For businesses around the world, the first six months of 2020 have been as turbulent as they will ever have encountered. In January, few will have fully appreciated the full impact that the pandemic would have on everyday life and balance sheets.
EssilorLuxottica says its top priority in recent months has been to protect staff and communities while supporting partners and customers. While working this specific need, the company managed to break even in the first half of 2020, despite overall revenue (€6.2bn) falling by 29% when compared to the first half of 2019. This was achieved, in part, by quick implementation of cost containment and cash preservation through measures such as compensation cuts, control of marketing expenses, rent relief, supplier negotiations, as well as the suspension of dividends, share buy-backs, capital expenditures and acquisitions.
The group recorded an adjusted net profit of €7m, a drop of 99.3% compared to the same period last year. Operating profit amounted to €126m, a drop of 91.7% compared to last year’s €1.5bn.
The Franco-Italian giant believed that the coronavirus situation was still too uncertain to comment on the rest of the year and no longer expected to meet its financial targets. However, it did suggest the third quarter will be another transition period towards normalisation.
‘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,’ said Francesco Milleri, CEO and deputy chairman of Luxottica, and Paul du Saillant, CEO of Essilor.
Digital growth and integration
The CEOs continued: ‘At the same time, we are increasing the pace of our integration, accelerating our digitalisation and launching major product innovations that will drive the industry forward.’
Like many retail sectors, the company experienced significant growth in ecommerce, with a 43% increase in the first half of the year and 68% in the second quarter as lockdown gradually eased. Online sales delivered strong year-on-year growth and accounted for 10% of the group’s revenue for the six-month period compared to 5% in same period of 2019.
Direct to consumer ecommerce boomed in the quarter, with Luxottica’s proprietary platforms posting sales at 145% above last year, representing around 20% of Luxottica’s total revenue. In the second quarter alone, Ray-Ban.com generated three quarters of the full year 2019 revenue.
‘The Covid-19 environment boosted digitalisation across the business and led to its continued transformation, from remote working to product development, global operations, omnichannel and the overall consumer journey, said an EssilorLuxottica statement.
‘At the same time, the integration of Essilor and Luxottica made meaningful progress during the pandemic leading to more agility, initiatives and tangible results in building a unified group.’
Within digital retail, integration included FramesDirect.com and Sunglasses-Shop.co.uk, two ecommerce platforms specialising in branded eyewear, into the company’s unified online brand portfolio, which will see each company’s brands available cross-platform.
The June launch in Italy of Ray-Ban Authentic, a new branded complete pair offering with Essilor lenses, was also cited as a key integration milestone.
Other segments
Lenses and optical instrument revenue was down 23% year-on-year, but there were sequential monthly improvements from April to June as a result of what the company said was renewed appetite for visual solutions from consumers following intense screen-time usage during lockdowns. The company said prescription lens orders in each market had taken approximately 10 weeks after reopening to recover to pre-Covid-19 levels.
Wholesale was down 43% year-on-year with order flows normalising in the last two months of the period on the back of a progressive recovery of independent opticians and key accounts, but the company saw a 28% year on year decline in sunglass and ready reader revenue, which it blamed on exposure to suppliers in China being the first to return to business.