Luxottica sales hit by China restructure
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Luxottica announced a decrease in first-quarter sales for fiscal 2018, hurt by a slump in European revenues due to bad weather, and distribution restructuring in China.
The maker and distributor of luxury eyewear said first-quarter revenue plummeted 10.7 percent to 2.13 billion euros, compared with 2.39 billion euros in the same period the previous year. With the effect of currency swings, sales were down 0.8 percent.
For the three months ended March 31, the Italian firm’s wholesale channel recorded an 11.1 percent to 830 million euros, or 4.2 percent at constant exchange rates, hurt by bad weather in Europe, which delayed orders by several weeks.
For the quarter, retail sales were down 10.4 percent to 1.3 billion euros, but grew 1.3 percent at constant exchange rates, while comparable-store sales decreased 0.6 percent, said the firm.
By region, Asia-Pacific sales declined 9.3 percent to 279 million euros, representing 13 percent of total sales for the quarter.
The dive was driven by China’s negative performance, as Luxottica continues to restructure its distribution channel, taking it to a more direct-to-consumer model.
The overall China downfall was offset by Australia, Japan and India, as well as travel retail, benefitting from stellar retail performances at Sunglass Hut at OPSM in Australia and LensCrafters and Ray-Ban stores in China.
By comparison sales in North America were down 13 percent to 1.19 billion euros, accounting for 56 percent of total revenues; Europe retail sales decreased 5.5 percent to 489 million euros, after twelve consecutive quarters of growth; and sales in Latin America decreased 9.8 percent to 131 million euros.
Looking ahead, the Italian company confirmed its full-year guidance and remains in the process of merging with French lens maker Essilor. The merger has been cleared by antitrust authorities in 18 separate countries but awaits approval from China still.
Luxottica is licensed to make eyewear frames for luxury fashion brands such Armani, Michael Kors and Prada, and is the owner and maker of sunglass brands Ray-Ban, Oakley and Oliver Peoples.
Questions & Answers
Q.What specifically caused the decline in Luxottica's Asia-Pacific sales?
What specifically caused the decline in Luxottica's Asia-Pacific sales?
The decline was driven by China's negative performance, as Luxottica is restructuring its distribution channel there. It is shifting towards a more direct-to-consumer model in the region.
Q.Which regions or channels helped to offset the overall decline in China's performance?
Which regions or channels helped to offset the overall decline in China's performance?
The overall downfall in China was offset by positive performances in Australia, Japan, and India. Travel retail also contributed positively, with strong sales at Sunglass Hut, OPSM, LensCrafters, and Ray-Ban stores.
Q.What factors led to the decrease in Luxottica's European revenues during the first quarter?
What factors led to the decrease in Luxottica's European revenues during the first quarter?
European revenues were negatively impacted by bad weather, which caused delays in wholesale orders for several weeks. This contributed to a slump in sales within the region.
Q.Is Luxottica's merger with Essilor fully approved across all necessary regions?
Is Luxottica's merger with Essilor fully approved across all necessary regions?
No, the merger is not yet fully approved. While it has been cleared by antitrust authorities in 18 countries, approval from China is still pending.
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