Luxottica expects its sales in Europe to accelerate in 2015, rising by 5-7 percent at constant currency rates, against growth of 4.6 percent in 2014. In a conference call with analysts, the new joint chief executive of the group in charge of markets, Adil Mehboob-Khan, said with a couple of months “under our belt” that the target is achievable. He noted that revenues are going to grow at that pace in the first part of the year and that the company should benefit from favorable comparisons in the second half with the relatively poor summer of last year in Europe, especially in the Mediterranean countries. In the fourth quarter of 2014, the group's wholesale revenues plummeted by 8 percent in Western Europe, largely due to the inventory overhang from weak summer sales.
In 2014, Luxottica's European sales totaled €1,507 million, with wholesale rising by 2.5 percent on a currency-neutral basis to €1,295 million and retail up by 21.1 percent to €212 million. Overall, Europe represented 20 percent of Luxottica's total of €7,652 million in revenues, with wholesale contributing 17 percent and retail 3 percent.
The group expects North American sales to grow this year by 4-6 percent at constant currency rates, with wholesale rising by 9-11 percent and retail up by 3-5 percent on a comparable store basis. In 2014, U.S. sales rose by 4.2 percent on a currency-neutral basis and reached €4,287 million, with wholesale up by 11.2 percent to €841 million and retail up by 2.6 percent to €3,445 million.Overall, North America represented 56 percent of Luxottica's top line, with wholesale contributing 11 percent to the total turnover and retail 45 percent.
For the Asia-Pacific region, Luxottica predicts a 10-14 percent increase in 2015 sales. Last year, sales in the region rose by 9.5 percent in local currencies and reached €1,050 million, with wholesale up by 15.9 percent to €433 million and retail up by 5.5 percent to €617 million. Asia-Pacific contributed 14 percent to group sales, with wholesale representing 6 percent and retail 8 percent. The group's sales in Asia-Pacific grew at double-digit rates in China, India and Southeast Asia, led by Ray-Ban and Oakley. To enhance sales of these two house brands, Luxottica created dedicated distribution organizations for Ray-Ban and Oakley. The group is now considering splitting the sales forces to focus them more on sunglasses and optical frames.
The company noted that it is currently competing in only 10 percent of the Chinese territory and that it still has “90 percent of China to conquer.” Last year, Luxottica set up its operations in Malaysia and is now building up its presence in the Indonesian market, focusing on Jakarta and Bali because they offer growth opportunities in sunglasses for locals and tourists.
In Australia, which represents 4 percent of Luxottica's sales, the group is facing tough competition in optical eyewear, with comparable retail sales unchanged year-on-year in the fourth quarter and up by 1 percent for all of 2014. The group's OPSM banner registered a 1.7 percent increase in same-store sales during 2014, with a slowdown in the second part of the year. On the positive side, Sunglass Hut's comparable sales surged by 8.5 percent during the year in Australia.
For 2015, the group is forecasting growth of 16-20 percent in Latin American sales at constant currency rates, after a 15.3 percent rise to €506 million in 2014. Wholesale revenues rose last year by 15.4 percent to €350 million and retail by 15.2 percent to €156 million. In the rest of the world, sales grew by 13.3 percent on a currency-neutral basis to €303 million, with wholesale up by 12.4 percent at €274 million and retail up by 22.0 percent at €29 million. Latin America contributed 7 percent to group sales and the rest of the world 4 percent.
In Brazil, sales rose by 17 percent in the local currency, driven by growth of 60 to 70 percent for the group's luxury brands. As Brazilians have been purchasing luxury items abroad to offset high import duties and taxes, the group lowered the prices of top-tier products two years ago, prompting Brazilian consumers to buy locally. The resulting increase in volumes offset the price cuts.
Now about half the products that the company sells in Brazil are manufactured locally thanks to the acquisition of Tecnol in January 2012. Half of the Brazilian production is allocated to the group's house brands, including Ray-Ban and Oakley.
Local manufacturing enables the group to avoid hefty customs duties and to improve client support. Currently, Brazil generates nearly €300 million in annual sales for the group and is coming closer to becoming Luxottica's second-largest wholesale market.