EssilorLuxottica bounced back in the third quarter after second-quarter revenues were nearly halved amid Covid-19 lockdowns. Sales in the three months to Sept. 30 were down by 5.2 percent from the year-ago quarter to €4,085 million, or by 1.1 percent at constant exchange rates. The company did not release earnings for the period, but only sales figures.
The management attributed the improvement to its resilient optical business and balanced mix in terms of products, segments and geographies. It highlighted the launch of Stellest in China, a new lens to manage myopia in children, and the recent partnership with Facebook in smart glasses.
Optical activities, which represent around 70 percent of the company’s revenues, drove the regained sales momentum. The management believes this was supported by pent-up demand and enhanced awareness from consumers about the need to take care of their eyes as they spend more time in front of screens during curfews, remote working and lockdowns.
At the end of September, more than 95 percent of stores had reopened across the globe. E-commerce was up by 40 percent to a record €878 million in the first nine months of 2020, driven by RayBan.com, Oakley.com and SunglassHut.com, as well as the multi-brand sites EyeBuyDirect.com, Clearly.ca and Visiondirect.co.uk. The company took several initiatives to drive online sales, including the extended rollout of Smart Shopper and in-store tele-optometry.
Essilux said the health crisis has turned out to be a catalyst to implement key decisions made just before the pandemic: to deepen its integration, simplify its organization, accelerate its decision-making process and digitalize its business, while controlling costs and preserving cash. As the pandemic reaccelerates throughout Europe and this second wave increases the level of uncertainty over the weeks to come, the group will continue to prioritize these actions.
During the third quarter and in constant currencies, wholesale revenues were down by 1.2 percent to €738 million and retail revenues dipped by 4.6 percent to €1,480 million.
Also on a constant currency basis, revenues improved by 2.7 percent to €1,683 million in the Lenses & Optical Instruments segment. The division enjoyed a good product mix thanks to antifatigue and blue-cut lenses, which alleviate the eye strain from the increased screen time triggered by the pandemic. New products were also supportive of the mix with Transitions GEN 8, AVA lenses and VR-800 measuring instruments.
However, sales decreased by 4.0 percent to €140 million in the Sunglasses & Readers segment, as department stores and travel retail continued to suffer, although sunglasses started to fare better. In the Equipment division, revenues dropped by 11.7 percent, also in constant currencies, as demand for surfacing and coating machines remained subdued.
On a geographic basis, EssilorLuxottica’s revenues in North America in the third quarter rose by 2.5 percent at constant exchange rates to €2,262 million. Revenues in Europe advanced by 1.2 percent to €1,033 million, with the business benefitting from strong consumer demand for the company’s flagship lens brands: Varilux in the progressive category, Crizal in anti-reflectives, Transitions GEN 8 in photochromics and Eyezen in anti-fatigue. France performed well thanks to the success of the multi-network distribution strategy, as well as Italy, the Nordics, the Benelux and Eastern Europe. Spain and the U.K. were the weakest performers as they continued to be penalized by the pandemic.
In Asia, Oceania and Africa, sales slipped by 8.3 percent to €620 million and in Latin America, which EssilorLuxottica currently sees as its most challenging market, revenues decreased by 22.2 percent to €171 million.
EssilorLuxottica’s management says the integration of the Essilor and Luxottica operating companies has accelerated in the last few months. It remains on track to deliver cumulative synergies of €420 to €600 million as a net impact on adjusted operating profit by 2023.
It also highlighted its solid financial position, with €8.8 billion in cash and short-term investments at the end of September. But because of the second wave of the Covid-19 pandemic in Europe, the company will wait until December to decide whether to pay a dividend this year.
Essilux did not release a guidance due to the current uncertainty surrounding the pandemic. But, the senior management did express ”great confidence” in the company’s prospects for 2021 and beyond.
During a conference call, Essilor’s chief executive Paul du Saillant also said that the acquisition of GrandVision is confirmed and the terms of the offer have not been changed. The comments came after he was asked whether EssilorLuxottica could request changes to the deal due to the altered economic scenario resulting from the pandemic, along the lines of the revised offer made by LVMH for the U.S. jeweler Tiffany.
EssilorLuxottica is due to buy Hal’s 76.72 percent stake in GrandVision within 24 months of the announcement date of July 31, 2019. But, Essilux has engaged legal proceedings against the Dutch retailer, accusing it of allegedly breaching its obligations with its handling of the Covid-19 crisis.