Sales declines for Oakley and Ray-Ban in North America caused Luxottica's global wholesale revenues to fall by 3.2 percent to €800 million in the third quarter ended Sept. 30, with a drop of 3.6 percent in local currencies.
The lower turnover was caused by the introduction in North America of minimum advertised prices (MAP) for Ray-Ban sunglasses, the reorganization of Oakley's sports channel, and a change in the distribution policy in China.
North American wholesale revenues dropped by 11.6 percent in euros and by 11.2 percent in local currencies, going down to €234 million. The company conceded that the impact of MAP was stronger than expected, noting that sales to online retailers fell by about 60 percent. However, this policy is reducing the level of discounts practiced by third parties, protecting Luxottica's own retail business. According to the group, the average discount applied by Amazon on Ray-Ban sunglasses has fallen to 6 percent from 37 percent in April.
The new pricing policy was fully implemented from July 1. Under its terms, Luxottica's clients must advertise recommended retail prices for Ray-Ban models, and rebates and sales periods have to be approved by the company. The group expects the impact of MAP on wholesale sales to last until early 2017, but its effect will be milder than in the last quarter. The trend already improved in September.
Meanwhile, as previously reported, Luxottica has been streamlining Oakley's North American sports channel and is cutting by 70 percent the size of the brand's apparel, footwear and accessories collection. Excluding the impact of MAP and of the Oakley reorganization, “you would be seeing a different number for wholesale in North America,” said the group's chief financial officer, Stefano Grassi, during a conference call. Luxottica added that the first weeks of October indicated that the North American wholesale business “might be in recovery mode” in the fourth quarter.
In the third quarter, higher retail revenues allowed the Luxottica group to post total sales of €2,225 million, up by 3.2 percent at actual exchange rates and by 3.5 percent at constant rates, with progress in Europe and emerging markets. While retail revenues expanded, wholesale revenues contracted. When adjusted for an accounting change at the group's American vision care unit, EyeMed, the top line rose by 1.2 percent at current exchange rates and by 1.4 percent at constant rates.
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