Tags: Luxottica | currency | headwinds | LUX

Luxottica Slowed by Currency Headwinds

By    |   Monday, 12 Dec 2011 08:07 AM

Italian eyewear manufacturer Luxottica Group (LUX) has built an impressive global business, and recent results have shown positive growth. Over the last year the company saw its growth slowed by currency exchange rates, converting dollars to euros.

The Luxottica Group manufactures in plants in China and Italy and distributes and retails eyewear products. The company owns the brands Ray-Ban and Oakley plus produces licensed products for such brands as Anne Klein, Ralph Lauren, Chaps, DKNY, Versace, POLO and Tiffany & Co.

Luxottica also owns chains of retail stores to sell eyewear, including Lenscrafters, Sears Optical, Target Optical and Sunglass Hut. Its more than 5,000 retail locations worldwide generate approximately 60 percent of revenues. Manufacture and wholesale contribute the remaining 40 percent.

For the first nine months of 2011, Luxottica revenues increased by 6 percent over the first three quarters of 2010 and net income increased by 10 percent. Net income per U.S. ADR share for the nine months was $1.19, up 19 percent from 99 cents in 2010.

For the 2011 fourth quarter the consensus earnings forecast is 20 cents per share compared to 16 cents in the last quarter of 2010. Earnings estimates for full year 2011 and 2012 are $1.39 and $1.64, respectively, compared to $1.16 earned in 2010.

Exchange issues

Luxottica Group currently generates 80 percent of its retail sales in the United States. As a result, net sales in euros for the third quarter increased by just 4 percent on a year-over-year basis. Sales in dollar terms grew by almost 14 percent.

On a constant currency basis, the sales would have grown by 10 percent. During the year, the euro strengthened against the dollar, going from about $1.30 per euro to over $1.41. A reversal of this trend would be positive for Luxottica in terms of euro results.

Areas of growth for the company are wholesale revenues, which increased by 7 percent in the third quarter, and Latin America sales, growing at a 20 percent rate. The wholesale group produces operating income of 23 percent of sales, while the larger retail group posts operating earnings of 12 percent of sales.

Of the 20 analysts following Luxottica, 15 have reduced their estimates for 2012 earnings results while just one analyst firm has increased.

The company reports next on Feb. 27.

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Italian eyewear manufacturer Luxottica Group (LUX) has built an impressive global business, and recent results have shown positive growth. Over the last year the company saw its growth slowed by currency exchange rates, converting dollars to euros. The Luxottica Group...
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2011-07-12
Monday, 12 Dec 2011 08:07 AM
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