Jan 30, 2017
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Luxottica's retail revamp lifts yearly sales 1%

Jan 30, 2017

Italian eyewear group Luxottica reported on Monday a 0.8 percent rise in 2016 adjusted sales helped by its fast-expanding retail network, while reorganisation efforts in the U.S. and Chinese markets hit its wholesale business.

Luxottica, which this month announced an all-share merger with top lens producer Essilor to create an eyewear powerhouse with more than 15 billion euros in annual sales, said 2016 revenue totalled 9.086 billion euros ($9.7 billion).

Giorgio Armani is one of the designer sunglass brands distributed by Luxottica

That compares with a average analyst forecast of 9.076 billion euros, according to Thomson Reuters SmartEstimate.

Stripping out currency moves, adjusted sales at the maker of Ray Ban and Oakley sunglasses rose 1.9 percent last year, compared with a 2-3 percent range Luxottica provided in July, cutting earlier sales guidance.

Executive Chairman Leonardo Del Vecchio said full-year earnings, due on March 1, would show a higher adjusted net profit compared to 2015. The adjustments concern accounting changes at a unit.

Luxottica guided in July for 2016 adjusted net and operating profit to grow in line with the increase in sales.

"The first few weeks of 2017 confirm the group's prospects for healthy growth that we expect will accelerate during the year," Del Vecchio said.

Under its energetic 81-year-old founder, who returned to the helm in 2014 in a management upheaval, Luxottica boosted its retail network to 7,977 shops at the end of last year up from around 7,200 at the end of 2015.

Part of the increase comes from the 430 shops of Italian eyewear chain Salmoiraghi&Vigano, for which Luxottica exercised an option to take full control in November. The opening of 100 new shops in Europe contributed to strong retail sales in the region.

Comparable retail sales were up 0.6 percent. Luxottica's retail network comprises chains LensCrafters and SunglassHut. Adjusted retail sales totalled 5.56 billion euros last year.

The group said on Monday it was expanding its retail presence in Brazil with the 110-million-euro acquisition of optical chain Oticas Carol.

Adjusted wholesale revenue dropped 1.8 percent at constant currencies as Luxottica introduced a policy aimed at curbing online discounts of its Ray Ban sunglasses in the States and cut independent distributors in China.

The 95-billion-euro global eyewear industry is seen expanding steadily thanks to an ageing population, rising scholarisation and growing awareness of sun damage.

However, it is also grappling with the challenge posed by e-commerce and the investments needed to develop wearable technology.

Also, the traditional licensing model was called into question by luxury group Kering's 2014 decision to take its eyewear business in house, a move that may be replicated by rival LVMH. ($1 = 0.9387 euros) 

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