Essilor Luxottica

Good morning and good afternoon, everybody. This is Giorgio Ionella from the IR team. Thank you for joining S0 Luxottica Q1 Revenue Management Call. The group's CFO, Stefano Grassi, will walk you through the revenue highlights of the first quarter of the year. After his presentation, there will be a 30-minute Q&A session. If you want to make a question, please press star followed by 5. We kindly ask you to limit your questions to a maximum of 2. With that, I hand it over to Stefano.

Good evening, good afternoon and good morning everyone. Welcome to our Q1 trading update. We start in the year with a mid-single-digit speed in revenue growth. Our top line was up 5.5% at constant currency, very much on target with our long-term strategic guidelines that we shared with you a couple of years ago. And we delivered this in a quarter where we have a pretty tough comparison base as Q1 2023 was up 8.6% at constant currency. Our growth at current exchange rate was 3%, so clearly you can see the impact of currency headwinds during the course of Q1. In particular, the headwinds come really from two currencies, the US dollar and the Turkish lira. If currency now stay at those level, you can expect those headwinds to continue throughout the remainder part of 2024, probably to a lower extent during the latter part of 2024. If we look at our two divisions, both professional solution and direct-to-consumer grew at a mid-single-digit territory with positive delivery in every single region. But now, as usual, let's begin our journey across the four different regions and let's start with North America, the biggest one. North America in Q1 delivered a top line up 1.7% at constant currency. The professional solution B2B poses low single-digit growth with frames that deliver a stronger pace than a lance business. On the frame side, optical frames were on a strong pace, double-digit growth, confirming a strong momentum that we've seen in 2023, while the sun part of the business was a little bit softer, and I would say it was softer in particular in two channels, the department store ones and the sport channel. Now, moving to the lens part of the business, in Q1, we were positive, and in particular, we were positive thanks to a strong price mix that helped very much to sustain our top line. The channel mix was good, in particular on the ECP. ECP delivered a positive growth on our B2B side, in particular thanks to Vision Source Alliance that delivered a strong high single-digit growth during the course of the first quarter. If we now move to the DARI to consumer, happy to report that Optical Retail Banner delivered positive comp sales in LensCrafter positive, in Target Optical positive, and last but not least, positive in uh in provision well on the some part of a business we were still on a negative side uh if i look at my my glass half full here i would say that we've seen sequential improvement in the comp sales of sunglass sat in north america between january february and march In March, we actually turned into the positive territory, and in particular, let me say that in Q1, the international sunglass out locations, the ones that were more exposed to the touristic traffic, delivered high single-digit growth during the course of Q1. But now let's move to EMEA. EMEA delivered an 8.5% of constant currency in Q1. This represents a further acceleration compared to the 2022 trend in the region. It's the 12th consecutive quarter, just to give a bit of statistics here, 12th consecutive quarter of sales growth in the region. We were mid-single digit in the professional solution and we were double digit in the direct-to-consumer segment. On the B2B side, Italy, Spain, UK and South Africa, they all deliver mid single digit growth while we were flattish in France. Price mix continue to be strong and we see strong price mix on lenses. We see strong price mix on the frame side of a business. If we touch for a second on frames, we were pleased with the delivery in Raban, high single digit for Q1 in EMEA. We were very pleased with Oakley, double digit growth in the first quarter in EMEA with both brands that deliver strong results in prescription as well as in sun. If we touch a bit on the lens part of our business, I would say that we are in very healthy shape here. And just to give you an example, the recently launched Varilux XR is now delivering strong results pretty much across the country, representing 80% of the growth that we deliver in the Varilux product category during the course of the first quarter. Now let's switch gear and look at the data to consumer. We were double digit comp sales for Sun and high single digit in the optical retail part of EMEA. So clearly very pleased with the trend that we've seen here. Optical retail banner posted a double digit in Italy, Netherlands and UK were actually on the high single digit territory. The integration with Grand Vision is marching at a pretty high speed. Just to give you a couple of examples. 60% of the lenses supplied to Grand Vision are coming today from Messero Lux Optica. Three out of four photochromic lenses sold today in Grand Vision are actually branded with transition. So pretty compelling picture of synergy realization in Grand Vision. I would say in Q1, but in the remainder part of the year, we have a pretty good and consistent expectation as well. Brief touch on Sun Retail banner, double-digit comps in Iberia. The DAC part continues to be strong, a double-digit, and Turkey was double-digit as well. The growth is very much driven by price mix and also by volume during the course of Q1. E-commerce was just south of 10% growth in Q1 with all the key banner, Ray-Ban, Sunglassat, Oakley, that all deliver double-digit growth during the course of Q1. Let's move east now to Asia Pacific with a top line that was up 8.2% at constant currency. This was another strong quarter for the region with double digit in China, with double digit in Korea and last but not least with double digit in Japan. In this region, the B2B side of a business deliver a double-digit growth, while on the other side, our direct-to-consumer was more on the mid-single-digit territory. Pretty happy with the performance and the delivery and the execution that we had in China in a pretty uncertain macro environment. The Shanghai Fair that was held in the month of March was a great success story for us at Exotica. We showcased our products with a new Ray-Ban Asian design collection. We had more than 1,600 visitors in our stands, and we engaged several key opinion leaders to talk about the most important topics for the industry, one of them clearly myopia management. In addition, during the course of the first quarter, we launched the Astroloxotica Prosbiopia Cap that is aiming to engage more than 10,000 ECPs in China and train them on the specific benefits of progressive lenses. Last but not least, Stelest. Stelest is delivering another outstanding quarter with revenue that were up over 70%. If we now move to the direct-to-consumer, well, in direct-to-consumer, brick-and-mortar sun continues to be strong in the region with mid-single-digit calms, and we have on one side the Southeast Asia, where traffic, conversion, and price mix were all trending in the positive territory, and we delivered double-digit calms, while on the other side, sun-glossed Australia was slightly negative during the course of the first quarter. We now remain for a second still in Australia. Our main optical retail banner, OPSM, posted low single-digit comps in Q1, with appointments that continue to be a bit soft, while conversion and price miss are improving. Now let's move to Latin America. Top line growth close to 11%, 10.9% at constant currency. This represents the 13th consecutive quarter of positive growth at constant currency. On the professional solution side in Brazil, we posted double-digit growth on frames, while on the lens part of the business, we turned into the negative territory in Q1, I would say more due to a timing effect between the delivery in Q4 and the first quarter of this year. Ochica Carole posted another outstanding quarter, a double-digit pace. More than 1,000 franchisees joined the new and renovated program of Ochica Carole that was rolled out during 2023, and we expect more to roll out into this program. Moving now to direct-to-consumer, our optical business posted high single-digit comps, very much driven by the grand vision banner in the region, in particular the ones that were in Mexico and in the Andes. And while we move now to the Sun part of our business, that business delivered low single-digit comps with strong comps in Brazil and Andes, while Mexico was a bit softer during the course of Q1, especially due to the softer demand that we experienced in the Sunglassat location that were more exposed to touristic traffic. With that, let me hand it over to the operator for the Q&A session.

Ladies and gentlemen, we will now start the Q&A session. If you want to book a question, press star followed by five. Our first question comes from Oriana Cardani in Tesa San Paolo.