In the second quarter ended June 30, the Group's net sales rose by 15.2 percent at current exchange rates (+7.0 percent at constant exchange rates), increasing from 1,633.5 million Euros ($2,351 mm) to 1,882.2 million Euros ($2,412 mm). During the half-year, revenue grew by 15.1 percent (+9.0 percent current exchange rates2) to 3,670.4 million Euros ($4,759 mm) compared to 3,189.6 million Euros ($4,476mm) during the same period in 2011).
“This year, we have arrived at the half-way point very satisfied. In a very challenging period, we managed to grow our business by 15 percent with respect to last year. Our profitability grew in a more than proportional manner and once again we generated approximately 180 million Euros of free cash flow,” commented Andrea Guerra, Chief Executive Officer of Luxottica. “We worked in a determined manner in all of the geographic areas in which we operate, achieving the objectives which we had pre-established. A balanced business model and a global geographic presence are the two pillars which have underpinned performance through today."During these months, we recorded significant growth in the United States. All of our divisions contributed substantially to these results," Guerra continued. "The organizational changes we have made over the years are paying off. In particular, Sunglass Hut once again increased sales of 11.7 percent on a comparable store sales5 basis. Sunglasses are a key driver of business growth in the United States for Luxottica. Despite the fact that the U.S. market is smaller and less mature as compared to Europe, it keeps growing.
In emerging markets, sales grew 35 percent in the first half of the year. We are growing our business everywhere and continuing to invest in order to transform our presence in an increasingly structural manner, in particular in China, India, Brazil, Mexico and Eastern Europe.
European market dichotomy
In Western Europe, the macroeconomic climate is different. During the first six months, we succeeded in delivering positive sales results once again (+1 percent). Performance can be divided into the following three parts: Continental Europe very good. France remained positive. Mediterranean Europe negative.In Australia, OPSM achieved favorable comparable store sales results as compared to 2011. We are confident that these half-year results constitute a solid foundation for reaching our full-year 2012 objectives, although 2012 is clearly harder to predict”.
EBITDA for the second quarter of 2012 rose by 18.1 percent over the same period in 2011, going from 352.2 million Euros in 2011 to 415.9 million Euros in the current period. Additionally, adjusted EBITDA for the first half of 2012 reached 761.2 million Euros an increase over the 635.1 million Euros recorded for the same period in 2011.
Operating income for the second quarter of 2012 amounted to 332.6 million Euros (276.8 million Euros during the same period of the previous year, +20.2 percent). The Group's operating margin grew even further rising from 16.9 percent in the second quarter of 2011 to 17.7 percent in the current quarter.
During the first sixth months of the year, adjusted operating income amounted to 590.6 million Euros, up by 22.0 percent as compared to 484.2 million Euros in the same period of 2011. The Group’s adjusted operating margin3,4 therefore rose from 15.2 percent during this period in 2011 to 16.1 percent in the first half of 2012.
Net income for the second quarter of 2012 increased to 195.5 million Euros ($250 mm), up 20.6 percent compared to 162.1 million Euros ($233 mm) a year earlier. That resulted in EPS (earnings per share) of 0.42 Euros (at an average €/US$exchange rate of 1.2814). EPS in US dollars was 0.54 US$ in the period. Also in the second quarter of 2012, the strict control of working capital enabled Luxottica to accumulate significant free cash flow in the amount of 180 million Euros for the quarter as compared to 154 million Euros of the same period of 2011. After having paid dividends during the quarter of approximately 227 million Euros, net debt as of June 30, 2012 was 2,164 million Euros (2,032 million at the end of 2011), with the ratio of net debt /adjusted EBITDA4 at 1.7, in line with expectations.
The wholesale division achieved record results. Net sales registered in the second quarter 2012 are the best in the Group's history.In terms of sales performance in Luxottica’s key markets, results in North America and the emerging markets stand out, and in particular, in China, India, Brazil, Mexico and Eastern Europe. Very sound results were also achieved in Continental Europe and in particular in the UK, Germany and Nordic countries. Performance continued to be positive in France while it was negative in Italy and Spain.
This significant growth in the wholesale division is primarily due to the increasingly close relationship with clients and to the excellent reception of new collections. Our brand portfolio had a fundamental role in achieving these results: Ray-Ban, Oakley and the premium and luxury segment continued their double-digit growth trend in percentage.
Net sales for the wholesale division reached 788.2 million Euros from 704.0 million Euros in the second quarter of 2011 (+12.0 percent at current exchange rates and +8.4 percent at constant exchange rates). On a half-year basis, net sales were 1,515.0 million Euros, improving by 12.6 percent at current exchange rates (+10.1 percent at constant exchange rates2) as compared to 1,345.1 million Euros in the first half of 2011.
Operating income grew to 207.7 million Euros, from 188.5 million in the second quarter of 2011 and the operating margin was 26.4 percent. In the first half of 2012, the operating margin was equal to 25.1 percent (25.0 percent in the corresponding period of last year).
Retail divisionDuring the course of the second quarter, the growth trend continued in the retail division, in particular for Sunglass Hut and Oakley in North America and GMO in Latin America. Net sales for the division equaled 1,094.0 million Euros (929.6 million Euros in the second quarter of 2011, +17.7 percent at current exchange rates and +5.9 percent at constant exchange rates2).
For the first six months of 2012, net sales were 2,155.4 million Euros, improving by 16.9 percent with respect to 1,844.5 million Euros in the first half of 2011 (+8.2 percent at constant exchange rates).
The division's operating income went from 129.8 million Euros in the second quarter of 2011 to 169.5 million Euros in the same period in 2012 and the operating margin accordingly grew to 15.5 percent from 14.0 percent for the period. On a half-yearly basis, the adjusted operating margin was equal to 13.6 percent (12.3 percent in the first half-year of 2011).
LensCrafters experienced a quarter full of ups and downs. The implementation of a new IT platform generated a temporary slowdown in store transactions, which was fully accounted for in the Division’s forecast for the period. The quarter ended with an increase in comparable store sales of approximately 1 percent. For the first six months of 2012, LensCrafters profitability was the best as compared to recent years.
Sunglass Hut on a tear
Once again, Sunglass Hut performance was exceptional. The Group’s sun specialty chain that operates in a number of geographic areas posted overall comparable store sales5 improving by 10.6 percent in the second quarter, with particularly positive performance in North America, emerging markets, South Africa and Australia.In Australia, the plan to develop OPSM and the reorganization of smaller retail brands have contributed to the division’s positive results. The quarter ended with growth in total OPSM net sales of 6.3 percent, despite store closings in the region, and comparable same store sales5 increasing by 8.0 percent in the period.
The Luxottica optical retail business in the region grew in profitability by 23.6 percent during the second quarter of 2012 as compared to results generated by this business in the same period of 2011.