China slowdown worries Ray-Ban maker Essilor Luxottica Q1



© Reuters. FILE PHOTO: Two-brand Sunglass Hut, owned by EssilorLuxottica SA, in Manhattan, New York, U.S., displays a Ray-Ban sunglasses frame for sale on November 30, 2021. REUTERS/Andrew Kelly/File Photo


Juliet Portara

(Reuters) – Shares in EssilorLuxottica fell on Friday as a slowdown in its China business overshadowed the French-Italian eyewear company’s better-than-expected first-quarter overall sales.

The group, which makes sunglasses and eyeglass frames for Prada (OTC ? and Versace), reported that sales in mainland China had “worsened” as coronavirus cases rose, saying about three-quarters of its factories were affected by COVID-related closed or low traffic.

“We’re still seeing a massive drop in traffic there,” Chief Financial Officer Stefano Grassi said on the conference call, adding that it was common with “a few exceptions.”

China’s race to contain the pandemic has clogged highways and ports, trapped workers and closed countless factories, causing disruptions that rippled through global supply chains.

Shares in EssilorLuxottica were down 1.9% at 11:10 GMT, paring earlier losses of 3.9%.

“The market, especially luxury and consumer goods stocks, is receiving growing concerns that China is Lockdown and slow down.”

These turmoil also cast a shadow over the French luxury goods company dry out (EPA ? First-quarter results, released Thursday. Another analyst noted that its shares fell as much as 7% on Friday, dragging down the broader luxury sector.

“A safe haven”

At times, however, Grassi seemed optimistic, noting that sales of Stellest lenses, which correct children’s myopia, are strong in China.

Stifel analyst Cédric Lecasble also noted that the Ray-Ban maker has limited exposure to China.

“The 5% exposure to China sales shields EssilorLuxottica from the top-line dilution suffered by its consumer peers,” Jefferies analysts said in a note to clients.

“The group’s resilience in times of supply chain disruption… also makes the stock a safe haven,” they added.

Demand for sunglasses picked up in the first three months of the year at EssilorLuxottica, with revenue of 5.61 billion euros ($6.09 billion), up 38.1 percent at current exchange rates.

Piral Dadhania of RBC Capital Markets said analysts generally see a good start to the year, with group sales 2 per cent above consensus estimates.

(1 USD = 0.9219 EUR)

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