This excerpt taken from the LUX 6-K filed Feb 6, 2009.
Sales trends in 2008
For Luxottica, 2008 was a year characterized by three main factors: the depreciation of the US Dollar against the Euro; the drastic contraction first of the US market and later of the European market; and, the first full year of integration with Oakley.
Consolidated net sales for the full year improved by 10.7% at constant exchange rates (by 4.7% at current exchange rates), to Euro 5,201.6 million, compared with consolidated net sales of Euro 4,966.1 million for fiscal year 2007, mainly due to the inclusion of sales by Oakley. Net pro forma sales (2) at constant exchange rates, on the other hand, were nearly unchanged, declining by 0.8% for the year.
Throughout the year, Luxottica was able to respond rapidly with flexibility and effectiveness to the slowdown it experienced in demand by implementing cost-control and cost-cutting measures that enabled the Group to maintain its operating margin for the first nine months of 2008 substantially in line with previous years. However, during the fourth quarter there was a significant contraction in demand that contributed to an erosion in the Groups margins in both the Wholesale and Retail Divisions.
Consolidated net sales for the fourth quarter increased to Euro 1,236.5 million, from Euro 1,188.5 million for the same quarter in the previous year (unchanged at constant exchange rates, up by 4% at current exchange rates). At the same time, consolidated net pro forma sales(2) for the quarter decreased by 5.5% at constant exchange rates. This slowdown triggered further cost-cutting measures, the benefits of which Luxottica expects to realize in the coming quarters.
Luxottica currently expects to post consolidated net income for the full year 2008 of approximately Euro 400 million (down by approximately 16% from the previous year(4)), with earnings per share (EPS) for the period of approximately Euro 0.88 (at an average Euro/US Dollar exchange rate of 1:1.47). On a comparable basis, i.e. considering EPS in US Dollars before trademark amortization (3), the decrease in consolidated net income would have been 8%(4). It should be noted that this estimate does not include an extraordinary capital loss of Euro 15 million after taxes (equivalent to EPS of Euro 0.03) arising from the write-off of debt related to the September 2006 sale of the Things Remembered business.
Luxottica also currently estimates that, thanks to its strict control on working capital and despite the negative impact of the Euro/US Dollar exchange rate experienced for the full year, its net debt to EBITDA ratio at December 31, 2008 will be substantially in line with the same ratio as of September 30, 2008.
Andrea Guerra, CEO of Luxottica Group, commented: 2008 was an important year for our Group, one in which we certainly worked on a number of fronts. Most importantly, we successfully closed the first full year of integration with Oakley: despite certain changes in the distribution structure in certain markets, we managed to significantly grow the brand and its visibility, particularly in European and emerging markets, which shows its great underlying value.
After years of sustained growth, global markets are now experiencing not a crisis so much as a structural re-adjustment, continued Mr. Guerra. Over the past five years, our Group enjoyed a near doubling in sales as well as improved overall performance and profitability, thanks to our unique business model. Now we must be as responsive and flexible as ever in adapting to the new scenario and continue on our path of growth in
anticipation of a 2009 that will certainly be challenging for all. For this reason, we are working on the optimization of our working capital and balance sheet, with the clear objective of continuing to generate strong cash flow. We want to make sure we have the appropriate resources to take advantage of all the opportunities that the coming years may offer, while being extremely selective with our investments. At the same time, we are aggressively adjusting our manufacturing, distribution and sales structures to the new level of demand. Similarly, in all areas of the business and regions in which we operate, we are working on our cost structure to make it even leaner.