The group announced an increase of 11.3 percent in its net income to a record level of €1,038 million for the past year, benefiting from a boost of about €50 million from the Italian tax relief scheme on intellectual property known as “Patent Box.” The adjusted net profit grew by 10.6 percent in 2017 to €970 million, and the board is proposing an increase in the dividend for the year of 10 percent to €1.01 per share.

Luxottica outlined a cautious outlook for 2018, indicating that the financial year could end up with a decline in revenues due to currency headwinds. In releasing its final financial results for 2017, the company said it was forecasting a sales increase of between 2 and 4 percent at constant exchange rates, but warned that the growth rate could be diluted by between 3 and 4 percentage points based on current currency exchange rates. A financial broker, Equita, expects the group's sales to drop by 2.5 percent to €8,989 million in euros, despite an organic growth estimated at 3.2 percent.

Luxottica anticipates that its sales in Europe and North American will grow at a low single-digit rate in local currencies, with Europe outperforming slightly. In North America, Ray-Ban and Oakley will be essential factors in the company's growth through the wholesale channel. Developing countries are expected to grow by a high single-digit rate, driven by the Asia-Pacific region and Latin America, where Luxottica will benefit from its acquisition last year of a Brazilian retailer, Óticas Carol.

Overall, Luxottica said it expects flattish growth in terms of volume during the present financial year, marking a recovery from the volume decline that it suffered in 2017. In reported terms, Luxottica posted a sales increase of just 0.8 percent to €9,157 billion last year as it implemented stricter trade policies and significantly reduced discounts in all sales channels.

In this regard, the company also noted that it lost 600,000 in unit sales because of unprocessed orders placed by dubious customers, as part of its efforts to fight counterfeiting and trade on the parallel market. Luxottica believes that the figure could be larger in 2018.

At constant currency rates, the group's revenues grew by 2.2 percent for the full 2017 financial year and by 4.3 percent in the last three months, which was the best quarter last year for its wholesale business, its comparable store sales, Sunglass Hut's operations in the main markets and e-commerce.

For the third consecutive year, Europe was the “engine” of the group's sales growth, posting an 11.7 percent increase to €1,966 million. In local currencies, the regional top line surged by 13.4 percent, smashing a growth target of 6-8 percent. The strong increase was driven by Italy, Spain, Germany, Turkey and Eastern Europe. In the fourth quarter, Luxottica's currency-neutral growth in Europe slowed down to 6.1 percent.

The company benefited from the consolidation of the Italian Salmoiraghi & Viganò chain of optical stores and from a strong performance by Sunglass Hut in continental Europe. Excluding Salmoiraghi, Luxottica's overall sales growth in Europe would have been close to a mid-single-digit rate at constant currency rates.

In North America, sales fell by 2.4 percent to €5,252 million last year, but in local currencies, the rate of the decline narrowed to 0.5 percent. Currency-neutral sales improved in the fourth quarter, growing by 3.9 percent and beating Luxottica's guidance of an increase of one to two percent.

Wholesale revenues advanced by 1.9 percent in North America to €1,056 million, up by 3.7 percent at constant currency rates. In the fourth quarter, they increased by 14.0 percent in local currencies, driven by Ray-Ban and other major brands.

North American retail sales fell by 3.4 percent to €4,197 million in 2017, down by 1.5 percent in constant currencies, missing the target of a 1-2 percent gain set by the management. In the fourth quarter, however, they grew by 1.5 percent in local currencies thanks to improved comparable store sales at Sunglass Hut and LensCrafters.

In Asia-Pacific, Luxottica's revenues slipped by 2.9 percent to €1,156 million, with currency-neutral sales down by 1.9 percent for the year, but with a 4.4 percent increase in the fourth quarter. Positive trends in Australia, Japan, Southeast Asia and travel retail were offset last year by a decline in wholesale revenues in China, where the group is restructuring its distribution network. In the second quarter of 2017, Luxottica started repositioning itself in China to increase its direct presence through physical stores and e-commerce.

Optical retail in Asia-Pacific ended 2017 with strong growth, thanks to higher sales by the OPSM chain in Australia and by Ray-Ban stores in Greater China. In Australia, optical retail booked a 6 percent increase in comparable store sales for the whole of 2017.

In Latin America, the group's full-year turnover rose by 8.6 percent to €616 million. The top line advanced by 6.1 percent at constant currency rates, led by Mexico, up by nearly a double-digit rate, and Brazil, up by a high single-digit rate. Revenue growth slowed down in Chile and Colombia as the firm reduced its business with distributors to build up a direct presence in the markets. Retail operations were driven by Sunglass Hut's entry in Colombia, Argentina and the Caribbean as well as the launch of Ray-Ban stores in the region.

At a group level, wholesale revenues fell by 0.6 percent to €3,505 million, but grew by 0.3 percent at constant currency rates for the year and by 4.7 percent in the final quarter.

Luxottica plans to go ahead with a policy of replacing distributors by subsidiaries. The policy was recently implemented in Latin America and Southeast Asia and is being extended this year to the Middle East.

Retail revenues advanced by 1.7 percent across the group to €5,652 million in 2017, with sales up by 3.4 percent in local currencies and same-store sales down by 2.6 percent. In the final quarter, retail sales grew by 4.1 percent in local currencies, while comparable store sales were “flattish.”

Sunglass Hut posted flat global sales for the full year at constant currency rates, but they jumped by 5 percent in the fourth quarter. LensCrafters' same-store sales were down 5 percent in the last quarter, after a drop of 8 percent in the third quarter.  

Luxottica pointed out that in the first two months of this year both LensCrafters and Sunglass Hut were experiencing similar sales trends as in the fourth quarter. It expects a change in LensCrafters' performance from the final part of the second quarter, consolidating in the second half of 2018 thanks to the current launch of a “massive” customer relationship management campaign and the launch this month of full sets of Ray-Ban frames and lenses. The chain was set to broadcast a new TV advertising campaign in March. LensCrafters is also developing a new internet platform.

LensCrafters unveiled plans to remodel over 50 stores in 2018 and a revised agreement with Macy's, the American department store chain. Under the new terms, LensCrafters will only open 200 locations by 2019 in its stores instead of the 500 it had agreed to open in three years' time under the initial deal, which was announced in November 2015. By the end of 2017, LensCrafters had opened nearly 140 points of sale at Macy's.

Luxottica Group Consolidated Income Statement

(Euros' 000, Year ended Dec. 31)





Manufacturing /Wholesale












Cost of Sales




Selling Expenses








Advertising Expenses




G&A *




Other Expense - Net












Minority Interest








Earnings/Share (Diluted)




*General and Administrative

Luxottica's adjusted gross profit margin dropped to 64.8 percent last year from 65.5 percent in 2016, due to an increase in industrial costs stemming from lower production volumes and a reclassification of some general and administration expenses to costs of goods sold.

Adjusted Ebitda rose to €1,983 million from €1,945 million and adjusted operating profit grew to €1,442 million from €1,432 million. Thus, the adjusted operating margin was flat at 15.8 percent, but up by 0.1 percentage points at constant currency rates. The Ebitda margin of the wholesale business remained unchanged at 15.8 percent on a currency-neutral basis, while the retail division increased its margin to 14.1 percent from 13.7 percent in 2016.

The group's capital expenditures rose to €663 million from €652 million in 2016 and the operating cash flow advanced to €1,393 million from €1,211 million. Net debt stood at €740 million at the end of December against €1,177 million a year earlier, reducing the net ratio of debt to adjusted Ebitda, down to 0.4 from 0.6. The ratio should further decline to 0.3-0.4 times at the end of 2018, according to the management.

Luxottica sees the gross margin improving throughout 2018. While the adjusted operating income is likely to grow at a ratio of 0.8-1.0 times the guided pace of the sales improvement, the adjusted net income is seen increasing one to two times as fast as sales. The bottom line is due to benefit from the U.S. tax reform approved in December, which could reduce the adjusted tax rate by a couple of percentage points from about 29.5 percent in 2017.

Equita is less optimistic. It estimates that Luxottica's adjusted operating profit will slip to €1,426 million in 2018, while on average analysts see it rising slightly to €1,460 million. The broker sees adjusted net profit slipping to €992 million.

Luxottica indicated that its capital investment budget for this year is “pretty much” in line with that of 2017, but the emphasis will be more on store openings and refurbishments. The company plans to expand the network of Ray-Ban stores in China and to open new stores in Europe and Latin America. The additional floor space is expected to contribute to half of the group's overall retail sales growth in 2018, and the balance of the gain will be largely organic.