EssilorLuxottica Stock: Comments On Q3 Results (OTCMKTS:ESLOF)

In June 2022, our internal team initiated EssilorLuxottica’s coverage (OTCPK:ESLOF, OTCPK:ESLOY), highlighting the company as a perfect combination between value and growth. Our buy case recap was based on 8 key takeaways coupled with an ongoing buyback and a compelling valuation. A month after the Q2 results were released, EssilorLuxottica provided a capital market update, confirming the following outcome:

1. Positive confirmation of the company’s 2026 outlook with expected revenues in the €27 and 28 billion range;
2. Consumer spending resiliency despite the ongoing macroeconomic challenges and geopolitical tensions;
3. Armani’s renewal collaboration agreement.

Source: Mare Evidence Lab’s previous publication

Q3 results

Starting the CEO’s words: “we are pleased with the solid performance our Company delivered in the third quarter of this year, with all the regions posting growth. The results once again demonstrate the power of our business model”. As usual, there was no disclosure of the company’s profitability. Q3 top line sales stood at €6.4 billion with a plus 8.2% at CER, and a plus 8.8% comparing the nine-month results versus the last year’s period. Considering the current FX development, the quarterly turnover recorded a 17% increase. Indeed, here at the Lab, we were expecting a positive contribution from the currency evolution. Unfortunately, the company did not disclose this positive headwind. Looking at the details, both Professional Solutions and Direct To Consumer divisions recorded €3 billion (+7.8%) and €3.3 billion (+8.5%) respectively. Important to note is E-commerce performance which was back to growth and now contributed to 7% of the company’s revenue line.

At the geographical level, EssilorLuxottica grew in all the regions with a positive confirmation in the EU (supported by tourism flow) and North American area. A special note was recorded in APAC and Latin America, both regions achieved double-digit sales with the former at a plus +22.7% (€761 million) and the latter at a plus +12.6% (363 million). In particular, as already mentioned in Hermes’ follow-up note, China significantly grew thanks to lower COVID-19 restrictions and lower pandemic outbreaks in the region.

Conclusion and Valuation

During the company’s CMD released in mid-Sept, the company’s CFO presented EssilorLuxottica’s financial roadmap, confirming the long-term guidance, summarized as follows:

1. Mid-single-digit growth at CER in the period between 2022 and 2026;
2. Adj. EBIT between 19% and 20% in 2026.

All were in line, including the latest buyback announcement. Therefore, here at the Lab, we maintain our buy rating at €196 per share.