This excerpt taken from the LUX 6-K filed Apr 25, 2007.
Earnings per share: 0.28 (US$0.37 per ADS)
Andrea Guerra, chief executive officer of Luxottica Group, commented on the results for the quarter as follows: The year started well. At constant exchange rates, consolidated sales for the quarter reflected strong growth (+13.1%), continuing the positive trend of fiscal 2006. Operating margin also continued to improve, exceeding 17%, while net income rose by 20.3%, which is a particularly positive result when considering the significant impact of exchange rates on results for the quarter.
It is important to mention that this positive performance was achieved while the Group is making significant investments in several markets to improve its ability to capture longer-term growth opportunities. In North America, management is currently focused both on the integration of the acquisitions made over the past 18 months and on the opening of new stores. During the first quarter we opened a record 149 new stores. In Asia-Pacific, we continued to work on our China-based retail operations: we are overseeing the building of a strong infrastructure from our new head office in Shanghai. Finally, we entered new markets with Sunglass Hut: in Hong Kong, we opened the chains first two stores in China, and we entered South Africa through the acquisitions of the Sunglass World and Occhiali for Sunglasses chains.
The comparison between the first quarter 2007 and the same period of 2006 was challenging, continued Mr. Guerra. In addition, this year the U.S. dollar depreciated by 8.3% against the Euro while weather conditions in North America during the month of February were especially unfavorable. Notwithstanding these challenges, our work on the brand portfolio and on the positioning of our retail chains allowed us to post strong results which are encouraging towards achieving our objectives for 2007. Additionally, the profitability of our retail business in North America continued to improve. As a result, today
we confirm our previously announced guidance for the full year and expect that results will fall towards the higher end of the range.
Luxottica Groups consolidated net outstanding debt on March 31, 2007, was 1,326.9 million, up from 1,148.5 million on December 31, 2006, as a result of the payment of US$199 million in advance royalties under the Polo Ralph Lauren license and an additional US$110 million for the closing of the D.O.C Optics acquisition. Free cash flow for the quarter before acquisitions, advance royalty payments and currency impact was 63.9 million, confirming the ability of the Group to generate significant levels of cash flow due to its strong business model.
The wholesale business continued to grow strongly. Sales rose by over 24% at constant exchange rates, with operating margin improving from 26.0% to 27.5%. Wholesale sales to third parties were even stronger, reflecting an improvement by approximately 29% at constant exchange rates due to strong products and continued excellent service levels. In addition to the positive performance of the Groups house brands, including Ray-Ban, Persol and Vogue, key license brands contributed strongly to the results for the quarter: sales of Burberry eyewear were above expectations, while Bvlgari, Chanel, Dolce & Gabbana, Prada and Versace performed especially well. In terms of geographic regions, Italy, the U.S., France and Spain posted particularly strong results, while at the same time the Group is increasingly focused on emerging market countries, consolidating its presence in Eastern Europe and in East Asia. During the quarter, the Group successfully launched the first Polo Ralph Lauren collections, although this had only a marginal impact on results for the period.
2007 is a very important year for the retail business: we have planned strong investments to expand and renew our store network and to consolidate recent acquisitions. Results for the first quarter already reflected the effects of these investments: at constant exchange rates, total sales increased by 6.3% while store comparable sales grew by 1.6%. We expect that results for the full year will also be positively impacted, with strong growth in both sales and profitability.
The positive momentum of LensCrafters and Sunglass Hut has continued. The results of the retail business in Asia-Pacific have been strong, confirming that our geographical diversification strategy has been successfully implemented. The Group was also pleased with the level of operating income achieved for the quarter, which was particularly strong when considering the level of investments mentioned above.
Luxottica Groups consolidated U.S. GAAP results for the first quarter of 2007 were approved today by its Board of Directors.