Luxottica Group

Luxottica Group continues to grow in 2016

The Board of Directors of Luxottica Group S.p.A. (MTA: LUX; NYSE: LUX), a leader in the design, manufacture, distribution and sale of fashion, luxury and sports eyewear, met today to review the consolidated net sales and preliminary results for the fourth quarter of 2016 and the full fiscal year 2016 in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
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2016 was a year of change for the Group, as it carried out a number of initiatives to support the organizational simplification, efficiency and integration of its business, alignment of prices across markets and enhancement of its brand portfolio. In particular, the adoption of the “MAP policy” (Minimum Advertised Price) in North America has allowed the Group to strengthen the equity of its brands, enhance the quality of its distribution network and protect the business of wholesale customers.
During the year, the Group also made investments in developing its manufacturing and logistical infrastructure, supporting the entry into new markets and strengthening digital communications.

Luxottica ended the year with reported net sales of Euro 9,086 million, up 3.9% at constant exchange rates (+2.8% at current exchange rates) despite a more uncertain macroeconomic environment. In the fourth quarter, net sales accelerated compared to the first nine months of the year.

In 2016, the Wholesale segment’s net sales remained almost unchanged from the previous year at constant exchange rates. On the upside, the Retail segment delivered reported net sales growth of +6.8% at constant exchange rates (+6.0% at current exchange rates). The Group’s key retail chains continued to drive the industry’s evolution towards innovative business models covering in-store, online and omnichannel, to offer consumers a more meaningful digital experience. Sunglass Hut confirmed its leadership in the sun segment with revenue growth of +8.1% at constant exchange rates, while LensCrafters in North America strengthened its brand equity and reported a net sales in US dollars increase of +1.3%. In Australia, a review of the assortments in OPSM stores proved successful during the year, with a gradual improvement in comparable store sales. In Latin America, GMO maintained a solid growth trend.

The Group’s e-commerce platforms in 2016 delivered excellent results, up by 24% at constant exchange rates. Ray-Ban.com, Oakley.com and SunglassHut.com further established themselves as the consumer favorites for buying branded eyewear online.

In the fourth quarter of 2016, the Group’s sales showed an acceleration compared to the previous quarters of 2016, with reported revenue growth of +5.2% at constant exchange rates (+6.3% at current exchange rates). An increase in performance in both Europe and Latin America was achieved through effective customer service delivered in each region , while the Wholesale division in North America benefited from the first positive effects of the “MAP policy” and the integration of the Oakley sports channel. In China, Luxottica continued the rationalization of its distribution network, terminating relationships with a number of local distributors.

“We are very pleased with the results of 2016, especially given that they were achieved in a year of major investments and initiatives to improve the quality of the Company and we expect to report a higher net profit on a year-over-year adjusted basis”, commented Leonardo del Vecchio, Executive Chairman, and Massimo Vian, CEO for Product and Operations of Luxottica Group.
“The courageous decisions taken in the last two years and the investments aimed at improving the Group’s offering with more innovative and excellent products and services are reflected in the net sales generated during the final months of the year, showing an improvement especially in North America. The first few weeks of 2017 confirm the Group’s prospects for healthy growth that we expect will accelerate during the year.
The Luxottica of today is a stronger, simpler and more efficient company, with a faster decision-making process. We are preparing to take a major step forward in the realization of our vision: to offer a product that finds the reason for its success in the integration of frame and lenses”.

Geographic segments: net sales and trends in 2016
North America
In 2016, net sales at constant exchange rates2 in North America were up 0.8%. The results were driven by the Retail segment’s growth, which more than offset the decline in the Wholesale segment (-2.6% at constant exchange rates) due to the adoption of the “MAP policy”. Benefits from this initiative were already visible in the fourth quarter, which saw an acceleration in sales at constant exchange rates of +5.5% and +3%, respectively, for the Wholesale segment and the whole Group, a sharp contrast with the third quarter. The Retail segment ended the year with +1.7% growth at constant exchange rates, thanks to the positive performance of LensCrafters and Sunglass Hut.

Europe
In 2016, Europe confirmed its positive trend with net sales up 6.9% at constant exchange rates. There was also an acceleration in fourth quarter sales, +12% at constant exchange rates.
During the year, the Wholesale segment posted net sales up by 2.8% at constant exchange rates, driven in particular by Italy, the UK, Spain and Eastern Europe.
The Retail segment increased its weight in the region, up by 28% in net sales at constant exchange rates. This is due to the strong performance of Sunglass Hut, with comparable store sales up by 9%, and approximately 100 new store openings, including 57 stores in Galeries Lafayette.

Asia-Pacific
The region’s results were affected by the deep distribution network restructuring in Mainland China, where the termination of relationships with a number of distributors resulted in the withdrawal of goods from the marketplace in the fourth quarter for a value greater than 30% of quarterly sales. Although the Chinese market returned to positive growth in the first few weeks of 2017, last year’s restructuring resulted in a decrease of 1.9% in Asia-Pacific in 2016 at constant exchange rates. Southeast Asia, India and Japan confirmed solid growth for the year.
The Retail segment, by contrast, in Mainland China registered a strong increase in sales substantially driven by the successful launch of new Ray-Ban stores (47 as of December 31, 2016).
The Group in Australia reported a strong performance in terms of comparable stores sales for Sunglass Hut and OPSM, the latter accelerating sequentially throughout the year, peaking in the last three months of the year thanks to newly implemented assortment policies.

Latin America
Latin America’s strong trend during the first nine months continued into the fourth quarter with sales up by 10% at constant exchange rates in the year. Mexico remains among the fastest growing countries for the Group, with double-digit growth at constant exchange rates. Brazil continued to generate growing sales in 2016 despite the current unfavorable economic situation.
In the twelve-month period ended December 31, 2016, the Retail segment posted double-digit growth at constant exchange rates, thanks to the favorable performance in comparable store sales4 of GMO and Sunglass Hut in Mexico and the Andean region also in the fourth quarter.

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