Essilor Luxottica

Hello everybody, this is Giorgio Iannella from the IR team. Thank you for joining a Seroluxottica Q3 revenue management call. The group's CFO Stefano Grassi will walk you through the revenue performance of the latest quarter. After its 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.

Hello everyone and welcome to our third quarter sales results. Acero Luxottica in Q3 posted revenue up 4% at constant currency, which leads to a first nine months of 2024 with top line up 4.9% at constant currency. When we look at our revenue at current exchange results, we look at revenue up 2.3% with a gap between current and constant exchange results that is broadly unchanged compared to what we've seen in the first six months of 2024. The main reason for that is the US dollar. The US dollar that during the month of July and August in particular devaluate quite strongly against Europe. The macroeconomic environment continues to be quite challenging, in particular in a couple of countries, the U.S. and China. But despite that, we had a strong delivery in both B2B professional solution and direct-to-consumer, both brick and mortar and e-commerce. On the direct-to-consumer side, we delivered mid-single-digit pace with a double-digit in Asia Pacific, with a double-digit in Latin America, and a strong contribution from EMEA. While we moved to the B2B professional solution, we experienced a deceleration in Q3 compared to the trend that we've seen in the first six months of 2024. And the main reason for that was a bit softer results in Greater China during the course of the third quarter. But now, as usual, let's start the journey across the four different geographies. And as usual, let's begin with the biggest one, North America. In North America, we experienced a slight acceleration compared to the Q2 delivery. The overall top line was up 1.6% at constant currency. And on the B2B side, the comments are going to be quite similar to the one that I shared with you during the second quarter. We had a delivery that was positive on both frames and lenses. On the frame side, I would say we continue to see strong demand from Ray-Ban Meta. We continue to see strong demand on prescription frame, while some part of our business faced a bit of a soft demand, and this is not new, we've already seen in the previous quarter, in particular on the department stores. When we look at our Lance business, the premium part of our Lance brand portfolio was positive with Varilux, with Eisen, they were very much instrumental to drive the growth during the course of a third quarter. And the nice thing is that we see that growth with a pretty good balance between price mix and volume. Quick touch on the channels. Our key account channel delivers solid mid-single-digit growth in Q3, while on the independent side, we still observe a polarized picture. On one side, the eye care practitioners that are part of our vision source program deliver a good mid-single-digit growth with strong demand and product supply on frames, on lenses, on instruments, while on the other side, Our reminder part of independent customer base was actually trending more on the negative territory in a market that I want to remind you continues to be still challenging and highly sensitive to price point. Moving now to direct-to-consumer, the third quarter comp sales were actually the best comp sales in North America for the year so far. Target Optical delivered mid-single digit comps. LensCrafter and PurrVision both delivered low single digit comps. A quick touch on Sun. Calm sales overall were still negative in Q3, but if I look at my glass half full for a second, I'm pretty pleased about the performance of Sunglassat in September, where we turned calm sales into the positive territory, very much driven by the international Sunglassat location, And what I can tell you that as we enter now in the fourth quarter, the month of October was actually positive as well. So we see good traction happening now for almost two months, which is a nice leading as we approach in the holiday season. But now, as usual, let's move to Europe and the EMEA region that deliver 5.6% at constant currency. That is another strong quarter for the region. We are looking at the 14th consecutive quarter of positive growth in EMEA. high single digit delivering direct to consumer mid single digit on the b2b professional solution most of the key countries recorded positive growth in q3 eastern europe turkey were double digit italy middle east were high single digit while France, on the other side, was really the only country that had a bit of a deceleration due to the challenging month of August, and many of you know the reason why, and that is related to the Olympics that clearly created a lot of constraints to the ordinary course of business. Now, if we look at it a bit closely, our professional solution site, our independents were very much the channel that drove the growth in EMEA region. And that was true for both frames and lenses. In particular, the lens part of our business had a strong quarter with volume as the main driver, but also with price mix that nicely supports our volume growth. On the freight side, I would say good prescription business, good sun with luxury and the premium passion part of our portfolio that were very much the key driver of our growth. Before we move to the direct-to-consumer, there are another couple of things that I want to share with you. First of all, in 2024, in the SILMO exhibition, our two key innovation, Transition Gen S and Ray-Ban Meta, won the prestigious SILMO door, respectively, in the category of vision and technological innovation in eyewear. And that proves, once again, the astrological leadership in product innovation. The last remark that I want to make today, it's related to the Olympics. We all have seen the great visibility that the Olympic Games have worldwide. And within the Olympics, the OK brand had an exceptional, exceptional visibility in front of millions, hundreds of millions of people, outfitting 2,000 athletes and becoming one of the 10 most visible and impactful brands at these Olympic Games. Direct to consumer now. The optical retail business delivered high single-digit comps on top of a strong quarter last year, with double-digit in Samurag Viganò, with double-digit in Turkey, with double-digit in the optical banner in Ukraine, and a high single-digit delivery in Netherlands, in Belgium, in Finland, and a mid-single-digit delivery in Vision Express in United Kingdom. Now, when we look at our synergy realization, we're pretty happy with the progression that we've seen in Grand Vision. As of today, approximately 70% of the lenses supplied in Grand Vision come from Estee Lauder Luxottica. And on the frame side, we have that percentage to be around 80%, including our proprietary exclusive brands. Last but not least, our sun retail. I would say we had a strong summer season here. Several countries, whether I look at Spain or DAC, whether I look at the Netherlands or Turkey, the Middle East or UK, I feel good about this quarter and in general about the sun season. Probably one exception, that is France, and that is very much due to, I would say, slightly negative trend that we've seen in department stores in France. Now let's move east, switch gear, Asia-Pacific, 5% delivery at constant currency. I remind you that we had a pretty tough comparison base. Last year in Asia-Pacific, our delivery was 12% growth rate. In the region, Japan delivered double-digit growth. India was on the high single-digit territory, while Australia and Korea were on the mid-single-digit growth. In China, we landed in a slightly positive situation in Q3 in terms of revenue growth, but clearly this is a deceleration compared to the trend that we've seen together in the previous quarter. I would say a couple of things on China. On the positive side, I think the resilience of Stellar's lenses and in general of myopia solution has been pretty impressive. Stellars in Q3 deliver a growth in excess of 40%, with approximately 2 million pairs of stellar lenses that were delivered so far in China. On the other side, I think when we look at Hong Kong, for example, we reported negative sales, and I believe that we have in Hong Kong right now a structural lack of touristic traffic, consumer spending, and that obviously doesn't help to grow our revenue base there. On the other side also, the Ballon brand. The Ballon brand, during the course of a third quarter, experienced a quite material deceleration, very much driven by a weak sell-out data. Brief touch on direct-to-consumer, I would say pleasing to see OPSM deliver in the quarter with comps that were in a mid-single-digit territory, and we enter now with a very similar trend in Q4, and that's obviously very promising as we approach the high seasonality. On the other side, our retail footprint in China struggled a bit with negative comp sales, and I would say that that was mainly driven by weak traffic across the China country. Latin America, the best performing region, up 10.1% during the course of a third quarter. In the Latin region, we clearly benefit and continue to benefit from the tailwinds of Argentina. But in any case, all the key countries in the region, like Brazil, Colombia, Mexico, Peru, and Chile, they all deliver solid growth in Q3 with a pretty good balance between the two distribution channels, professional solution and direct-to-consumer. On the B2B side, I would say happy with both frames and lenses in Brazil, while on the Hispanic Latam we were double digit on both optical and some frames. While the lens part of Hispanic Latam was a bit softer in Q3 due to a slow pace that we saw in Mexico, in particular on a couple of key accounts. Moving to the direct-to-consumer, I would say double-digit comps in the optical retail banner with price mix that were very much driving the growth as we reshape the overall assortment of lenses and frames similar to what we've done in Europe with Grand Vision and that clearly is driving price mix up. While in the sunglasses part, we have a double-digit in Anderson in Brazil and a low single-digit in Mexico. But now, before I hand it over to the operator for the Q&A session, let me just close out today's session with a couple of remarks. We are entering the fourth quarter conscious of the assets we are deploying across the different markets. We are ready to face a holiday season, an insurance week, a Black Friday with a team that is very much committed and prepared for a strong execution. On top of that, we're consolidating from day one in the fourth quarter, both Supreme and Heidelberg, which will give us an additional lift in our revenue profile. So I can tell you and share already today that we have an expectation of revenue acceleration compared to the trend that you've seen for the first nine months of 2024. With that, let me hand it back to the operator to start the Q&A session. Thank you.

Ladies and gentlemen, we will now start the Q&A session. Our first question comes from Luca Soca, Bernstein.