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Luxottica FY'17 profit rises on fatter margin

Eyewear maker Luxottica Group SpA, which is in the process of executing a merger with Essilor International SA, on Feb. 26 reported 2017 earnings that beat expectations due to fatter profit margin. The eyewear manufacturer also issued a positive outlook for 2018.

Milan-based Luxottica, the owner of brands such as Ray-Ban and Oakley, reported that adjusted earnings per share for the year ended Dec. 31, 2017, jumped 10.3% year over year to €2.03 from €1.84 in 2016, outpacing a mean consensus of analysts' estimates compiled by S&P Capital IQ for normalized EPS of €1.96.

Adjusted net income rose 10% year over year to €970 million from €882 million as net margin climbed to 10.6%. Luxottica did not provide an adjusted year-ago comparison for net margin, but the company said it was the first time that its net margin exceeded 10%.

Adjusted net sales edged up 0.8% year over year at current exchange rates to €9.16 billion from €9.09 billion. At constant exchange rates, adjusted net sales increased 2.2%.

The eyewear company also raised its dividend by 10% year over year to €1.01, an outlay of €483 million, equivalent to 50% of adjusted net income.

Luxottica, which makes eyewear under license for labels such as Dolce & Gabbana, Channel and Versace, attributed its improved performance to the group's transformation and strategic renewal. "A more direct relationship with the consumer and an extensive digitization of the entire business were the main drivers of change," it said in a statement.

"Among the most significant initiatives of 2017 were the launch of Ray-Ban ophthalmic lenses, price harmonization across sales channels, greater segmentation and attention to wholesale distribution and the continuous development of proprietary brands' e-commerce platforms," Luxottica added.

The company said it expected 2018 to be another year of growth and investment. It forecast sales growth of 2% to 4% at constant exchange rates and adjusted net income growth at "1.0-2.0x sales."

"We confirm that 2018 will be a year of further growth, in which we will continue to invest to strengthen our business in all markets," CEO Leonardo Del Vecchio was quoted as saying.

Luxottica said its deal with Essilor still was subject to approval by antitrust authorities in certain jurisdictions, but it expected the transaction to close in the first half of 2018.

The company in January 2017 agreed to merge with lenses maker Essilor, based in Charenton-le-Pont, France, in order to better seize growth opportunities resulting from strong demand in the eyewear market, driven by the increasing need for corrective and protective eyewear and the appetite for strong brands. Under the terms of the transaction, Essilor and Luxottica would combine to form EssilorLuxottica, a company with operations in 150 countries and 140,000 employees.