Essilor Luxottica

Good morning to everybody. Thanks for joining us today and thanks for the interest you continue to show in Essilor Luxottic. I'm happy to join you for my first earnings call as the Group CEO. We are pleased to present today strong results with the sharp acceleration of the Group performance in the second quarter of the year. leading to a nice growth of revenue and margins in the first half overall. The new governance, based on the high-profile board of directors and supported by the management team, is promoting a faster and better execution of our strategic vision and integration programs. This allows us to upgrade our outlook for the full year 2021. Now point to meet single-digit revenue growth and some margin expansion versus 2019 at constant currency. Backed by an improving business environment in most of the areas worldwide, starting from North America and leveraging its best-in-class proposition. Essilor Luxottica grew 9.2% in revenue in the second quarter versus the same period of 2019 at cost and currency, which is a substantial acceleration compared to plus 1.9% of the first quarter. Our business grew in all areas, in both optical and sun, as well as in wholesale and retail. Optical was driven by value-added lens brands and our optical retail banners, in particular in North America and Australia. Sunglasses strongly bounced back in the quarter, in Sunglass App Store and on e-commerce platforms. driven by Ray-Ban and Oakley as well as luxury brands. These prove once again the brands matter in our business and underpins the group's strategic focus and investment effort on branded top quality offerings. Both the new divisions we introduced today, professional solution and direct-to-consumer, representing the wholesale and retail business of the group, grew and accelerated. E-commerce continued to grow fast, up by 66% in the quarter and reaching 9% of the group's total business. Our balanced focus on both the wholesale and retail channels reflects the strategic idea of network company and open model presented at our first Capital Market Day with the goal to elevate the standards of the entire eye care and eyewear industry to the benefit of all its stakeholders. The acquisition of Grand Vision, closed one month ago, perfectly fits into such a strategic framework. Aimed at replicating in Europe the successful multi-channel model we have adopted in North America since the acquisition of Landscrafter in 1995. We are happy with the transaction and ready to make the most of it. like we have been pleased to see the merit of our position fully acknowledged by the arbitration court. Essilor Luxottica is rebuilding its foundations and reshaping the industry, going through such a transformational phase with energy and enthusiasm. Vertical integration, global footprint, clear leadership as well as strategic vision and execution capability are the key strengths of our group, which make us look at the future with great confidence. With that, I head over to our CFO, Stefano Grassi, for a quick review of the group revenue drivers and our Deputy CEO, Paul Dusayan, to talk about the key areas of mission and sustainability.

Thank you, Francesco. Good morning, everybody, and welcome to our first of 2021 earnings release. As we're starting now a new journey for Astro Luxottica, we decided to move away from the old heritage of Astro Luxottica, very much moving into a new structure that includes two divisions for the group. On one side, we have our professional solution division, that very much represent our wholesale business. On the other side, we have our direct-to-consumer division, that represents our brick-and-mortar division, as well as our e-commerce commercial proposition. I believe this structure truly enhances our vertically integrated business model and will allow you, all of you, to very much better understand our underlying business trends for the group. In the appendix, you will also find an extended disclosure of our revenue base by quarter for 2019 as well as for 2020. But now, let's start our journey around the different geographies as usual, using and leveraging very much the new structure that we just announced. Let's begin with the biggest geography, North America, that in the second quarter posted top line up 16% compared to 2019 levels. As you can see, this number is something that we haven't seen in the past. It's actually the best quarter that we recorded in North America for Asura Luxorica. The market in North America is pretty healthy. Our top-line performance was very much supported by a strong delivery from both the division, Professional Solutions, as well as direct-to-consumer. The Professional Solutions division was up on a high single-digit territory during the second quarter. The LEMS business in North America delivered a strong growth, well supported by ECPs as well as our strong branded portfolio. The EL360 program, a joint effort between the LEMS, the FRANCE and the insurance on retrolexotica in North America, is now rolling out on about 2100 as of the end of June. The frame business in North America posted top line up about 20% during the course of a second quarter, with independent, key account, e-commerce, sports account, all on the double-digit pace. From a brand standpoint, very happy, very pleased to report that Rabun and Oakley posted double-digit growth in prescription as well as on their sump part. In particular, our Oakley brand was very well supported by the launch of the Kato product, that thanks to his disruptive design and innovation, already represents an icon for our Oakley brand, that is gaining a lot of visibility during the Olympics Games that are in due course in Tokyo, Japan. Our direct-to-consumer division was up double digits during the course of the second quarter. LensCrafter was up double digits in April, double-digit in May, double-digit in June. And that happened despite our traffic material decline compared to the pre-covered level, and we're talking about a traffic decline that is in the 20% range during the course of the second quarter. But thanks to a strong retail execution, thanks to a strong length mix, we were able to deliver such a strong result. was double-digit, likewise, land scrapper in every single month of the second quarter, supported by a strong rebound of local demand. Last but not least, e-commerce. E-commerce was close to double the size of the business compared to 2019. With Oakley.com, Sanglota.com, Raven.com, and iBuyDirect.com, all of them on the triple digit territory. But now let's move ahead and let's go back into INEA. INEA just recorded a top line up approximately 4% during the course of the second quarter. It's a remarkable rebound of our performance in Europe, where you might remember, during the course of the first quarter, we recorded negative 7%. So we moved from negative 7 to plus 4% in the second quarter, with a stronger acceleration during the second part of the second quarter in Europe. Professional solution was solid positive in the second quarter. France, the largest country in the region, was up on the mid-single digit, but also Italy, Scandinavia, Russia, Eastern Europe, as well as South Africa, all posted solid growth during the course of Q2. On the frame side, we were very pleased to report that the Sun business was finally flat to 2019. That has been one of our challenging areas, if you remember, in Europe. And the month of June actually recorded a promising high single-digit growth in 2021 compared to 2019. but a solid response continues to come from the optical business that again was positive once again and posted top line up on the mid-single-digit territory for Q2. A brief touch on the direct-to-consumer side that was up mid-single-digit, very much driven by a strong e-commerce performance and that's not something new for us, we've already seen it in the past. While a brief touch on retail brick-and-mortar I think is important. Retail brick-and-mortar is still negative in Q2, Just to give you an idea, we're operating during the second quarter our retail brick-and-mortar with 10% to 20% less operating hours compared to pre-COVID level. But we see some encouraging signs of recovery during Q2. In particular, in Italy, we were solid positive in May as well as in June. In St. Glastat, recorded... flat sales in the UK in June and we were double digit up in Turkey again during the month of June. So some encouraging sign of recovery that we start seeing in Europe. But now let's move to the eastern part of the world and let's touch Asia-Pacific. As you can see in Asia-Pacific our revenue declined 3.5% under constant effects. The professional solution division was just slightly negative during the course of the second quarter, we were very pleased with the performance that we've seen in Greater China, with a top line that was close to 30% in Q2, and Australia, that did another solid quarter of double-digit growth. On the other side, we have to report that India, South Asia, Korea, Japan, continue to be on the negative trend, very much due to the product restriction that impacted this part of the world, In China, I will probably mention the performance, the remarkable performance, the impressive track record of the cellulose lenses. They continue to post solid increase week after week in lens delivery. And I gotta tell you, just to give you an idea of the importance that myopia management has in China, during the course of the second quarter in the lens business, about half of the growth was very much achieved through myopia solution. In the dollar-to-consumer side of Australixotica in Asia-Pacific, our sales were negative, but we see very different trends within the region. On one side, our optical Australia business posted calm sales on the high single-digit territory, despite several lockdowns that impacted the Australian country during the first half of the year. And just to give you an idea, we had approximately 560 stores that were impacted by local lockdown in Australia for a total of 40 days of closure in different time periods for different clusters of stores. But again, a massive impact on our business. And we continue to see that happening, unfortunately, in the month of July with the lockdown impacting the New South Wales region and Sydney in particular. In China, Our business direct-to-consumer was still on the double-digit negative in Hong Kong, while the mainland China showed encouraging sign of recovery in April as well as the month of May. But then the restriction that impacted the southern part of China in the month of June created a deceleration of our trend over there. For the rest of Southeast Asia, we continue to see negative trend here. very much due to the strong limitation that we see on the travel retail side. But now let's touch our last region, that is Latin America, where you do see top line up on a 2% base, on a constant effect basis. The professional solution delivered a low single-digit growth during the second quarter. We were positive on both length as well as frames. despite still a challenging situation for the vast majority of the Latin American countries during the course of the second quarter. In Brazil, April, and I would say the vast majority of the month of May, the population was impacted by severe restrictions, in particular in shopping malls, and we see that impact in our business. But then, in the month of June, we start seeing a good recovery, in particular on the ECP channel, as well as in our sport channel in Brazil. From a lance mix standpoint, we are very pleased to see favorable price mix, thanks and well supported by our Barlux and Aydan lances in Brazil. From another country mix standpoint, happy to report Mexico, as well as Argentina, both solid drawing during the course of the second quarter, while Colombia is still very much on the challenging territory due to the political turmoil and the impact of the COVID restrictions. So, on the larger consumer side, sales in the quarter landed just slightly negative. With April, there was double-digit negative, while May and June were both on the positive side, very much led to a strong recovery in our Chile operation. And this promise is trend, and that's good news. It's also continuing during the month of July. With that, let me hand it over to Paul that will give us more color around the great initiative that we're building up with respect to our mission and sustainability.

Thank you, Stefano. Good morning to you all. It's great to be here and together with Francesco to be able to share such great results and momentum. Now, I would like to focus on a topic that is very important to Essilor Luxottica and to us all, mission and sustainability. Sustainability is deeply rooted in Essilor Luxottica DNA, and both companies have a long history of corporate responsibility. It is very much part of who we are. Today, we are proud to announce that building on our past momentum, our teams have defined a single company-wide sustainability approach that ties into our mission. It is a wonderful milestone for us, and I would like to thank our team for their outstanding effort in combining their expertise and delivering a clear and unified roadmap. This is a great example of the progress we have made in our integration. Another proof point on how we are working as one company. The approach, named Eyes on the Planet, structures our new sustainability roadmap around five pillars. Carbon, circularity, website, inclusion, and ethics. Each of these topics are deeply rooted in our organizations. You can find more information on the new sustainability section on the company website. I would like to touch on three of these pillars today. Starting with carbon, our contribution to fighting climate change. Together with Francesco, I am pleased to announce that Exibir Lusotica has set a target for itself to achieve carbon neutrality at its facilities by 2025, starting in Europe by 2023 for Scope 1 and 2. A lot of progress has already been made in reducing our carbon footprint in recent years. And with this pillar, we will continue to do so by focusing on key areas such as producing and procuring renewable energy wherever we can. We will invest in new processes that reflect our commitment and continue to update our equipment and technologies with energy usage in mind, in addition to investing in initiatives to protect and restore natural ecosystems, to name a few examples. The second pillar I would like to highlight is circularity. With our strong intention to improve product design and functions, waste management and materials we use. We will continue to make bold moves across the entire production cycle, including a shift from fossil-based materials to bio-based materials, which produce fewer emissions and are easier to recycle. This is also reflected in the recent investment in Mazzucchelli to develop and produce a highly sustainable type of acetate. And I would like to conclude with our world site pillar, which, in line with our mission, aims to bring good vision to everyone, everywhere. We remain committed to our goal of eliminating uncorrected provision by 2050. It is frankly an anchor for the industry, and we have some of the best philanthropic partners and NGOs around the world partnering with us to achieve this goal. I would like to take this opportunity to highlight the news announced last Friday. All 193 member states of the United Nations have unanimously passed a resolution committing to making eye care accessible for the billions of people living with preventable vision impairment by 2030. The inclusion of eye care in the Sustainable Development Goals supports Ethylor Lucetica's own ambition and roadmap launched during the UN General Assembly in 2019 to eliminate uncorrected vision in a generation. As we celebrate this milestone, I would like to thank all our teams for their contribution over the past decade in elevating good vision onto the world health agenda. So as you can see, Estirolusotica today not only has a fantastic and clear mission, which is now officially supported by the UN, we also have a clear sustainability approach through which we plan to contribute to some of the key societal issues of our time and continue to make a positive impact for everyone around us. From all you have heard us share this morning, I'm confident you can see the momentum which we have been able to create for us and for the industry. And with that, I would like to hand over to the operator for the Q&A. Thank you.