EssilorLuxottica is cautiously optimistic about the remainder of the year and expects its “transition on the way towards normalization” to continue in the third quarter after second-quarter revenues were nearly halved amid Covid-19 lockdowns. Yet given uncertainty on the evolution of the pandemic, with local lockdowns already re-imposed in some countries, management believes it is premature to reinstate forecasts for the full year.
EssilorLuxottica reported second quarter revenues of €2,446 million, down by 46.1 percent on the year earlier at constant exchange rates. This brought revenues in the first half to €6,230 million, down by 29.2 percent.
EssilorLuxottica’s adjusted gross profit in the first half amounted to €3,545 million, down by 36.4 percent at constant rates and representing 56.9 percent of total sales versus 63.2 percent in the first half of 2019. EssilorLuxottica posted an attributable net loss of €412 million in the first half compared with a profit of €671 million the year earlier. Adjusted attributable net profit was €7 million compared to €1,047 million the year earlier.
Despite the sharp second-quarter decline in its top line, EssilorLuxottica said its sales performance has improved after falling into a trough in April, when revenues were down by about 70 percent at constant rates on the year earlier and only about 30 percent of the group’s retail network was open. In May, the group’s top line was down by about 50 percent, followed by a 20 percent decrease in June. In the month of June, EssilorLuxottica highlighted growth in select markets. The company expects further improvement on the revenue front in the month of July.
“Our solid restart was underpinned by structural needs in prescription, a prompt rebound in retail and new products well suited to the new environment,” Paul du Saillant, CEO of EssilorLuxottica, said in a conference call with analysts.
At the end of June, EssilorLuxottica had reopened all its factories and laboratories and about 90 percent of its retail stores. Lagging behind this overall trend was Latin America, where only about 70 percent of retail stores were opened at end June.
Throughout the first half, the strong performance of online sales have helped compensate in part for store closures. EssilorLuxottica’s online sales increased by 43 percent in the first half and were 68 percent higher in the second quarter alone. Online sales accounted for 10 percent of total sales in the first half, double the year earlier.
In the second quarter, Essilor’s revenues fell by 40.1 percent at constant rates to €1,162 million, with revenues for lenses and optical instruments down by 40.2 percent to €1,003 million, revenues from sunglasses & readers were 35.6 percent lower at €134 million and revenues for equipment down by 54.7 percent to €25 million.
Luxottica reported revenues for the second quarter of €1,284 million, down by 50.6 percent at constant rates, with wholesale revenues down by 63.5 percent to €345 million and retail revenues 43.0 percent lower at €939 million.
On a geographic basis, EssilorLuxottica’s revenues in North America in the second quarter fell by 44.2 percent at constant exchange rates to €1,356 million. Revenues in Europe declined by 48.3 percent to €600 million while revenues in Asia, Oceania and Africa slipped by 40.2 percent to €429 million. Revenues in Latin America, which EssilorLuxottica currently sees as its most challenging market, decreased by 69.2 percent to €60 million.
EssilorLuxottica’s management says the integration of the Essilor and Luxottica operating companies has accelerated in the last few months. “The Covid-19 pandemic has clearly shown the relevance of the combination between Essilor and Luxottica and the depths of our business model,” said du Saillant. An example of closer integration is the Ray-Ban Authentic initiative launched in Italy in June, which sees Essilor’s advanced lens technology used on Luxottica’s Ray-Ban brand glasses. Cross-selling initiatives have also increased between Luxottica and Essilor platforms.
In the uncertainty in the healthcare situation and its economic impact, EssilorLuxottica highlighted its solid financial position, with €7.9 billion in cash and short-term investments at end June. The company said it will continue to closely monitor its cost base and adapt its actions to the economic environment, as it did in the first half.
EssilorLuxottica declined to say whether it still expects the planned acquisition of GrandVision, the Netherlands-based optical retailer, to go through by July 2021. Pierluigi Longo, head of M&A at EssilorLuxottica, told analysts the company would assess its position once it gets information from GrandVision. EssilorLuxottica in July initiated legal proceeding before a Dutch district court in Rotterdam to obtain information on GrandVision’s management of its business during the pandemic.