EssilorLuxottica's 2Q Dragged by Slowing US Economy -- Update

By Joshua Kirby

EssilorLuxottica SA on Friday flagged a worsening economy in the U.S. as second-quarter sales slowed, hit also by the effects of stringent pandemic lockdowns in mainland China.

The Franco-Italian eyewear group reported rising earnings, with adjusted operating profit climbing 2.2 billion euros ($2.24 billion) in the half-year, 14% higher at constant currency than the same period last year.

Revenue in the six months meanwhile rose to EUR11.99 billion, a 9% increase when adjusted for the integration of Dutch optical retailer GrandVision.

However, the Ray-Ban maker noted sales decelerated in the second quarter to 7% from 12% in the first three months of the year. In the group's largest market, North America, growth slowed close to flat, as a result of deteriorating business conditions in the U.S., the company said. The figure was also affected by a tougher comparison base following last year's rebound from the pandemic period, EssilorLuxottica said.

In the direct-to-consumer section, sales in North America weakened to a flattish performance, with optical banners turning negative, while e-commerce was stable. In the wholesale business, the lower end of the lens market came under pressure in the region, though luxury brands booked healthy growth, the company said.

Having flagged the tougher economic conditions, EssilorLuxottica didn't set out any specific financial targets for 2022. However, it confirmed its target of annual revenue growth in the mid-single digits from this year to 2026, by which point it also aims to reach an operating margin of 19%-20%.

In Asia-Pacific, a less important region in terms of the group's top line, total revenue was dragged by the heavy impact of "selective but prolonged" Chinese lockdowns in the quarter, the company said. EssilorLuxottica booked declining quarterly sales in the country, leaving overall regional growth barely positive. However, sales in mainland China turned positive in June, driven by a recovery in the optical category and especially myopia solutions, the company said.

Elsewhere, Europe, Middle East & Africa sales were steadier in the second quarter, with a 12% increase against an easier comparison base, while the group's smallest region by sales, Latin America, booked the highest quarterly growth at 24%.

The Russia-Ukraine crisis didn't affect the group's performance in the half-year, EssilorLuxottica said. The company continues to operate its retail stores in Ukraine, while restrictions remain in place on the retail and wholesale business in Russia, it said.

"The company will monitor the evolution of the conflict and its macroeconomics impacts and adapt its response accordingly," the company said.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

(END) Dow Jones Newswires

July 29, 2022 03:02 ET (07:02 GMT)

Essilor Luxottica (PK) (USOTC:ESLOY)
Historical Stock Chart
From Oct 2024 to Nov 2024