Luxottica Group Q3 Profit Down 20.6%, Sales Edges Up - Update

(RTTNews) - Designer and distributor of fashion, luxury and sports eyewear Luxottica Group SpA (LUX, LUXGF.PK), on Thursday reported a 20.6% drop in profit for the third quarter, reflecting higher expenses and lower margins, notwithstanding a 0.9% growth in sales from last year.

Andrea Guerra, CEO of Luxottica Group, commented: "Now that we are approaching the end of a year as demanding as 2009, we believe that the worst is behind us. Flexibility, speed, the ongoing search for new solutions and a continued focus on the balance sheet have enabled Luxottica to post positive results even in a period as difficult as what we experienced.

For the third quarter, the Milan, Italy based company's net income attributable to Luxottica group shareholders slid to EUR 83.1 million from EUR 104.6 million in the year-ago quarter. On a per share basis, earnings slipped 20.7% to EUR 0.18 from EUR 0.23 last year.

Earnings before Interest, Taxes, Depreciation, and Amortization, or EBITDA, for the quarter declined 17.3% to EUR 214 million from EUR 258.6 million in the prior-year quarter. On a per share basis, earnings before trademark amortization dropped 14.5% to EUR 0.21 from EUR 0.25 last year. In U.S. dollar terms, net income declined 24.5% to US$ 118.86 million from US$ 157.50 million last year. Earnings decreased 24.6% to US$ 0.26 basic per share from US$ 0.34 basic per share in the year -ago period.

In the previous second quarter, Luxottica's net income decreased 12.7% to EUR 115.7 million from EUR 132.6 million in the prior-year quarter. On a per share basis, earnings dropped 12.9% to EUR 0.25 per share from EUR 0.29 per share last year. EBITDA for the second quarter declined to EUR 277.3 million or EUR 0.28 per share from EUR 294.7 million or EUR 0.32 per share a year earlier.

Net sales for the latest third quarter grew to EUR 1.223 billion from EUR 1.211 billion a year earlier. However, sales were down 1.4% at constant exchange rates from the previous-year quarter. In U.S. dollar terms, net sales for the quarter declined 4.1% to US$ 1.750 billion from US$ 1.824 billion a year earlier.

Segment wise, Wholesale division's revenue for the quarter slid 0.1% to EUR 429.8 million from EUR 429.5 million a year earlier. Operating income for the division decreased 11.4% year-over-year to EUR 62 million.

Retail sales for the quarter rose 1.5% to EUR 793.8 million from EUR 782.2 million in the comparable quarter last year. Operating income for the quarter, however, declined 17.6% to EUR 114 million from EUR 138.3 million in the same quarter last year.

Sunglass Hut, the sun specialty chain overall comparable sales for the quarter dropped 5.6% year-over-year, with very positive performance in Australia and New Zealand, South Africa and the UK, but a negative performance again in North America though continuing to improve.

For the sequentially preceding quarter, sales increased 3.5% to EUR 1.401 billion from EUR 1.354 billion in the year-earlier quarter.

Consolidated EBITDA margin for the quarter under review contracted to 17.5% from 21.3% in the year ago quarter.

Consolidated operating income for the quarter was EUR 143.7 million, down 26.4% from EUR 195.1 million in the same period of last year. Operating margin decreased to 11.7%, from 16.1% in the corresponding period last year.

Luxottica's cash flow generation for the quarter was EUR 207 million. At September 30, 2009, consolidated net debt was EUR 2.414 billion, compared to EUR 2.627 billion at June 30, 2009 and EUR 2.949 billion at December 31, 2008.

The company known for its brands including Ray-Ban, Persol and the recently acquired Oakley, Inc. noted that the third quarter saw a further stabilization in the international markets, though in an environment that continued to be challenging. In Europe, in particular, the market saw a second consecutive quarter of improvement, with encouraging signs of recovery coming from Italy, Spain, Germany and France. The North American market found some stability. Overall, emerging markets did not show signs of a slowdown in growth.

For the nine-month period, net income attributable to Luxottica group shareholders declined 18.1% to EUR 279.2 million from EUR 340.9 million last year. EBITDA for nine months decreased 13% to EUR 720.9 million from EUR 828.6 million in the same period last year. On a per share basis, earnings before trademark amortization dropped 15.1% to EUR 0.70 from EUR 0.82 last year.

In U.S. dollar terms, net income decreased 26.5% to US$ 381.42 million from US$ 518.81 million last year. Earnings declined to US$ 0.83 per basic share from US$ 1.14 per basic share in the year earlier period.

Net sales for nine months slipped 0.7% to EUR 3.937 billion from EUR 3.965 billion in the same period last year. In U.S dollar terms, net sales dropped 10.9% to US$ 5.380 billion from US$ 6.034 billion in the year ago period.

Looking forward, Luxottica said it is working to make sure that 2010 is again a normal year, in which it enjoys growth in sales, a solid improvement in profitability, greater than the growth in sales, as well as strong free cash flow generation and deleveraging.

Luxottica also approved a cash dividend payment of EUR 0.22 per ordinary share. The company will pay the dividend in U.S. dollars to ADR holders on December 4, 2009 at the Euro/U.S. dollar exchange rate as of the close of business on November 27, 2009.

LUX is currently trading at $25.44, up $1.21 or 4.99%, on a volume of 0.12 million shares on the NYSE. In the past 52 weeks, the stock trended in a broad range of $11.77 - $26.95, with a three-month average volume of 0.93 million shares.

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