Luxottica Group CEO Discusses Q3 2010 Results – Earnings Call Transcript

Luxottica Group S.p.A. ( LUX)

Q3 2010 Earnings Call

October 25, 2010 12:00 PM EST


Alessandra Senici – Group IR Director

Andrea Guerra – CEO

Enrico Cavatorta – CFO


Daniel Hofkin – William Blair & Company

Edouard Crowley – Exane BNP Paribas

Erwan Rambourg – HSBC

Domenico Ghilotti – Equita

Valentina Romitelli – UBS

Allegra Perry – Nomura



Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Luxottica Group third quarter 2010 results presentation conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions).

At this time, I would like to turn the conference over to Ms. Alessandra Senici, Group Investor Relations Director of Luxottica. Please go ahead, madam.

Alessandra Senici

Thank you, operator. Good afternoon and thank you for joining us today. Here with me are Andrea Guerra and Enrico Cavatorta.

Before we begin, first, I have a couple of quick items to cover. As a reminder, a slide presentation which we will informally follow during this call is available for download from our website under the reading Investor Relations Presentation section. This presentation includes certain non-IFRS financial information within the meaning of Regulation G under the US Securities Exchange Act.

Further information including additional information required by Regulation G is also available in Luxottica Group's press release relating to its results for the third quarter of 2010, which may be found on our website under the reading Investor Relations Press Releases section. This conference call is being recorded and is also available via audio webcast from our website.

During the course of today's call, certain projection or other forward-looking statement may be made regarding Luxottica Group's future financial performance or future events. We wish to caution you that such projection or statement are based upon current information and expectation, and actual results may differ materially from those projected in the forward-looking statements. You can read more about such forward-looking statements on page two of the slide presentation.

We also refer you to our filings with the SEC and Italian securities authorities. These filings contain additional information concerning factors that could cause actual results to differ materially from those contained in management projection or forward-looking statements.

We will begin with our CEO, Andrea Guerra.

Andrea Guerra

Welcome to our third quarter review conference. Obviously, I am and we are all in Luxottica very pleased with our results. There are a number of reasons why we are pleased.

I think the first being one of the main reasons why we live and we are in this market, and it is our brand portfolio, a portfolio which has demonstrated to be effective in very different market conditions.

I am so happy to say that we are back with a solid double-digit high teens growth in our premium and luxury segment and not only what we shipped, but we also have an excellent order portfolio in our hands. The sun season has been good and long. And, obviously, Ray-Ban and Oakley were ahead of the pack.

The second growth factor of which we are particularly pleased is our ability to grow in Europe and North America. In Europe, our growth rate has been 12%. In US, in dollars, our growth of our all our businesses have been plus 8%. So it means that in all developed markets of the world, we were able to grow and to have a solid growth rate.

On the other side, emerging markets, we were much faster. And I think this was again in another quarter of quick growth in emerging markets above the 20% rate, I would say in all major emerging markets.

Third fact is that our profitability has grown much faster than the sales growth, above 30%. And I would say that even if we have grown 30%, obviously, probably we would have grown a little bit faster if we were not comparing ourselves with the third quarter last year in which we had reversed some accruals, and Enrico will tell you more in details about this, and the second being a continuous not positive performance in Australia, a geography in which I have to say the last four weeks have shown a solid improvement.

So profitability has grown, has grown significantly and systematically around the company. And I think that our fourth quarter will drive profitability even faster than what we have done in Q3.

Fourth factor of our happiness today is that again we have been able to generate consistent free cash flow, EUR250 million in a quarter. And I think this is also paying the continuous effort that all our people daily are putting on working capital with excellent results on inventory and receivables.

Fifth, we have invested for the long quarter. It’s not just we are just reaping the efficiency activities of a year-ago of higher growth rate of sales. We also reinvested back in the business. And in the first nine months of the year, we have invested EUR40 million more in our marketing activities and I think this is very important for our long term.

Enrico, if you want to give us some more details, thank you.

Enrico Cavatorta

Thank you, Andrea, and good evening. So let's have a quick look of our main financial highlights for the third quarter and the nine months of 2010.

First of all, we are pleased to see that we have an acceleration of sales growth in both division and total group, both at constant exchange rate of current. Andrea mentioned we are in the 19%, 20% area of current exchange rate in both division and the group.

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