Luxottica's consolidated net income rose by 20.9 percent to e101.1 million in the first 3 months ended March 31, giving the industry leader a net margin of 11.7 percent, and it's now predicting a net margin of 12 percent for the full year on sales of more than 3.3 billion euros. The progress is largely due to changes in US accounting regulations which will take about e60 million in goodwill amortization off from the company's accounts for the year.
First-quarter sales were up 30.5 percent to e866.8 million in the quarter, boosted by the acquisition of Sunglass Hut which was consolidated only on March 31 of last year. The management notes that Sunglass Hut broke even in the 1st quarter of this year, versus an operating loss of $11 million in the year-ago period, thanks to the chain's integration with LensCrafters, and there is scope for further improvement.
The management expects Sunglass Hut to reach the same profitability as LensCrafters by the end of this year, confirming a previous target of 15.2 percent for the operating profit of its retail operations. Because of the Hut's acquisition, the group's total retail revenues grew by 40.1 percent in the quarter to $498.4 million, but they remained unchanged on a same-store basis and their overall operating income rose by 15.2 percent to $67.6 million, or 13.6 percent of sales. On a comparable basis, including the Hut's sales and losses for the 1st quarter of 2001, sales would have risen by only 6.5 percent but the operating margin would have shown a big jump from a year-ago level of 10 percent.
An apparent improvement in consumer confidence in the USA and the rest of the world was reflected in an 8.4 percent sales increase in revenues from manufacturing and wholesale distribution, which rose by 8.4 percent to €324.8 million, with a 7.5 percent gain in local currencies, generating 16.9 percent higher operating income of €88.9 million. Sales picked up strongly in the Far East.
Delivery times in Europe have been reduced with the concentration of logistics in a single distribution center at Sedico, in Italy. Furthermore, Luxottica has diminished its dependence on outside suppliers and obtained cost savings by raising its own production capacities for sun lenses and starting to produce polycarbo-nate lenses at its own Lauriano plant near Turin. The company now makes in-house nearly 100 percent of its crystal lenses and 30 percent of its polycarbonate lens requirements.
The group's consolidated gross profit rose by 30.8 percent to the very high level of 71.8 percent of sales in the latest quarter. Operating income was up 25.4 percent to e163.2 million, or 18.8 percent of sales.