Oakley Buoys Luxottica in Tough Third Quarter
Press Release
- October 28 2008
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AS REPORTED BY SPORTSONESOURCE.COM - Luxottica Group S.p.A. reported net sales reached €1.212 billion in third quarter, up 12.8% at constant exchange rates from the same period of the previous year. Pro forma net sales, on the other hand, were down 2.7% at constant exchange rates.
Good sales performance by Oakley across all markets, together with the ongoing success of the Ray-Ban brand, enabled the Group to weather the effect of the international situation. Sales to third parties in this segment rose 37.5% to € 429.8 million in third quarter 2008 from € 312.7 million in third quarter 2007. Pro forma sales to third parties, on the other hand, fell 0.7% at constant rates.
Regarding sales on a geographical basis, Luxottica saw very good results in continental Europe and emerging economies, with marked growth in Brazil, India and Southeast Asia, while sales were down in certain Mediterranean countries of Europe and in Japan.
The wholesale division, which includes Oakley, reported operating income of € 105.1 million, up 2.8% from € 102.3 million in third quarter 2007. The pro forma operating margin dropped to 20.1% in third quarter 2008 from 22.8% in third quarter 2007. The change reflects charges relating to the integration of Oakley (€ 8 million for the quarter) and exchange rates, which reduced the division’s operating margin by 130bps.
On the operating front, EBITDA rose 3.1% from € 250.9 million in third quarter 2007 to € 258.6 million for the same period in 2008. On a pro forma basis, the EBITDA margin decreased to 21.3% in third quarter 2008 from 21.7% in third quarter 2007, down 40 basis points.
At the Group level, operating income for third quarter 2008 amounted to € 195.1 million, in line with the figure for the same period of the previous year. On a pro forma basis, the Group’s operating margin decreased to 16.1% in third quarter 2008 as compared to 16.4% in third quarter 2007, down 30 basis points.
Earnings per share (EPS) for the quarter reached $0.34 (up from the same period the previous year), or € 0.23 (against € 0.25 in third quarter 2007).
Net income for third quarter 2008 amounted to € 104.6 million, down 7% from € 112.4 million in the same period the previous year. The reduction in net income was almost entirely due to higher financial charges following the Oakley merger and to exchange rates.
In the third quarter, the Group continued to grow in both market share and sales volume despite a particularly challenging economic environment that deteriorated steadily over the period. Further, there was significant depreciation in the major currencies in each of our key markets (including especially the US dollar) against the € during the period.
“We are in a particularly difficult year,” commented Luxottica Group CEO Andrea Guerra.
The Group’s free cash flow in the quarter (over € 180 million) enabled it to reduce its net indebtedness for euro-denominated and US Dollar-denominated facilities by approximately € 140 million and $20 million, respectively. Due to exchange rates, however, the Group’s net debt as of Sept. 30, 2008 was € 2,911 million (€ 2,840 million at June 30, 2008), with a net debt/EBITDA pro forma ratio of 2.8 (2.6 net of exchange rate effects). Notably, none of the Group’s credit facilities require refinancing in the coming months, and maturities until 2011 may largely be covered by the Group’s cash generation.
Forecasts for 2008
The Group anticipates that, for the first time in 2008, pro forma operating margin should improve in the fourth quarter when compared to the same period last year. The flexibility and effectiveness of the Group’s business model should enable it to continue to produce solid cash flows, which, for the full year 2008, are expected to be € 360-€ 380 million.
According to current estimates, Luxottica now expects to achieve an EPS for 2008 between € 0.96 and € 0.98.
Third quarter 2008(1) (millions of euro, except per share amounts) 3Q08 3Q07 % Change Net Sales 1,212.0 1,151.0 +5.3 % (+12.8% at constant exchange rates) EBITDA(3) 258.6 250.9 +3.1 % Operating income 195.1 195.0 0 % Net income 104.6 112.4 -7.0 % EPS (in Euro) 0.23 0.25 -7.2 % - Before trademark amortization(3) 0.25 0.26 -7.4 % EPS (in US Dollars) 0.34 0.34 +1.7 % - Before trademark amortization(3) 0.37 0.36 +1.5 %
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