophthalmic lenses, frames
and sunglasses. Formed in 2018, its mission is to help people
around the world to see more, be more and live life to its fullest
by addressing their evolving vision needs and personal style
aspirations. The Company brings together the complementary
expertise of two industry pioneers, one in advanced lens technology
and the other in the craftsmanship of iconic eyewear, to set new
industry standards for vision care and the consumer experience
around it. Influential eyewear brands including Ray-Ban and Oakley,
lens technology brands including Varilux® and Transitions®, and
world-class retail brands including Sunglass Hut and LensCrafters
are part of the EssilorLuxottica family. In 2019, EssilorLuxottica
had over 150,000 employees and consolidated revenues of Euro 17.4
billion. The EssilorLuxottica share trades on the Euronext Paris
market and is included in the Euro Stoxx 50 and CAC 40 indices.
Codes and symbols: ISIN: FR0000121667; Reuters: ESLX.PA; Bloomberg:
EL:FP.
CONTACTS
EssilorLuxottica Investor
Relations(Charenton-le-Pont) Tel: + 33 1 49 77 42
16(Milan) Tel: + 39 (02) 8633 4870E-mail:
ir@essilorluxottica.com |
EssilorLuxottica Corporate
Communications(Charenton-le-Pont) Tel: + 33 1 49 77 45
02(Milan) Tel: + 39 (02) 8633 4470E-mail:
media@essilorluxottica.com |
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