EssilorLuxottica First Half 2020 Revenue Drops 29 Percent Due to COVID, But Management Sees Signs of Recovery

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CHARENTON-LE-PONT, France—EssilorLuxottica (Reuters: ESLX.PA) posted revenue of €6,230 million for the six months ended June 30, 2020, down 29 percent at both current and constant exchange rates, compared to first-half 2019 revenue. First-half revenue for Essilor alone totaled €2,923 million, down 24.1 percent over year ago. Luxottica’s first-half revenue totaled €3,307 million, down 32.9 percent. These declines were the direct result of COVID-19 related lockdowns across markets, the company said, noting that a sequential, month by month recovery followed store re-openings in most markets.

“Our first priority in recent months has been to protect our people and our communities, and to support our partners and customers during the COVID-19 pandemic. While living up to our responsibility as an industry leader, we also proved the strength of our business model by managing to break even in the first half with positive operating income and critical cash flow generation,” said Francesco Milleri, CEO and deputy chairman of Luxottica and Paul du Saillant, CEO of Essilor.

They added, “Given the resilience of vision needs, we are cautiously optimistic about the remainder of the year and will be watching the evolution of the virus closely, ready to adapt wherever needed. At the same time, we are increasing the pace of our integration, accelerating our digitalization and launching major product innovations that will drive the industry forward.”

EssilorLuxottica’s adjusted gross profit as a percent of sales came in at 56.9 percent, while adjusted operating profit was 2.0 percent of sales. Adjusted net profit attributable to the owners of the parent was €7 million.

EssilorLuxottica reported that during the first half of the year, the company’s performance was characterized by good revenue resilience despite the closure of many stores for most of the period. Revenue from sales of Lenses & Optical Instruments fell 23 percent year-on-year and close to flat year-on-year in June alone. Marked sequential monthly improvements from April to June, due to renewed appetite for visual solutions from consumers following “intense screen-time usage during lockdowns,” the company said. Recovery to pre-COVID-19 levels for prescription orders observed to be 10 weeks on average in the first markets to reopen with independent ECPs leading the recovery and supporting the product mix in many countries.

EssilorLuxottica also said that although revenue for its Sunglasses & Readers business unit fell 28 percent year-on-year, the division benefited from significant exposure to China, the first key market to reopen. Retail revenue dropped 27 percent year-on-year, witnessing a gradual recovery in May and June in line with the lifting of the lockdown measures and boosted by a solid momentum in online sales. Reopened stores revealed a sound performance on the back of progressive improvements in traffic and a jump in conversion rates, the company said. Wholesale sales fell 43 percent year-on-year, with order flows sequentially normalizing in the last two months of the second quarter. Online sales delivering strong growth year-on-year and reaching 10 percent of group revenue for the period versus 5 percent in the prior year.

In the second quarter of 2020, EssilorLuxottica reported €2,446 million in revenue, down 46.4 percent from year ago. Essilor posted revenue of €1,162 million, down 40.9 percent from year ago. Luxottica reported €1,284 million in revenue, down 50.6 percent from the prior year period.

EssilorLuxottica management cited several positive factors that are contributing to its recovery. These factors include the launch in Italy in June of Ray-Ban Authentic, a new, branded complete pair offering with Essilor’s advanced lens technologies; the expansion of cross-selling between Essilor and Luxottica platforms; the initiation of regional programs for combined distribution of the company’s products; the development of EssilorLuxottica 360, a joint independent ECP program combining the offerings of Essilor, Luxottica and EyeMed in North America; the kick-off of the integration of and, into the company’s unified online platform and retail brand portfolio; the continued deployment of a single IT platform throughout the company.