EssilorLuxottica: Full year 2019 results / Uplift in Sales and Net Profit growth / Strong foundation to accelerate synergy delivery
Full year 2019 results
Uplift in Sales and Net Profit growth
Strong foundation to accelerate synergy delivery
- Revenue growth at constant exchange rates2 of 4.4%, compared to 3.2% in 2018 pro forma1
- Adjusted6 operating profit: Euro 2,812 million, 16.2% of revenue
- Adjusted6 net profit attributable to owners of the parent: Euro 1,938 million, 11.1% of revenue and growth of 4.8%1 at constant exchange rates2
- Free cash flow7: Euro 1,825 million
- Adjusted6 EPS: Euro 4.46
- Dividend recommendation: Euro 2.23 per share, scrip dividend proposed
Charenton-le-Pont, France (March 6, 2020 – 7:00am) - The Board of Directors of EssilorLuxottica met on March 5, 2020 to approve the consolidated financial statements for the year ended December 31, 2019. These financial statements were audited by the Statutory Auditors whose certification report is in the process of being issued. The Board of Directors has also approved the Restated Unaudited Pro Forma1 Consolidated Financial Information for the year ended December 31, 2018, which has been prepared for illustrative purposes only.
“In its first full year, EssilorLuxottica delivered a solid performance. It advanced on its Mission and delivered innovative products at every price point to customers and consumers worldwide while generating profitable growth. This translated into strong revenue, free cash flow and net profit growth, in line with guidance. The Company also implemented a range of structural decisions in order to start the integration process and the delivery of the expected synergies presented at its Capital Markets Day. Essilor, for its part, performed strongly. It continued to leverage its unique innovation capabilities in vision care and eyewear, its digital platforms and the flexibility provided by its global network of interconnected plants and prescription laboratories”, said Laurent Vacherot, CEO of Essilor.
"When we look at Luxottica’s performance over the past year, there is so much to be proud of, both in terms of our solid results and many notable achievements - our continued digital transformation in particular proved that the work we’ve done over the past five years is paying off. Along with growing and improving our profits, we set a new standard for the way technology can elevate an entire organization, from online sales growth to our deep connections with consumers across every channel. These successes, along with our outstanding cash flow generation of 1.2 billion Euro, were key contributors to EssilorLuxottica’s overall results for the year”, commented Francesco Milleri, Deputy Chairman and CEO of Luxottica.
Full year 2019 adjusted6 results
2019 is the first year in which EssilorLuxottica’s consolidated statement of profit or loss shows the full year performance of both Essilor’s and Luxottica’s businesses. However, since the 2018 information presented in the statement of profit or loss is affected by the accounting of the combination between Essilor and Luxottica, the financial information deemed relevant to compare 2019 performance is based on the restated pro forma1 information for the year ended December 31, 2018.
In millions of Euros | 2019 | 2018* pro forma1 | Reported Change |
Revenue | 17,390 | 16,194 | +7.4% |
Adjusted6 gross profit | 10,887 | 10,209 | +6.6% |
% of revenue | 62.6% | 63.0% | |
Adjusted6 operating profit | 2,812 | 2,618 | +7.4% |
% of revenue | 16.2% | 16.2% | |
Adjusted6 net profit attributable to owners of the parent | 1,938 | 1,774 | +9.2% |
% of revenue | 11.1% | 11.0% |
* The 2018 comparative information has been restated following the application of IFRS 16 Leases, as well as to reflect the finalization of the purchase price allocation (“PPA”) related to the EssilorLuxottica Combination.
In 2019, EssilorLuxottica’s full year revenues grew by 7.4% compared to prior-year pro forma1 revenue (4.4% at constant exchange rates2). The Company’s adjusted6 gross profit as a percent of sales came in at 62.6% while adjusted6 operating profit was stable at 16.2% of sales. Adjusted6 net profit attributable to the owners of the parent of Euro 1,938 million represents an increase of 9.2%1 compared to the prior year (4.8%1 at constant exchange rates2).
Full year 2019 highlights
- Strong revenue growth at constant exchange rates2 across all divisions with the best performance from Sunglasses & Readers up 8.9%, Lenses & Optical Instruments up 5.5%, and Retail up 4.0%;
- Direct e-commerce, which represented around 5% of consolidated revenue, grew by 16% at constant exchange rates2, with positive trends across all major platforms and regions;
- On a geographical basis at constant exchange rates2, Fast Growing Markets4 expanded by 8.5% and represented close to 20% of revenue, Europe grew by 5.1% and North America was in line with global market growth at 3.1%;
- Adjusted6 operating profit as a percent of sales remained stable reflecting underlying margin improvement offset by investments behind key brands and growth initiatives worldwide;
- Free cash flow7 amounted to Euro 1.8 billion, the same level as last year despite the impact of fraudulent financial activity at one of Essilor’s plants in Thailand;
- Key investment fueled new product launches (notably Transitions® Signature® GEN 8TM and Vision-RTM 800), further digitalization of the business, stronger offerings on proprietary e-commerce sites, refurbishment of key retail stores and expansion of operating structures in Fast Growing Markets4 among others;
- Activation of synergies in line with Company’s expectations, with structural decisions creating a strong foundation for an increase in synergy delivery in 2020 and 2021;
- Continued strong momentum in external growth with the proposed acquisition of GrandVision and several bolt-on transactions such as Barberini in Italy and Brille24 in Germany.
Fourth quarter 2019 highlights
- Lenses & Optical Instruments grew by 5.2% at constant exchange rates2 thanks to Fast Growing Markets4, the Transitions® Signature® GEN 8TM launch in the United States and double digit-growth in e-commerce;
- Sunglasses & Readers grew by 10.1% at constant exchange rates2 with a strong performance by Xiamen Yarui Optical in China, fueled by its expansion into optical frames and online sales;
- Wholesale rose by 2.4% at constant exchange rates2 thanks to stronger performance in North America (including independents), key markets in Europe, steadily sound trends in Brazil with Óticas Carol and rebuilt Mainland China;
- Retail continued on its solid path, up 4.6% at constant exchange rates2, thanks to the optical networks in North America (including positive trends at LensCrafters) as well as the entire business in Australia, Europe and Brazil;
- Fraudulent financial activity was discovered at one of Essilor International’s plants in Thailand. The financial impact has been fully recorded in the 2019 consolidated statement of profit or loss for an amount of Euro 185 million after taking into account foreign exchanges impacts;
- The Company launched a bond issuance for a total amount of Euro 5 billion, notably to (re)finance a portion of the consideration to be paid in relation to the proposed acquisition of GrandVision, to (re)finance the existing debt of the Company and to fund general corporate purposes. Group net debt amounted to Euro 4,046 million at the end of December 2019, compared to Euro 3,849 at the end of December 2018 (restated following the implementation of IFRS 16 Leases).
Synergies and integration
The Company has started to drive integration and deliver revenue and cost synergies. It confirms that the net impact of those synergies on adjusted6 operating profit is expected to be in the range of:
- Euro 300 to Euro 350 million in the period 2019-2021;
- Euro 420 to Euro 600 million by 2022-2023.
In 2019, the first synergies generated as part of this plan were in line with internal expectations. This included the development of Essilor lenses, including the most innovative and technologically advanced categories, within the Company’s own retail networks as well as key initiatives in R&D, procurement, prescription laboratories and insourcing.
In addition, structural decisions were made during the year to create a strong foundation for further integration and accelerate synergy delivery in 2020 and 2021, in line with the plan. These decisions include:
- Defining one single IT platform to be rolled out across the Company, after the ongoing pilot project in Italy;
- Creating one single network of prescription laboratories, as part of an integrated supply chain;
- Establishing a unified platform for the provision of complete pairs of branded glasses, starting with the availability of full prescription products under the Ray-Ban brand both in the clear and sun segments;
- The full integration of Costa into the brand portfolio of Luxottica;
- A common employee shareholding plan, which was extended to Luxottica employees in Italy in 2019 with a subscription rate of over 67%.
Eliminating poor vision around the world
Essilor has created more than 15,000 inclusive businesses worldwide since 2013, which have the potential to give more than 300 million people access to vision health. These access points delivered vision solutions to 10.7 million new eyeglass wearers in 2019 alone, bringing the total for the past seven years to 33.5 million.
These efforts earned EssilorLuxottica the 17th spot in Fortune Magazine’s annual Change the World list in 2019. In this same spirit of raising awareness on good vision, Essilor made presentations in different parts of the world to leverage the report it published on the sidelines of the last United Nations General Assembly session, entitled “Eliminating Poor Vision in a Generation: What will it take to eliminate uncorrected refractive errors by 2050?”. The report quantifies the scale of uncorrected poor vision in the world and recommends a cumulative investment of $14 billion over the next 30 years to eliminate it.
In 2019, Essilor worked toward this goal through partnerships to eliminate poor vision in many regions. In Bhutan, 30,000 pairs of glasses have been delivered to date to make this country the first in the world to eliminate poor vision. In India, more than 143,000 people were screened to put the Doddaballapura region on track to be the first in the country to also eliminate poor vision by 2021. In Nepal, the company signed a letter of intent to provide access to eye care to the 350,000 residents of the Bhaktapur district. And in China, Essilor worked with the Huoqiu County to eliminate poor vision in the county within three years. Partnerships were also launched with governmental ministries in France, Kenya and India to promote eye exams and raise awareness about the importance of visual health in schools or among underprivileged children (see page 15 for more details).
Subsequent events
COVID-19
The current COVID-19 epidemic has a negative impact on the Company’s business in Greater China, which represents approximately 5% of consolidated revenue. So far, the virus has also slightly impacted the Company’s revenue performance in other regions. At the current level, inventory is sufficient to meet several weeks of demand.
In terms of production, EssilorLuxottica plants in China are currently operating at slightly reduced capacity, which is quickly normalizing, while the plants in Italy and all other locations are currently running at full capacity. Contingency plans can be activated in case of a protracted pandemic. They would aim at optimizing the Company’s global infrastructure. EssilorLuxottica can rely on a worldwide network of plants and laboratories, which allow flexibility and continuity.
GrandVision
The European Commission has initiated a Phase II review of the proposed acquisition of GrandVision. The transaction has been unconditionally cleared so far in the United States, Russia and Colombia, and it is currently under review also in Brazil, Chile, Mexico and Turkey (see page 28 for more details).
Fraud
The Company announced on December 30, 2019 that it had discovered fraudulent financial activity at an Essilor plant in Thailand. Since then, Essilor International has implemented a wide range of corrective measures under the supervision of the EssilorLuxottica Board of Directors (see page 28 for more details).
Management Changes
EssilorLuxottica confirms that the search for a new CEO is ongoing. It is now also considering internal candidates. The final appointment is expected to be made by the end of 2020.
David Wielemans is appointed co-CFO of EssilorLuxottica alongside Stefano Grassi, in replacement of Hilary Halper.
Ariel Bauer is appointed co-Head of Investor Relations of EssilorLuxottica alongside Giorgio Iannella, in replacement of Véronique Gillet.
Dividend
The Board of Directors will recommend that shareholders at the Annual Meeting to be held on May 15, 2020 approve the payment of a dividend of Euro 2.23 per share. Shareholders will be offered the option of receiving their dividend in cash or in newly issued shares. The dividend will be paid – or the shares issued – as from June 15, 2020.
Outlook
The Company’s financial objectives for 2020 assume that the COVID-19 outbreak will subside in the next few months.
Based on this assumption, and excluding any contribution from GrandVision, EssilorLuxottica expects to grow in sales and profits. Including synergies and at constant exchange rates2, it is projecting the following:
- Sales growth: +3.0%-5.0%
- Adjusted6 operating profit growth: 0.7-1.2x sales growth
- Adjusted6 net profit growth: 0.7-1.2x sales growth
In addition, due to the COVID-19 outbreak, the Company’s current expectation is for revenue growth to be below the annual trend in the first half of the year, followed by a recovery in the second half.
Conference call
A conference call in English will be held today at 11 am CET.
The meeting will be available live and on a replay mode at:
https://channel.royalcast.com/webcast/essilorluxotticaen/20200306_1/
Upcoming investor events
- Q1 2020 Sales: May 5, 2020;
- Annual Shareholders Meeting: May 15, 2020;
- H1 2020 Results: July 31, 2020.
Notes
1 Pro forma: the Restated Unaudited Pro Forma Consolidated Financial Information has been produced for illustrative purposes only, with the aim of providing comparative information for the year ended December 31, 2018 as if the combination between Essilor and Luxottica had occurred on January 1, 2018. For further details, please refer to the table in the Appendix.
2 Constant exchange rates: figures at constant exchange rates have been calculated using the average exchange rates in effect for the corresponding period in the previous year.
3 Like-for-like: growth at constant scope and exchange rates.
4 Fast-growing countries or markets: include China, India, ASEAN, South Korea, Hong Kong, Taiwan, Africa, the Middle East, Russia, Eastern Europe and Latin America.
5 Comparable store sales or comps: reflect, for comparison purposes, the change in sales from one period to another by taking into account in the more recent period only those stores already open during the comparable prior period. For each geographic area, the calculation applies the average exchange rate of the prior period to both periods.
6 Adjusted measures or figures: adjusted from the expenses or income related to the combination between Essilor and Luxottica and other transactions that are unusual, infrequent or unrelated to the normal course of business as the impact of these events might affect the understanding of the Group’s performance.
7 Free Cash Flow: Net cash flow provided by operating activities less the sum of Purchase of property, plant and equipment and intangible assets and Cash payments for the principal portion of lease liabilities according to the IFRS consolidated statement of cash flow.
EssilorLuxottica is a global leader in the design, manufacture and distribution of ophthalmic lenses, frames and sunglasses. Formed in 2018, its mission is to help people around the world to see more, be more and live life to its fullest by addressing their evolving vision needs and personal style aspirations. The Company brings together the complementary expertise of two industry pioneers, one in advanced lens technology and the other in the craftsmanship of iconic eyewear, to set new industry standards for vision care and the consumer experience around it. Influential eyewear brands including Ray-Ban and Oakley, lens technology brands including Varilux® and Transitions®, and world-class retail brands including Sunglass Hut and LensCrafters are part of the EssilorLuxottica family.
In 2019, EssilorLuxottica had over 150,000 employees and consolidated revenues of Euro 17.4 billion.
The EssilorLuxottica share trades on the Euronext Paris market and is included in the Euro Stoxx 50 and CAC 40 indices.
Codes and symbols: ISIN: FR0000121667; Reuters: ESLX.PA; Bloomberg: EL:FP.
CONTACTS
EssilorLuxottica Investor Relations (Charenton-le-Pont) Tel: + 33 1 49 77 42 16 (Milan) Tel: + 39 (02) 8633 4870 E-mail: ir@essilorluxottica.com | EssilorLuxottica Corporate Communications (Charenton-le-Pont) Tel: + 33 1 49 77 45 02 (Milan) Tel: + 39 (02) 8633 4470 E-mail: media@essilorluxottica.com |
Excerpts from the full year 2019 management report
Full year 2019 revenue by operating segment
In millions of Euros | 2019 | 2018 Restated* Pro forma1 | Change at constant rates2 | Currency effect | Change (reported) |
Lenses & Optical Instruments | 6,791 | 6,283 | +5.5% | +2.6% | +8.1% |
Sunglasses & Readers | 885 | 787 | +8.9% | +3.6% | +12.5% |
Equipment | 221 | 210 | +2.0% | +3.3% | +5.3% |
Essilor revenue | 7,897 | 7,280 | +5.8% | +2.7% | +8.5% |
Wholesale | 3,260 | 3,145 | +1.8% | +1.9% | +3.7% |
Retail | 6,232 | 5,769 | +4.0% | +4.0% | +8.0% |
Luxottica revenue | 9,493 | 8,914 | +3.2% | +3.3% | +6.5% |
Total | 17,390 | 16,194 | +4.4% | +3.0% | +7.4% |
* 2018 information has been restated following the application of IFRS 16 Leases.
EssilorLuxottica’s revenue amounted to Euro 17,390 million and increased by 4.4% at constant exchange rates2 in 2019, in the upper half of the Group’s 3.5% to 5% outlook.
Lenses & Optical Instruments
The Lenses & Optical Instruments division grew by 5.5% at constant exchange rates2 in 2019, for total sales of Euro 6,791 million. The division showed strength across all regions through a continued focus on innovation, fast growing markets4 and e-commerce. Key milestones in 2019 included the launch of Transitions® Signature® GEN 8TM in the US market, the success of the Vision-R™ 800 phoropter in Europe, double-digit growth both in China, thanks to branded lenses (notably EyezenTM, Crizal® and Varilux®), and Latin America owing to market expansion activities and a new partnership with a key player in the region.
Sunglasses & Readers
The Sunglasses & Readers division performed well in 2019, with revenue rising 12.5% to Euro 885 million (+8.9% at constant exchange rates2). This reflected robust results in China, especially for Xiamen Yarui Optical (Bolon™) and strong market demand for readers and sunglasses at Costa and FGX International in the United States. Furthermore, e-commerce sales were once again buoyant for the division, with revenue ending the period up by more than 20% on a like-for-like3 basis.
Lastly, in keeping with the commitments made to Turkish antitrust authorities at the time of the combination with Luxottica, Essilor divested its subsidiary Merve, which markets sunglasses to consumers in Turkey.
Equipment
The Equipment division grew by 2% at constant exchange rates2 with a mix of solid market trends in Europe, Latin America and Asia offset by a slowdown in the capital investment cycle in other developed markets, partly due to industry consolidation. On a consolidated financial basis, Europe and Asia contributed to growth while North America and Latin America were headwinds. With respect to products, performance was driven by digitalization, new generation surfacing machines and coating machines. The order book ended the year slightly up. The business contributed to group profitability, which enabled continued R&D investment to support innovation in production methods and lab efficiency across the global ophthalmic lens industry.
Wholesale
The Wholesale division closed the year with revenue up by 3.7% to Euro 3,260 million, or +1.8% at constant exchange rates2, the strongest pace since 2015 thus proving the effectiveness of the set of strategic initiatives undertaken. All regions were on the rise, with a remarkable acceleration experienced by North America over the second part of the year supported by positive trends at independents, department stores and third-party e-commerce. The steady growth posted by Europe was driven by volumes and benefited from the relentless evolution of STARS. On a global basis, the program is now comprised of approximately 16,600 doors, representing over 13% of sales for the Wholesale division. As for Asia, Oceania and Africa and Latin America, both the regions experienced a deceleration in the second half of 2019, mainly attributable to poor trends in Hong Kong and travel retail and a weakening performance in Mexico respectively. Conversely, Brazil was among the top performers and recorded a sustained growth, at high single digit pace during the twelve months, boosted by STARS and Óticas Carol (both meaningfully increasing the number of doors). Mainland China continued to leverage the success of the strategic repositioning of the business undertaken two years ago.
Retail
The Retail division was up 8.0% in revenue to Euro 6,232 million in the full year, or +4.0% at constant exchange rates2, with accelerating momentum in the fourth quarter. Revenue was positive throughout the entire year, with comparable store sales5 slightly above the parity in the twelve months. In North America all the networks contributed to the division growth, in particular the Optical Retail Business led the growth with LensCrafters posting the strongest quarter of the year (thanks to a healthy insurance week and a strong price-mix), a solid contribution from the insurance business unit Eye Med as well as Target Optical and Pearle Vision. During the fourth quarter the sales drop was amplified at Sears Optical. In Europe Sunglass Hut and Salmoiraghi & Viganò kept nicely growing, like both optical and sun business did in Australia and sun in Brazil. Hong Kong confirmed to be a drag, with no signs of improvement, while GMO was impacted by protests in Chile and Ecuador in the last quarter of the year. Direct e-commerce grew double digit across all the platforms in the full year, mostly driven by North America that posted in the fourth the best quarter of the year.
Full Year 2019 revenue by geographical area
In millions of Euros | 2019 | 2018 Restated* Pro forma1 | Change at constant rates2 | Currency effect | Change (reported) |
North America | 9,154 | 8,433 | +3.1% | +5.4% | +8.5% |
Europe | 4,236 | 4,038 | +5.1% | -0.2% | +4.9% |
Asia, Oceania and Africa | 2,892 | 2,694 | +5.4% | +2.0% | +7.4% |
Latin America | 1,108 | 1,028 | +9.5% | -1.8% | +7.7% |
Total | 17,390 | 16,194 | +4.4% | +3.0% | +7.4% |
* 2018 information has been restated following the application of IFRS 16 Leases.
North America
In North America revenue increased by 8.5% to Euro 9,154 million (+3.1% at constant exchange rates2).
The Lenses & Optical instruments division posted another strong full year through a continued focus on its go to market strategy in the core United States lens business along with strong e-commerce growth. The lens strategy in the United States, led by key brands and innovation, partnerships with Independent Eyecare Professionals (ECP) and key accounts, continued to deliver results. Performance was stronger in the second half owing to the launch of Transitions® Signature® GEN 8™. Full year 2019 growth was further boosted by robust engagement with Luxottica both for select key accounts and sales of value added lenses though the Group’s retail channels. Canada and sales of Transitions to other lens casters were headwinds while contact lens distribution activities added to growth.
Trends were strong in Sunglasses & Readers. Costa made further inroads with Eyecare professionals as well as in sporting goods stores and online channels, while increasing its presence in the United States. The brand notably solidified its leadership in fishing stores, selling to fishing enthusiasts and those living near beaches, lakes and rivers. Late in 2019, Costa started being integrated into the Luxottica portfolio, which should help this young brand expand its global footprint more quickly and benefit from significant synergies, given Luxottica’s expertise in sunwear. In addition, strong market demand for readers and sunglasses allowed FGX International to make up in the second half for the impact of a demanding comparison basis in the first six months. It continued to diversify its distribution network in the United States and to expand its international and online operations.
The Equipment division posted a modest decline for the year, owing mainly to softer fourth quarter dynamics, as key customers work to absorb capacity from recent investment programs.
In North America, Luxottica posted its best year since 2015 in terms of sales growth with Wholesale and Retail both accelerating in the fourth quarter. The growth in Wholesale was reinforced by the solid performance in the independent, department store and the third-party e-commerce channels. The Retail business had a strong year with Target Optical and EyeMed leading the way at double-digit sales growth. Sunglass Hut posted positive performance building on a winning omnichannel proposition, further articulated and resonating well with its customers. LensCrafters closed the year on a positive note benefitting from an expanding store remodeling program and a favorable price-mix boosted by a higher penetration of value-added lenses. The crisis of Sears had a significant impact on the overall performance of the Retail business leading to the decision to exit the banner by the end January 2020. The proprietary e-commerce platforms delivered exceptional growth, with a further acceleration in the fourth quarter. Oakley eyewear experienced a relevant uplift from the partnership with the NFL (with its testimonial Patrick Mahomes winning the Superbowl and the related MVP trophy), posting mid-single digit growth in the second half of the year.
Europe
In Europe, revenue increased by 4.9% to Euro 4,236 million (+5.1% at constant exchange rates2).
Operating in a fiercely competitive environment, the Lenses & Optical Instruments division demonstrated resilience in France, the largest market in the region, and in all Eastern European countries, particularly Poland and Russia. Gains were driven by value-added lenses, especially progressive lenses. Elsewhere in Europe, revenue was either flat or slightly lower. Growth in E-commerce sales was satisfactory, especially for contact lenses distributed through the VisionDirect website. The Instruments business saw strong growth in 2019, fueled by the launch and marketing of two major new products during the year: Visioffice® X, a tool for personalizing lenses in optical stores, and the Vision-R™ 800 phoropter. A world first, the latter radically changes the eye exam process and customer experience, allowing measurement up to 0.01 diopter versus 0.25 diopter with other machines on the market. In addition to revolutionizing optometry, the Vision-R™ 800 paves the way for ophthalmic lenses with much greater accuracy.
Within the Sunglasses & Readers division, FGX International delivered robust sales, notably in the United Kingdom and Germany.
The Equipment division had a strong finish to the year in the fourth quarter, following an exceptional third quarter performance.
In 2019, Europe continued to contribute to the overall Luxottica growth, with a positive evolution at both Wholesale and Retail divisions, supported by best-selling proprietary brands (also online) as well as main luxury licenses. The Wholesale channel showed steadily growth over the year, supported by volumes expansion. Among major countries, Italy, Germany, Turkey and Eastern Europe outperformed other markets. The successful development of the STARS program remains a key pillar of Luxottica’s strategy, and currently represents over 20% of Wholesale revenue in the region, showing a nice acceleration in the last part of the year. Sales in Europe were also supported by the growth around double-digit of the Retail division, on the back of effective in-store execution empowering positive results in all countries. Sunglass Hut confirmed its healthy growth trajectory, growing at mid-single digit in comparable sales5 in Continental Europe and with 21 successful new openings during the year. In Italy, Salmoiraghi & Viganò, the leading multi-brand retailer in the country, consolidated further its position, growing nicely in both comparable sales5 and total revenues, also thanks to a successful store renovation plan that will be carried forward in 2020 as well. Finally, Persol opened its first store in Europe (in Milan).
Asia, Oceania and Africa
In Asia, Oceania and Africa, revenue increased by 7.4% to Euro 2,892 million (+5.4% at constant exchange rates2).
The Lenses & Optical Instruments division was a major contributor to the regional performance. It delivered double-digit growth in China, thanks to branded lenses (notably EyezenTM, Crizal® and Varilux®), instruments, myopia control solutions and innovation in the midrange. Good performances from progressive and photochromic lenses have accelerated gains in South Korea quarter after quarter, and kept momentum strong in Southeast Asia. In India, promotional campaigns, online sales and innovative business models for Base-of-Pyramid consumers only partially offset the decline in sales through traditional distribution channels. Revenue in Japan got a lift from value-added lenses and a series of commercial successes with optical chains.
The Sunglasses & Readers division also saw double-digit revenue growth in the region with excellent results at Xiamen Yarui Optical (BolonTM and MolsionTM) in optical frames and robust online sales. The division strengthened its positions in the Chinese sunwear market, its main market in the region.
The Equipment division posted solid growth as market conditions in fast growing markets remained favorable.
2019 was positive for Luxottica in the region as a whole, with growing sales at constant exchange rates2 in both Wholesale and Retail divisions. The second half of the year decelerated versus the first, particularly due to weaker Wholesale in the third quarter (mostly reflecting political turmoil in Hong Kong, dropping travel retail business and unfavorable weather conditions in Japan), but turning positive in the fourth quarter. Australia, Mainland China, South East Asia and Middle-East drove the group’s performance in the area, more than balancing the decline in Hong Kong and travel retail business, while Japan and Korea closed the year at around the par. Wholesale growth was basically driven by Mainland China, where the business restarted on much cleaner basis. In Retail, Australia and New Zealand kept on a nice growing trajectory in both optical at OPSM, posting the 14th consecutive quarter of positive comps5/sales, and sun business at SGH, consistently in terms of sales and comparable store sales5 growth, reaping the fruits of the store refurbishment program carried out last year. Hong Kong retail remained negative, for the fourth consecutive year.
Latin America
In Latin America, revenue increased by 7.7% to Euro 1,108 million (+9.5% at constant exchange rates2).
The Lenses & Optical Instruments division generated significantly improved growth at constant exchange rates2 for the full year 2019 when compared to 2018 consisting of balanced growth in Brazil and Spanish speaking markets through most of the year. 2019 was marked by several key initiatives including marketing programs such as “Varilux® em Dobro” in Brazil, “Cambia tu cara” in Colombia, and enhanced client marketing at Grupo Vision in Costa Rica. The division also rolled out new technological advances and product ranges to independent laboratories to further support growth. After having bought the assets of the laboratory of Devlyn Holdings, Essilor signed a supply contract with Opticas Devlyn, the leading optical chain in Mexico, which boosted growth in constant currency terms. In e-commerce, online sales in Brazil continue to develop rapidly. Major strides were also made in digital marketing with consumers in Mexico and Colombia now able to access the Spanish-language edition of the eye care information website “AllAboutVision.com”.
The Sun & Readers division contributed modestly to regional growth.
The Equipment division was a slight headwind to regional growth on a consolidated basis despite solid underlying activity as market conditions in fast growing markets remained favorable.
Luxottica continued to grow in Latin America last year, expanding sales at constant exchange rates2 in both Wholesale and Retail divisions. The second half of the year slightly slowed down compared to the first, mostly due to a weakening performance in the fourth quarter in Mexico. The key market of Brazil kept the positive momentum it showed throughout the entire year, made of high-single digit growth in Wholesale, boosted by STARS and Óticas Carol (reaching 1,335 franchise locations), as well as double-digit growth in Retail, primarily sustained by SGH. GMO closed the year positive in sales and comparable store sales5, absorbing the negative impact of the protests in Chile and Ecuador in the last quarter.
Fourth-quarter 2019 revenue by operating segment
In millions of Euros | Q4 2019 | Q4 2018 Restated* | Change at constant rates2 | Currency effect | Change (reported) |
Lenses & Optical Instruments | 1,701 | 1,589 | +5.2% | +1.8% | +7.0% |
Sunglasses & Readers | 242 | 214 | +10.1% | +2.8% | +12.9% |
Equipment | 70 | 73 | -6.8% | +2.1% | -4.7% |
Essilor revenue | 2,012 | 1,876 | +5.3% | +2.0% | +7.3% |
Wholesale | 753 | 725 | +2.4% | +1.4% | +3.8% |
Retail | 1,539 | 1,439 | +4.6% | +2.3% | +6.9% |
Luxottica revenue | 2,291 | 2,164 | +3.9% | +2.0% | +5.9% |
Total | 4,304 | 4,040 | +4.5% | +2.0% | +6.5% |
* 2018 information has been restated following the application of IFRS 16 Leases.
EssilorLuxottica’s revenue increased by 4.5% at constant exchange rates2 during the fourth quarter of 2019.
Fourth-quarter 2019 revenue by geographical area
In millions of Euros | Q4 2019 | Q4 2018 Restated* | Change at constant rates2 | Currency effect | Change (reported) |
North America | 2,273 | 2,113 | +4.3% | +3.3% | +7.6% |
Europe | 971 | 918 | +4.9% | +0.8% | +5.7% |
Asia, Oceania and Africa | 756 | 707 | +5.0% | +1.8% | +6.8% |
Latin America | 304 | 301 | +3.8% | -2.9% | +0.9% |
Total | 4,304 | 4,040 | +4.5% | +2.0% | +6.5% |
* 2018 information has been restated following the application of IFRS 16 Leases.
North America
In North America, revenue increased by 7.6% to Euro 2,273 million (+4.3% at constant exchange rates2).
The Lenses & Optical Instruments Division benefitted from the continued momentum from the Transitions® Signature® GEN 8™ launch, both with Independent Eyecare Professionals and through the Company’s retail channels. Robust growth continued with Alliance members and Essilor Experts while key accounts expanded at a modest pace. Similar to the full year trend, contact lens distribution activities contributed to growth.
Sunglasses & Readers performance in the United States was driven primarily by FGX during the fourth quarter.
Trends in the Equipment division moderated after a particularly strong third quarter and an elevated prior year comparison base.
Both Luxottica divisions posted the best quarter of the year. Wholesale grew high-single digit thanks to the sound execution across all channels. The benefit from the consolidation of Barberini weighted to a smaller extent. On the Retail side, sales were up mid-single digit, led by LensCrafters delivering strong results especially during the ramp up towards the end of the insurance year. The performance at Sunglass Hut was mixed. The brick and mortar stores were impacted by an unfavorable timeframe of the holiday season and lower traffic in the touristic locations, but the shortfall was made up online. Target Optical and EyeMed confirmed their sound growth path, while Sears continued to be a heavy drag. The direct e-commerce business had another exceptional quarter growing at 27% at constant exchange rates2 and all major websites contributed to the success.
Europe
In Europe revenue increased by 5.7% to Euro 971 million (+4.9% at constant exchange rates2).
The performance of the Lenses & Optical Instruments in the quarter was driven by robust gains in Russia, Turkey, Instruments and online sales of contact lens through VisionDirect.
The Equipment division continued its strong performance in the fourth quarter, ending the year sharply higher.
Luxottica’s turnover in Europe kept expanding in the last quarter of the year. The Wholesale division saw robust trends in particular in Spain, Portugal, Greece, UK, Turkey and Eastern Europe. Performance of the sun category stood out in the fourth quarter. The company continued to develop its STARS program, thanks to top key accounts, and related turnover experiencing a further acceleration, up by more than 50% compared to the fourth quarter of last year. Retail sales increased soundly in the quarter in high-single digit area, posting its 24th consecutive quarter of turnover expansion. All major countries showed a positive evolution in the division, led by Sunglass Hut in Continental Europe and Salmoiraghi & Viganò in Italy.
Asia, Oceania and Africa
In Asia, Oceania and Africa revenue increased by 6.8% to Euro 756 million (+5.0% at constant exchange rates2).
The Lenses & Optical Instruments division delivered strong in the region, with business up sharply in China, South Korea, Southeast Asia and Japan. Growth was fueled by value-added lenses in all countries.
The Sunglasses & Readers division continued to benefit from its expansion in optical frames and online sales, primarily in China.
Following an exceptional performance through the first nine months of the year, the Equipment division slowed down during the fourth quarter.
Luxottica’s regional sales accelerated in the fourth versus the third quarter, driven by Australia, Mainland China and South East Asia. Australia and New Zealand retail gained further momentum, even amid wildfires emergency, with the optical business recording the 14th consecutive quarter of positive sales, also helped by refurbishments, and the sun business contributing as well, both positive in comparable store sales5. Mainland China speeded up at double-digit pace, fueled by both revamped Wholesale and positive Retail in sales and comparable store sales5. On the opposite, Hong Kong did not improve, deteriorating further in Retail sales and comparable store sales5. Ray-Ban mono-brand store roll-out made further progress last year in the region, focused on Mainland China which reached 141 locations at the end of December, out of a total 171 in the whole Asia-Pacific area.
Latin America
In Latin America, revenue increased by 0.9% to Euro 304 million (+3.8% at constant exchange rates2).
Growth in the Lenses & Optical Instruments division remained in double digits at constant exchange rates2 through a mix of strong underlying trends and new partnerships. In Brazil, the solid dynamics through the first nine months eased as the focus shifted to the Transitions® Signature® GEN 8™ launch anticipated in the earlier part of 2020. E-commerce activity in Brazil supported regional growth. Elsewhere in the region growth was supported by continued market development and improved product mix, which more than offset economic headwinds in select markets, notably Chile and Colombia. Recently formed partnerships contributed to growth at constant exchange rates2, particularly in Mexico where sales expanded at a double-digit rate during the fourth quarter.
The Sunglasses & Readers division contributed modestly to regional growth during the quarter.
For Luxottica, in the fourth quarter the still sound performance of Brazil was counterbalanced by weakening result of Mexico, all in all ending up in flattish sales at constant exchange rates2 in the region. Brazil confirmed sound performance in the fourth quarter, even accelerating in retail sales at constant exchange rates2, essentially boosted by SGH comparable store sales5. On the opposite, after a positive first half of the year, the Mexican wholesale business started deteriorating in the third quarter and failed to recover in the final three months, mostly due to the poor performance of independents and key accounts. The abovementioned political unrests in Chile and Ecuador affected the sales performance of GMO in the last quarter of the year, negative in sales and comparable store sales5.
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