Bumper Year For Oakley & Rayban Owner Luxottica

The Board of Directors of Luxottica Group S.p.A. (MTA: LUX), a leader in the design, manufacture, distribution and sale of fashion, luxury and sports eyewear, met today to review the draft statutory financial statements and consolidated financial results for the fiscal year 2017 in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

In 2017, Luxottica's net sales grew to Euro 9,157 million, up 2.2% at constant exchange rates2 (+0.8% at current exchange rates). Net profit and free cash flow generation3 exceeded one billion Euro for the first time in the Group's history and the net margin exceeded 10%.

The performance in the past year is the result of the Group's profound 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. 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.

During 2017, Luxottica’s majority shareholder Delfin, the Group and Essilor International continued to work together for the successful conclusion of the combination announced on January 16, 2017. The transaction remains subject to the approval of the antitrust authorities of certain jurisdictions and is expected to close in the first half of 2018.

"We closed a very good 2017 with many positive signals coming every day from the markets and confirming the value of our strategic initiatives from digital innovation and the evolution of e- commerce to the start of big lens laboratories and the establishment of global and standardized commercial policies. After fifteen years, we report the net margin above the 10% threshold, with a record net income of over one billion Euro. The new Luxottica we have created over the last three years with its newfound simplicity, courage and speed, is beginning to remind me of the Group I had left", commented Leonardo Del Vecchio, Executive Chairman of Luxottica.

"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. We look forward to writing a new chapter of our history together with our French partners at Essilor.

In 2017, Group revenues reached Euro 9,157 million, up 2.2% at constant exchange rates (+0.8% at current exchange rates) with accelerating net sales in the fourth quarter. The last three months were the best of the year for the wholesale business, comparable store sales4, Sunglass Hut in the main geographies at constant exchange rates and e-commerce.

Both divisions including e-commerce activities contributed to the positive performance of the year, despite stricter trade policies in North America and China and the sharp reduction in discounts across all sales channels.

The Group's operating income increased on an adjusted basis by 0.7% to Euro 1,442 million in 2017 (-3.3% to Euro 1,301 million on a reported basis), with an adjusted operating margin  at 15.8%. The adjusted operating margin  of the Wholesale division was 24.1%, in line with last year's result; the adjusted operating margin  of the Retail division grew by 40 basis points and amounted to 14.1%.

Adjusted operating  income   excludes  organizational  simplification  and restructuring  costs for certain business areas as well as non-recurring costs for a total of approximately Euro 142 million.

Net income for fiscal year 2017 grew by 10% to Euro 970 million on an adjusted basis and by 22.4%6  to Euro 1,038 million on a reported basis, benefiting from the lower cost of debt and reflecting benefits from Luxottica’s Italian Patent Box agreement and from American tax reform. The EPS (earnings per share) on an adjusted basis was Euro 2.03 (US$ 2.29 at the exchange rate of €/US$ of 1.1297).

Free cash flow generation reached the record level of Euro 1,028 million for the twelve-month period ended December 31, 2017. Net debt3 as of December 31, 2017 was Euro 740 million, down by 37.1% compared to the same period last year, with a net debt/adjusted EBITDA ratio of 0.4x.

North America

In 2017, North America reported net sales almost in line with the previous year (-0.5% at constant exchange rates, -2.4% at current exchange rates) helped by the acceleration of sales in the fourth quarter in both divisions. The Wholesale division grew by 3.7% at constant exchange rates (+1.9% at current exchange rates) with excellent year-over-year performance driven by the main brands, in particular Ray-Ban, and an increase of 14.0%2 in the fourth quarter of 2017. The Retail division recorded net sales which were down by 1.5% year over year at constant exchange rates (-3.4% at current exchange rates).  However, the division saw a trend reversal in the fourth quarter compared to the third quarter of 2017, with retail division net sales up 1.5%, including improved comparable store sales at Sunglass Hut and negative, but improving, sales for LensCrafters, which is still focused on transforming its business model.

Europe

In 2017, Europe was the engine of the Group's growth for the third consecutive year. Italy, Spain, Germany, Turkey and Eastern European countries  drove  revenues  up by 13.4% at constant exchange rates2  (+11.7% at current exchange rates) due to the success of eyewear collections and  a  growing  appreciation  for  superior service.  The  Retail  division  benefited  from  the consolidation of the Salmoiraghi & Viganò stores in Italy and the strong performance of Sunglass Hut in continental Europe.

Asia-Pacific

Net sales for the year in the Asia-Pacific region, down 1.9% at constant exchange rates (-2.9% at current exchange rates), saw a reversal of the trend in the fourth quarter where net sales rose by 4.4%2. The positive contribution of Australia, Japan, Southeast Asia and travel retail only partially

offset during the year the decline in wholesale sales in China due to the restructuring of its distribution network. The optical retail business in the region ended the year with strong growth thanks to the solid performance of OPSM in Australia and Ray-Ban stores in Greater China.

Latin America

Latin America reported sales up 6.1% at constant exchange rates2  (+8.6% at current exchange rates). Drivers included the solid growth of Mexico, one of the Group’s most vital markets, and Brazil, which benefited in the second half from the completion of the acquisition of Óticas Carol, one of the region’s largest optical franchisors. In retail, Sunglass Hut continued its expansion with the opening of its first stores in Colombia, Argentina and the Caribbean, along with the launch of Ray-Ban stores in the region.

Outlook for 2018

2018 is expected to be another year of growth and important investments for the Group. The growth pillars remain unchanged: product quality, strong brands, efficient factories, widespread distribution and an increasingly direct relationship with the end-consumer through retail and e- commerce.

In 2018, the Group expects:

•   Sales growth: +2-4% at constant exchange rates2

•   Adjusted operating income growth2: 0.8-1.0x sales

•   Adjusted net income growth2: 1.0-2.0x sales

•   Net debt/EBITDA adjusted ratio: 0.3-0.4x

The Board of Directors will submit a motion to the General Meeting of Stockholders recommending the distribution of an ordinary cash dividend in the amount of Euro 1.01 per share, equal to 50% of the adjusted net income of the Group. The total dividend amount will be approximately Euro 483 million.

The Board of Directors will convene the Ordinary and Extraordinary General Meeting of Shareholders  on  April  19,  2018  to  approve  the  2017  Statutory  Financial  Statements,  the distribution of the cash dividend, the appointment of the Board of Directors and the Board of Statutory Auditors, as current terms will expire concurrently with the General Meeting. The Company’s Compensation Policy will also be submitted for review.

The Extraordinary General Meeting of Shareholders will be called to vote on a proposed amendment to Article 18 of the Group’s By-Laws relating to the term of office of the directors, in order to allow them to remain in office up to a maximum of three financial years according to the determinations that will be taken by the Group’s shareholders.

The ordinary cash dividend will be payable on April 25, 2018 (the coupon detachment date will be April 23, 2018 pursuant to the Borsa Italiana calendar with a record date of April 24, 2018). Regarding the American Depositary Receipts (ADRs), the record date will be April 24, 2018 and, according to Deutsche Bank Trust Company Americas (the depositary bank for the ADR program) the payment date for the dividend in US dollars is expected to be May 2, 2018. The dividend amount in US dollars will be determined based on the €/US$ exchange rate as of April 25, 2018.

The Board of Directors, upon the recommendation of the Human Resources Committee, assigned a total of 446,767 Luxottica Group shares to 478 beneficiaries of the Plan. This assignment was executed according to the Performance Share Plan 2015 first approved on May 4, 2015, and later amended by the Board of Directors on May 16, 2017. Detailed information on this assignment will be provided pursuant to Article 84bis of the CONSOB Issuers' Regulation, within the time limit provided by law for the publication of the remuneration report.