Luxottica posted third-quarter results in line with market expectations, reassuring observers after the company issued a profit warning in July. The company was upbeat about the fourth quarter and expects 2017 to be a year of growth.

For the third quarter ended Sept. 30, Luxottica posted sales of €2,225 million, up by 3.2 percent at actual exchange rates and by 3.5 percent at constant rates, with progress in Europe and emerging markets. While retail revenues expanded, wholesale revenues contracted. When adjusted for an accounting change at the group's American vision care unit, EyeMed, the top line rose by 1.2 percent at current exchange rates and by 1.4 percent at constant rates.

Wholesale revenues fell by 3.2 percent to €800 million due to a decline in North America following the introduction of minimum advertised prices (MAP) for Ray-Ban sunglasses, the reorganization of Oakley's sports channel, and a change in the distribution policy in China. At constant currency rates, global wholesale revenues were down by 3.6 percent.

Wholesale revenues fell by 3.2 percent to €800 million due to a decline in North America following the introduction of minimum advertised prices (MAP) for Ray-Ban sunglasses, the reorganization of Oakley's sports channel, and a change in the distribution policy in China. At constant currency rates, global wholesale revenues were down by 3.6 percent.

Retail sales reached €1,425 million in the third quarter, up by adjusted rates of 3.8 percent at actual currency rates and 4.4 percent at constant rates. Same-store sales rose by 0.7 percent across the group in the three months. During the quarter, the group added about 130 stores to its retail network.

Global comparable sales for Sunglass Hut went up by 4.9 percent in the quarter, marking a strong increase from the first half and lifting the growth rate for the first nine months to 2.6 percent.

By region, North America sales totaled €1,347 million, representing 61 percent of the group's total revenues in the quarter. They were down by 0.7 percent in euros and by 0.3 percent on a currency-neutral basis.

North American wholesale revenues dropped by 11.6 percent in euros and by 11.2 percent in local currencies, going down to €234 million. The company conceded that the impact of MAP was stronger than expected, noting that sales to online retailers fell by about 60 percent. However, this policy is reducing the level of discounts practiced by third parties, protecting Luxottica's own retail business. According to the group, the average discount applied by Amazon on Ray-Ban sunglasses has fallen to 6 percent from 37 percent in April.

The new pricing policy was fully implemented from July 1. Under its terms, Luxottica's clients must advertise recommended retail prices for Ray-Ban models, and rebates and sales periods have to be approved by the company. The group expects the impact of MAP on wholesale sales to last until early 2017, but its effect will be milder than in the last quarter. The trend already improved in September.

Meanwhile, Luxottica has been streamlining Oakley's North American sports channel (see Eyewear Intelligence vol. 9, N° 10+11) and is cutting by 70 percent the size of the brand's apparel, footwear and accessories collection. Excluding the impact of MAP and of the Oakley reorganization, “you would be seeing a different number for wholesale in North America,” said the group's chief financial officer, Stefano Grassi, during a conference call. Luxottica added that the first weeks of October indicated that the North American wholesale business “might be in recovery mode” in the fourth quarter.

Retail sales in North America were up by an adjusted rate of 1.9 percent to €1,113 million, and they rose by 2.4 percent in local currencies. They were lifted by Sunglass Hut, whose total sales in the region were up by about 8 percent, which comparable store sales up by 2.9 percent in the quarter.

They were also supported by the opening of LensCrafters stores at Macy's department store, totaling 47 units toward the end of October and trending toward 80 stores on stream by the end of the year. The new store openings at Macy's could be fewer than 200 next year. A year ago, Luxottica had given a goal of 500 LensCrafters stores at Macy's in three years' time.

The LensCrafters format installed at Macy's heralds the chain's strategy for the future, the company indicated. The points of sale are smaller and more productive. They bear lower costs, having been stripped of the in-store lens laboratory, and they are more integrated with the group's supply chain, eliminating the need for inventories in the store.

“Macy's LensCrafters today are already like showrooms where you go, choose your frame, get your eye exam done, and order your complete pair that will be delivered from our Atlanta distribution center to your place,” said Massimo Vian, the group's chief executive.

He added that the group is gradually moving away from the one-hour delivery schedule offered in LensCrafters stores because in “gateway” cities such as New York, clients do not have time to wait an hour for their glasses to be prepared. Some clients prefer to have the glasses delivered at the office, home or a specific store the following day.

In the coming months, Luxottica will start inviting customers to use its online platforms to pre-select the frames of their choice and to book a visit to one of its stores. By introducing this service, the company hopes that it will raise the chances that a customer entering a shop will end up making a purchase.

Vian also expects its virtual try-on program to be available for Ray-Ban models on and for all mobile devices in the first quarter of next year. He sees the virtual try-on tool available on for prescription frames in the second half of 2017.

In the third quarter, LensCrafters' comparable store sales fell by 1.6 percent in North America due to reduced promotional activity during the back-to-school period and management energy being distracted by other initiatives, such as the Macy's project, the roll-out of the new Carifye digital eye exam and the introduction of a new point-of-sale payment system.

Same-store sales fell by 1.4 percent at Sears Optical and Target Optical. While Luxottica sees Target Optical as a “growth story,” it says that the situation at Sears is “a bit more challenging.”

In Europe, Luxottica raised reported revenues by 5.2 percent and constant-currency sales by 8.3 percent, moving them up to a total of €386 million in the quarter. They were driven by Ray-Ban and Oakley. All major markets grew in constant currencies except Turkey, with the U.K., the Nordic countries, Portugal and Eastern Europe posting double-digit growth.

The European retail business enjoyed double-digit comparable sales growth thanks to a sunny summer. The group benefited from a strong acceleration in retail sales in the U.K, Iberia and Germany. Sunglass Hut booked double-digit growth in the region.

In Asia-Pacific, group revenues increased by 4.5 percent to €283 million at current currency rates but fell by 0.2 percent in local currencies. Luxottica registered “solid” growth in Japan, South Korea and Southeast Asia, and it saw some signs of improvement in Hong Kong, where its business remained negative.

Excluding Greater China, currency-neutral sales were up by 4 percent in Asia-Pacific. In mainland China, Luxottica's total revenues decreased. The wholesale business dropped because the group is terminating some agreements with local distributors to build up a direct presence. But the retail segment posted strong growth in the country thanks to double-digit same-store sales in its optical retail network and the addition of new Ray-Ban stores.

At the end of October, the group had 37 Ray-Ban stores in China. It aims for about 70 locations by the end of year and has plans for further expansion next year. Luxottica is also testing the sale of high-end Bay-Ban branded prescription frames in those stores.

Same-store sales in the group's optical retail business in Australia and New Zealand rose by 0.3 percent in the third quarter, a sharp slowdown from the first half, resulting in 1.9 percent growth for the first nine months.

In Latin America, sales rose by 6.9 percent to €134 million, with an increase of 6.8 percent at constant exchange rates. The growth was driven by the retail business, thanks to strong sales at the GMO chain and Sunglass Hut. Comparable retail sales grew by a high single-digit rate in the optical retail circuit in the region.

The best performing markets were Mexico, with double-digit growth, and the Andes countries. Brazilian sales were weak but the group claims to have raised its market share.

In the rest of the world, Luxottica's sales dropped by 5.0 percent at current exchange rates and by 5.9 percent in local currencies, down to €75 million for the quarter.

In the first nine months of this year, Luxottica posted overall sales of €6,944 million, up by a reported 1.8 percent. On an adjusted basis, they were down by 0.1 percent at current currency rates and up by 1.5 percent at constant currency rates.

The group's e-commerce business, which includes, and, raised its quarterly sales by 18 percent at constant currency rates, with underperforming due to a tough comparison with last year. Around mid-September 2015, Luxottica closed websites offering discounted Oakley products. From October of this year, the increase in e-commerce sales will look “a lot closer” to 30 percent, according the group.

Looking at the fourth quarter of 2016, the management anticipates its wholesale business to perform “definitely better” than in the third quarter. It also expects an acceleration in retail sales.

Luxottica predicts that sales will increase by a mid-single-digit rate next year, in line with market expectations. The launch of its new Valentino collection next Jan.1 will help boost the top line.

Analysts currently see Luxottica posting sales of around €9,060 million this year and about €9,500 million in 2017 against €8,837 million in 2015.

Vian noted that Luxottica continues to be “very, very active” in seeking potential acquisitions that are more likely to be “on the market side and distribution side.” The group is not particularly interested in acquiring more brands.