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EssilorLuxottica Sound Revenue Growth, Margins Expanding, Two Acquisitions including Supreme

In the second quarter of the year, EssilorLuxottica confirmed the sound growth pace of the business it recorded in the first quarter. The Group’s revenue rose 5.2% at constant exchange rates1 (+3.8% at current exchange rates) to Euro 6,955 million, on top of a strong performance in the same period of last year (+8.0%) like in the first quarter. In the first semester, the Group’s revenue grew by 5.3% at constant exchange rates1 (+3.4% at current exchange rates) to Euro 13,290 million, in line with the long-term targets. The second quarter revenue performance was in continuity with the first quarter trends also in terms of the key growth drivers. The growth was quite balanced across the regions, categories and channels

Revenue growing by 5.2% in Q2 at constant exchange rates1, +5.3% in H1

· EMEA as the driving region, North America keeping the pace of Q1

· Stellest in China and Ray-Ban Meta wearables continuing to grow exponentially

· Adjusted2 operating profit margin at 18.8%, up 50bps at constant exchange rates1

· Strong free cash flow5 generation, at Euro 971 million in H1

Acquisition of leading diagnostic med-tech platform Heidelberg Engineering and Supreme

Francesco Milleri, Chairman and CEO, and Paul du Saillant, Deputy CEO at EssilorLuxottica commented: “In the first half of the year, EssilorLuxottica’s strategy continued to pay off with all regions and businesses contributing to positive results. With top line growth, margin expansion and record cash flow, the last six months further solidified our long-term outlook, made possible thanks to the unique talent and engagement of our 200,000 colleagues worldwide.

Today, our commitment to the two strategic pillars of med-tech and smart eyewear is taking shape, with Stellest seeing exponential growth, the success of Ray-Ban Meta and Nuance Audio set to establish a new category in the market. Announced just last week, the acquisition of Heidelberg Engineering will give us a new foothold in the clinical ophthalmology space.

The third strategic pillar, our iconic brands, will make the first two more accessible, consumer-friendly and relevant. With new collections coming from all our house and licensed brands, including our first- ever for Moncler, and the announced acquisition of Supreme, we are exactly what we need to be: a tech-driven and brand-rich company caring for and connecting with hundreds of millions of people globally

Geographically, all the regions rose high-single digit in the period, with the exception of slower North America. EMEA stood out again as the most powerful growth engine for the Group, with both the channels contributing and optical retail comparable-store sales3 up double digits, also thanks to the rising penetration of the subscription model. North America continued to be just low-single-digit positive, held back by still negative comparable-store sales3 at Sunglass Hut and negative trends with the ECPs not engaged in partner programs. In Asia-Pacific, Professional Solutions and Direct to Consumer equally contributed to the solid sales performance, with Stellest and the myopia management portfolio being the major driver. Latin America sound growth was based on slightly positive Brazil and Mexico and hyperinflationary Argentina.

Price-mix played a key role in the second quarter of the year to sustain revenue growth, as the Group continued to deploy innovation in lenses and frames and leverage the mix as a driver, and at the same time implemented a single-digit increase to its price lists across the board.

The top line growth was well balanced also in terms of product categories, with vision care and sunglasses growing broadly at the same pace. As for the brands, in lenses Stellest was still the champion rising above 80%, while Varilux and Transitions progressed at mid-single digit pace; in frames, Ray-Ban posted a healthy high-single-digit growth driven by both traditional eyewear and smart glasses, while in license portfolio Prada was the best performing name, up in the high teens.

In terms of profitability, despite the persistence of a material inflation drag the Group managed to restart its margin expansion journey, consistent with its long-term targets.
The adjusted2 gross profit amounted to Euro 8,541 million in the first semester, reaching 64.3% of revenue, 20 basis points higher than H1 2023 (or +40 basis points at constant exchange rates1).

The adjusted2 operating profit reached Euro 2,431 million in the first half, representing 18.3% of revenue, unchanged versus H1 2023, while at constant exchange rates1 the margin expanded by 50 basis points to 18.8% of revenue.
The adjusted2 Group net profit amounted to Euro 1,746 million in the first half, representing 13.1% of revenue, compared to 12.9% in H1 2023, a margin accretion of 20 basis points, while at constant exchange rates1 the margin expanded by 60 basis points.

Free cash flow5 amounted to Euro 971 million in the first six months of the year, compared to Euro 954 million in the same period of last year.

The Group ended the six months with Euro 2.16 billion in cash and cash equivalents and a net debt6 of Euro 9.76 billion (including Euro 3.51 billion lease liabilities).

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EMEA 2nd Quarter

EMEA posted revenues of €2,648 million, up 7.9% at constant exchange rates1 compared to the second quarter of 2023 (5.0% at current exchange rates), driven by the first-class execution in both channels.

The Professional Solutions business continued to build its track record as a solid and reliable source of growth, well spread among geographies and product categories. The further ramp up of the XR series propelled Varilux to become the most successful asset this quarter, while the launch of Transitions Gen S in France, Italy, UK and Ireland also generated excitement among customers. In anticipation of the 2024 Paris Olympics, Oakley emerged as one of the top performing frame brands leveraging its new styles and collections created for the occasion. The euphoria transmitted by the Team Oakley athletes further elevated its perception as a winning brand. The new licenses had a meaningful impact, together contributing approximately one fourth to the quarterly growth of the frame business.

Direct to Consumer once again delivered excellent results. On top of its best quarter last year, the optical business achieved double-digit comparable-store sales3. This was driven by the remarkable progress made on all the strategic initiatives laid out in the integration plan. The share of EssilorLuxottica’s own products in the stores increased significantly since last year and the upgraded offer range yielded an excellent response. On top of this, the subscription program “Vision as a Service” represented an additional catalyst for growth with the number of optical subscribers doubling year over year. The sun business experienced a slowdown in the quarter as a result of the adverse weather conditions affecting the region.

EMEA 1st half 2024

In the first half of 2024, EMEA posted revenue of €4,969 million, up 8.2% compared to 2023. The performance in the region was supported by its resilient Professional Solutions business and further boosted by Direct to Consumer riding on the back of the integration. Almost all countries in the region registered positive growth in the first half. In Professional Solutions, all the major product categories contributed to the performance, led by Varilux on the lens side, as well Prada, Oakley and the solid start of the new licenses on the frame side. The Direct to Consumer business was sustained by both optical and sun banners, growing at a broadly similar pace in terms of comparable-store sales.

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EssilorLuxottica to Acquire Supreme® from VF Corporation

On July 17, 2024, EssilorLuxottica announced that they had entered into a definitive agreement for EssilorLuxottica to acquire the Supreme® brand from VF for $1.5 billion in cash. The Supreme® brand runs a digital-first business and 17 stores in the U.S., Asia and Europe.

This acquisition perfectly aligns with the EssilorLuxottica innovation and development journey, offering to the Group a direct connection to new audiences, languages and creativity. With its unique brand identity, fully- direct commercial approach and customer experience – a model the Group will work to preserve – Supreme® will have its own space within the house brand portfolio and complement the licensed portfolio as well. The brand will be well-positioned to leverage the Group’s expertise, capabilities, and operating platform.

The Company confirms its target of mid-single-digit annual revenue growth from 2022 to 2026 at constant exchange rates1 (based on 2021 pro forma4 revenue) and expects to achieve an adjusted2 operating profit as a percentage of revenue in the range of 19-20% by the end of that period