GrandVision enjoyed a stronger-than-expected recovery in the third quarter, especially thanks to the performance achieved in the Benelux, Germany, Austria and Switzerland, but the company remains cautious as the second wave of the Covid-19 pandemic hits Europe.
So far, one of the positive aspects of the pandemic has been to bolster the company’s store productivity. At the end of September, over 99 percent of GrandVision’s fleet had reopened after Covid-19 related lockdowns, compared with about 90 percent at the end of June. The Dutch eyewear retailer noted that customer traffic remains below previous levels, but has been more than offset by higher customer conversion thanks to an increase in online appointment bookings and higher purchase intent by customers.
It added that traffic flows are more evenly distributed throughout the week, as clients seek to avoid store visits during weekends and peak hours.
GrandVision’s positive operating trend continued in October, but the company has started to see the first signs of weakness in a number of European markets stemming from the second wave of the pandemic and the subsequent reintroduction of restriction measures by local governments.
Due to the uncertainty caused by the virus, the company did not provide a guidance for the rest of the year and 2021. Despite its intention to pay a dividend on its 2019 results it will wait for the release of its trading update on Jan. 22, 2021, to confirm the payment. The delay will enable it to gauge the impact of the pandemic on its financial position before deciding whether to propose a dividend.
GrandVision however, indicated that capital expenditure for 2020 will be at the lower end of its guidance range of 4 to 6 percent of revenues. It highlighted that it has invested in automated eye measurement equipment, enabling its stores to operate in compliance with Covid-19 health and safety protocols.
Third-quarter sales up by 0.3%
In the third quarter, group revenues inched up by 0.3 percent year-on-year to €1,047 million. Growth was partially hindered by the depreciation of the Turkish lira, the Russian ruble and most Latin American currencies against the euro. The increase reached 2.3 percent at constant exchange rates and 0.8 percent at a comparable growth rate. System wide sales rose by 1.0 percent to €1,148 million.
In the quarter, adjusted Ebita was €176 million against €132 million a year earlier, resulting in an Ebita margin of 16.8 percent compared with 12.6 percent. Ebita benefited from efficiency gains, especially in countries such as the U.K., the U.S. and Italy where profitability was lagging more mature businesses.
In the core G4 segment, which comprises stores operating in France, Luxembourg, Germany, Austria, the Netherlands, Belgium, the U.K. and Ireland, third-quarter sales stood at €610 million, with comparable growth 3.4 percent. In the region, the adjusted Ebita margin was 18.6 percent, compared with 16.2 percent a year earlier.
In Benelux, Germany and Austria, GrandVision achieved a mid-to-high single digit growth rate in revenues, with positive comparable growth. The markets benefited from higher average selling prices thanks to the outperformance of higher value optical products. Stores in the region were also less affected by traffic reductions than in other countries because of a focus on how close the stores were in those markets.
In France, optical sales grew by a mid-single digit rate but the increase was offset by weaker sunglass sales, especially in main street and tourist locations. In the U.K., revenues were slightly negative but enjoyed a sequential improvement during the quarter with the Tesco stores posting a “particularly strong performance.”
In the rest of the Europe, revenues were €337 million, with comparable sales down by 0.8 percent. But at constant currency rates, the reported top line was up by 1.7 percent. Sales in the business region were driven by Denmark, Hungary and Switzerland. In Italy, and other parts of southern Europe, the strong recovery in optical sales was offset by weaker sunglass sales.
The adjusted Ebita margin was 17.0 percent, compared with 13.0 percent a year earlier, thanks to a strong performance in Nordic countries, Italy, Switzerland and Portugal. Many markets benefited from growth in multifocal glasses and the roll-out of optical subscription programs.
In the Americas and Asia, revenues totaled €101 million, with a comparable decline of 6.2 percent as the business region continued to be impacted by the pandemic during the third quarter. On a reported basis, the decline even reached 21.0 percent due to adverse currency movements. Turkey and Russia achieved positive revenue and comparable growth while the U.S. and most markets in Latin America suffered a decline in sales.
The adjusted Ebita margin widened to 11.9 percent from 6.2 percent a year earlier, with the U.S. returning to profitability during the quarter.
In the first nine months of 2020, group revenues dropped by 17.8 percent year-on-year to €2,500 million and system wide sales decreased by 17.4 percent to €2,739 million. The adjusted Ebita margin narrowed to 6.1 percent from 12.1 percent.
In the nine-month period, e-commerce sales grew by 225 percent on GrandVision’s banner websites, underpinned by the launch of prescription glasses in more than 10 countries, and by 40 percent on the group’s pure-play online platforms. The group also reduced its retail network to 7,247 stores at the end of September from 7,406 at the end of 2019.
GrandVision did not release a bottom line figure for the quarter or the nine months.
At the end of September, the group had a net debt of €602 million, down from €755 million three months earlier. It reiterated its support to EssilorLuxottica’s purchase of Hal’s stake and still aims to complete the deal within 24 months of the announcement date of July 31, 2019. EssilorLuxottica announced plans to buy Hal’s 76.72 percent stake in GrandVision but has since engaged legal proceedings against the Dutch retailer, accusing it of allegedly breaching its obligations with its handling of the Covid-19 crisis.