On March 27, EssilorLuxottica said it had stopped a share buyback program that it had announced only 10 days earlier, due to the growing uncertainty being created by the rapidly expanding Covid-19 pandemic. It’s one of the measures that the group is implementing to improve its liquidity in view of the consequences of the disease on its accounts.
Since the launch of the share buyback, 1.55 million shares had been bought at an average price of €102.54. The group was planning to buy up to 3 million shares by May 27. The shares were destined to be awarded to employees and directors of the group and affiliated companies in the context of profit-sharing plans, bonuses and performance share awards, stock option plans, and employee share-ownership plan.
EssilorLuxottica and its two operating units have also introduced cost and cash control measures, putting on hold non-crucial investments and adjusting capacity to meet demand levels.
Meanwhile, EssilorLuxottica has withdrawn the financial outlook for 2020 that it had released on March 6 while reviewing its 2019 results, due to the lack of visibility stemming from the propagation of the Covid-19 pandemic throughout Europe and North America.
Previously, excluding a possible contribution by GrandVision to the total turnover in case of its acquisition, the group was expecting sales to grow by between 3.0 and 5.0 percent this year. Adjusted operating earnings and net earnings were both projected to rise between 1.7 and 1.2 percentage points faster than sales, thanks in part to new synergies from the integration of Essilor and Luxottica.
EssilorLuxottica stressed that in January and February it delivered “solid growth” in line with its targets for the full year but the situation deteriorated in March. In the second quarter, the group expects revenue to decelerate further and to “materially impact” profitability.
The group said that Essilor’s lens manufacturing operations have temporarily closed all their industrial sites in France but the supply of lenses continues thanks to the group’s global network of plants and laboratories. It noted that manufacturing facilities in China are “back to full speed” and have spare capacity. It added that e-commerce is growing without any back orders.
Meanwhile, Luxottica has suspended its manufacturing activities in Italy, except for the production of lenses, and in other “smaller locations.” In the meantime, its Chinese operations are back to normal levels. Stores in Europe and North America are complying with local lockdown measures, while the group’s e-commerce platforms continue to operate globally.
On March 6, Essilux had indicated that its Chinese factories were operating at 90 percent of their capacity, after running at 50 percent at the beginning of February, and normalizing quickly. Some production was relocated from China to Italy and Brazil to ensure a faster recovery.
The company pointed out then that it had sufficient inventories to meet several weeks of demand and that it could leverage its global network of plants and laboratories to guarantee flexibility and continuity.