OAKLEY Doing "Very Well" In Second Quarter

As reported on shop-eat-surf.com June 30th 2008
Oakley’s new owner, Luxottica Group, hosted a conference call last week to reaffirm its guidance for the second quarter and year. I listened to a replay of the call this morning and read the company’s recently filed annual report and found a few interesting details about Oakley’s and Luxottica’s business.

Luxottica owns 6,200 optical and sunglass stores around the world including the Sunglass Hut and Lenscrafter chains. It also owns Ray-Ban, Arnette and Revo and makes and sells licensed brands Bvlgari, Burberry, Chanel, Dolce & Gabbana and others.

Luxottica executives said:

- Market conditions remain tough in North America.

- Sales in Italy and Spain have been tough due to bad weather but have improved in the past 15 days or so. The company believes those countries can meet plan.

- The rest of continental Europe and Northern Europe are keeping a “good pace.” Emerging markets are also doing well.

- Oakley’s integration into the Luxottica structure in Europe will be complete today. Luxottica has created a new sports channel to fully leverage Oakley in Europe. Oakley is “more visible than before” in Europe.

- Luxottica’s sun business is doing better than its optical business and premium is doing better than its licensed brands. Luxury sales slowed a bit.

- Oakley and Ray Ban are doing “very well.”

- The company launched several projects in North America in March, April and May to gain efficiencies. Those projects are now being implemented in other parts of the world.

- For the second quarter on a pro forma and at constant exchange rates, Luxottica expects low-single digit sales growth in its wholesale division and negative low-single digit comp declines in its retail division. Overall, that translates into flat total company sales for the quarter.

- The tough economy lead the Luxottica team to create a contingency plan at the end of last year and the beginning of this year. That plan has now been implemented and is becoming a platform for long-term efficiencies. Areas where the company found cost savings were in store labor, merchandise and product mix, supply chain and factory planning.

- It was the first time in four years that the company looked deeply at its operations to gain efficiencies. Previously, the company was focused on building capacity to satisfy demand as annual sales grew in the high teens.

- The overall message from the call is that top line growth for the company this year will be more challenging than the bottom line.

Luxottica’s annual report

In addition to the operating synergies to be gained with the Oakley and Luxottica merger, there were a few other more subtle advantages mentioned:

Luxottica believes it can help Oakley with its women’s glasses and prescription eyewear because of its expertise in those areas.

Oakley can help Luxottica brands with brand building and grass roots marketing methods.