Luxottica's Profit Rose 25% in Second Quarter

By Manuela Mesco 

        MILAN--Italian eyewear giant Luxottica SpA saw its second-quarter net profit increase by a quarter, as the weakening euro against the dollar boosted its sales result in the period.
        The maker of eyewear for the likes of Giorgio Armani and Chanel said its net profit rose 25% to EUR295 million, while operating profit stood at EUR500 million, up 26% on the year.
        Sales grew 19.3% in the second quarter of the year, compared with the same period last year, to EUR2.46 billion, with a particularly pronounced increase in the retail division, up 23.4% on the year. On a constant exchange-rate basis, sales grew 5% on the year, the company said.
        With the euro progressively weakening against the dollar, several luxury goods players have been benefiting off the currency tailwind. Luxottica's second-quarter performance brings total sales for the first half of the year to EUR4.7 billion, up 20% at current exchange rate, but only 5% at constant rates.
        On Monday, French conglomerate Kering SA, owner of Gucci and Bottega Veneta, said that its sales grew nearly 23% in the second quarter, but only 7.7% at organic level, which strips out the effect of fluctuating exchange rates.
        As a result of the currency fluctuations, Luxottica said it is now looking at harmonizing prices between the different markets, to reduce price differentials that have emerged particularly between Europe and Asia following the weakening euro. Prices in China and in the U.S. will go down in the second half of the year, particularly in the higher-end product ranges, Luxottica's Co-Chief Executive Adil Khan said to analysts. "As a common practice we look at prices every six months," But while normally prices move upward, "it takes a little courage to go down. We do have a favorable situation and we want to make sure we use this moment for prices to go downward," Mr. Kahn added.
        The low euro against the dollar made the price of high-end accessories vary greatly between New York, Paris and Beijing. In March, Chanel made a similar move by increasing prices in Europe on some of its handbags and slashing them in China. Since then, several luxury firms have considered making similar adjustments, but most of them have kept cautious attitudes so far.
        Luxottica's sales in North America, which account for 57% of the total, rose 29% at current rates compared with the previous year. At constant rates, North American sales grew nearly 6% on the year. In Europe, 21% of the total, sales grew 9% at current rates, but 6.5% at constant rates. In Asia Pacific they increased 18% at current rates and 6% at constant rates. The company said that its China business also continues to perform strongly.
        Luxottica, which also owns brands like Ray-Ban and Oakley, said that its second-quarter operating profit rose 26.3%, compared with the second quarter 2014, to EUR500 million.
        Considering an adjustment in the way one of Luxottica's units, EyeMed, reports net sales, the company said its adjusted net profit for the period was EUR314 million, adjusted operating profit was EUR521 million, while adjusted sales stood at EUR2.5 billion.
        Write to Manuela Mesco at manuela.mesco@wsj.com
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        (END) Dow Jones Newswires

        July 27, 2015 14:24 ET (18:24 GMT)

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