Jul 26, 2016
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Luxottica cuts 2016 outlook as U.S. weakness hits profit

Jul 26, 2016

Italian eyewear group Luxottica cut its full-year outlook on Monday, blaming uncertain markets, after first-half adjusted operating profit fell 2.5 percent hit by weakness in North America, its biggest market.

Luxottica headquarters in Italy. - Luxottica

With global security threats clouding the outlook for tourism and consumer spending, Luxottica Chief Financial Officer Stefano Grassi said it was too early to say whether group forecasts for the next two years still stood.

In a widely expected move, the maker of Ray Ban sunglasses said it now saw sales rising 2-3 percent at constant currencies this year - down from a previous 5-6 percent forecast.

Luxottica said adjusted earnings before interest and tax (EBIT) would grow in line with sales - down from a previous forecast of an EBIT rise equivalent to 1.5 times the sales increase.

Luxottica had last set its outlook in March when it announced 1.5 billion euros in investments for retail and digital expansion in an effort to fight slowing profit growth.

At the time, the Milanese group forecast an acceleration in 2017-2018, when sales were due to rise mid-to-high single digit.

"We're taking a more cautious approach, we want to see how things progress (before looking) at future years," Grassi said when asked bout the outlook beyond 2016.

Adjusted EBIT came in at 857 million euros in the first half, compared with an average forecast of 845 million euros in a consensus of six analysts compiled by Reuters.

Adjusted revenues totaled 4.72 billion euros, in line with forecasts and down 0.7 percent from a year earlier. Revenues rose 1.6 percent at constant currencies in January-June.

Fewer tourists and generally more muted consumer spending partly due to bad weather in May and June weighed on Luxottica's sales in North America, its biggest market accounting for 60 percent of the total.

Sales of Ray Ban are also suffering from Luxottica's decision to improve control of its biggest brand by allowing shops to advertise discounts only if they have been previously agreed with the company.

"Ray Ban ... pays our salaries every month, we need to protect it," Paolo Alberti, head of wholesale, said.

Luxottica said results were adjusted for 25 million euros in restructuring costs, the one-off 44 million euro expense for the sacking of CEO Adil Mehboob-Khan in January and accounting changes at the EyeMed healthcare insurance unit.

Leonardo Del Vecchio, Luxottica's 81-year old founder and controlling shareholder, this year returned to the helm as executive chairman after the company lost three CEOs in 17 months.

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