EssilorLuxottica Société anonyme (EL) Earnings Call Transcript & Summary

Good morning to everybody. Thanks for joining us today, and thanks for the interest you continue to show in EssilorLuxottica. I'm happy to join you for my first earnings call as the group CEO. We are pleased to present today strong results with a sharp acceleration of the group performance in the second quarter of the year, leading to a nice growth of revenue and margins in the first half overall. The new governance based on the high-profile Board of Directors and supported by the management team is promoting a faster and better execution of our strategic vision and integration programs. This allows us to upgrade our outlook for the full year 2021. Now point to mid-single-digit revenue growth and some margin expansion versus 2019 at constant currency. Backed by an improving business environment in most of the areas worldwide, starting from North America and leveraging its best-in-class proposition, EssilorLuxottica grew 9.2% in revenue in the second quarter versus the same period of 2019 at constant currency, which is a substantial acceleration compared to plus 1.9% of the first quarter. Our business grew in all areas in both optical and Sun as well as in wholesale and retail. Optical was driven by value-added lens brands, and our optical retail banners, in particular, in North America and Australia. Sunglasses strongly bounced back in the quarter in Sunglass Hut store and on e-commerce platform, driven by Ray-Ban and Oakley as well as luxury brands. This proved once again the brands matter in our business and underpins the group's strategic focus and investment effort on branded top quality offerings. Both the new divisions we introduced today, professional solution and direct-to-consumer, representing the wholesale and the retail business of the group, grew and accelerated. E-commerce continued to grow fast, up by 66% in the quarter and reaching 9% of the group's total business. Our balanced focus on both the wholesale and retail channels, reflects the strategic idea of network company and open model presented at our first Capital Market Day, with the goal to elevate the standards of the entire eye care and eyewear industry to the benefit of all its stakeholders. The acquisition of GrandVision, closed 1 month ago, perfectly fits into such a strategic framework. Aimed at replicating in Europe the successful multichannel model we have adopted in North America since the acquisition of LensCrafter in 1995. We are happy with the transaction and ready to make the most of it, like we have been pleased to see the merit of our position fully acknowledged by the arbitration court. EssilorLuxottica is rebuilding its foundations and reshaping the industry going through such a transformational phase with energy and enthusiasts. Vertical integration, global footprint, clear leadership as well as strategic vision and execution capability are the key strengths of our group, which make us look at the future with great confidence. With that, I hand over to our CFO, Stefano Grassi, for a quick review of the group revenue drivers, and our Deputy CEO, Paul du Saillant, to talk about the key areas of mission and sustainability.

Thank you, Francesco. Good morning, everybody, and welcome to our first half 2021 earnings release. As we're starting now a new journey for EssilorLuxottica, we decided to move away from the old heritage of EssilorLuxottica, very much moving into a new structure that includes 2 divisions for the group. On one side, we have our Professional Solutions division that very much represents our wholesale business. On the other side, we have our direct-to-consumer division that represents our brick-and-mortar division as well as our e-commerce commercial proposition. I believe this structure truly enhance our vertically integrated business model and will allow you, all of you, to very much better understand our underlying business trends for the group. In the appendix, you will also find an extended disclosure of our revenue base by quarter for 2019 as well as for 2020. But now let's start our journey around the different geographies, as usual, using and leveraging very much the new structure that we just announced. Let's begin with the biggest geography, North America, that in the second quarter posted top line up 16% compared to 2019 levels. As you can see, this number is something that we haven't seen in the past. It's actually the best quarter that we recorded in North America for EssilorLuxottica. The market in North America is pretty healthy. Our top line performance was very much supported by a strong delivery from both the division, Professional Solutions as well as direct-to-consumer. The Professional Solutions division was up on a high single-digit territory during the second quarter. The lens business in North America delivered a strong growth, well supported by ECPs as well as our strong branded portfolio. The EL 360 program, the joint effort between the lens, the frames and the insurance arm of EssilorLuxottica in North America, is now rolling out on about 2,100 as of the end of June. The frame business in North America posted top line up about 20% during the course of the second quarter with independents, key accounts, e-commerce, sport account, all on the double-digit pace. From a brand standpoint, very happy, very pleased to report the Ray-Ban and Oakley posted double-digit growth in prescription as well as under some parts. In particular, our Oakley brand was very well supported by the launch of the [ cat ] product, that thanks to his disruptive design and innovation, already represents an icon for our Oakley brand that is gaining a lot of visibility during the Olympics game that are in due course in Tokyo, Japan. Our direct-to-consumer division was up double digits during the course of the second quarter. LensCrafters was up double digit in comps in April, double digit in May, double digit in June. And that happened despite our traffic material decline compared to the pre-COVID level. And we are talking about a traffic decline that is in the 20% range during the course of the second quarter. But thanks to a strong retail execution, thanks to a strong lens mix, we were able to deliver such a strong result. Sunglass Hut was double-digit, likewise LensCrafter, in every single month of the second quarter, supported by a strong rebound on local demand. Last but not least, e-commerce. E-commerce was close to double the size of the business compared to 2019. With oakley.com, sunglasshut.com, ray-ban.com and EyeBuyDirect.com, all of them on the triple-digit territories. But now let's move ahead and -- let's go back into EMEA. EMEA that recorded a top line up approximately 4% during the course of the second quarter. It's a remarkable rebound of our performance in Europe, where you might remember, during the course of the first quarter, we recorded negative 7%. So we moved from negative 7% to plus 4% in the second quarter with a strong acceleration during the second part of the second quarter in Europe. Professional Solutions was solid positive in the second quarter. France, the largest country in the region, was up on the mid-single-digit territory, but also Italy, U.K., Scandinavia, Russia, Eastern Europe as well as South Africa, all posted solid growth during the course of Q2. On the frame side, we were very pleased to report that the Sun business was finally flat to 2019. That has been one of our challenging areas, if you remember, in Europe. And the month of June actually recorded a promising high single-digit growth in 2021 compared to 2019. But a solid response continues to come from the optical business that again was positive once again and posted top line up on the mid-single-digit territory for Q2. A brief touch on the direct-to-consumer side that was up mid-single digit very much driven by a strong e-commerce performance. And that's not something new for us, we've already seen it in the past. While a brief touch on retail brick-and-mortar, I think it's important, retail brick and mortar is still negative in Q2. Just to give you an idea, we were operating during the second quarter our retail brick-and-mortar with 10% to 20% less operating hours compared to pre-COVID level. But we see some encouraging sign of recovery during Q2. In particular, in Italy, we were solid positive in May as well as in June. And Sunglass Hut recorded flat sales in the U.K. in June. And we were double digit up in Turkey again during the month of June. So some encouraging sign of recovery that we start seeing in Europe. But now let's move to the Eastern part of the world and let's touch Asia Pacific. As you can see, in Asia Pacific, our revenue declined 3.5% on a constant FX. The Professional Solutions division was just slightly negative during the course of the second quarter. We were very pleased with the performance that we've seen in Greater China with a top line that was close to 30% in Q2 and Australia that did another solid quarter of double-digit growth. On the other side, we have to report that India, Southeast Asia, Korea, Japan continue to be on the negative trend, very much due to the COVID restrictions that impacted this part of the world. In China, I would probably mention the performance, the remarkable performance, the profit track record of the Stellest lenses. They continue to post solid increase week after week in lens delivery. And I've got to tell you, just to give you a idea importance that myopia management has in China. During the course of the second quarter, in the lens business, about half of the growth was very much achieved through myopia solutions. In the dollar to-consumer side of EssilorLuxottica in Asia Pacific, our sales were negative. But we see very different trends within the region. On one side, our Optical Australia business posted comp sales on the high single-digit territory despite several lockdowns that impacted the Australian country during the first half of the year. And just to give you an idea, we had approximately 560 stores that were impacted by lockdown in Australia for a total of 40 days of closure in different time periods for different cluster of stores, but again, a massive impact on our business. And we continue to see that happening, unfortunately, in the month of July with a lockdown impacted the New South Wales region in Sydney in particular. In China, our business, direct-to-consumer, we're still on the double-digit negative in Hong Kong, while the Mainland China show encouraging sign of recovery in April as well as the month of May. But then the restrictions that impacted the southern part of China in the month of June created a deceleration of our trend over there. For the rest of Southeast Asia, we continue to see negative trends here, very much due to the strong limitation that we see on the travel retail side. But now let's touch our last region, that is Latin America, where you do see top line up on a 2% base on a constant FX basis. The Professional Solution delivered a low single-digit growth during the second quarter. We were positive on both lens as well as frames despite still a challenging situation for the vast majority of the Latin American countries during the course of the second quarter. In Brazil, April, and I would say the vast majority of the month of May, the population was impacted by severe restrictions, in particular in shopping malls. And we see that impact in our business. But then in the month of June, we started seeing a good recovery in particular on the ECP channel as well as in our sports channel in Brazil. From a land mix standpoint, we are very pleased to see favorable price/mix, thanks and well supported by our Varilux and Eyezen lenses in Brazil. From another country mix standpoint, happy to report Mexico as well as Argentina, both solid growing during the course of the second quarter, while Colombia is still very much on the challenging territory due to the political turmoil and the impact of the covered restrictions. So on the direct-to-consumer side, sales in the quarter landed just slightly negative, with April, that was double-digit negative, while May and June were both on the positive side, very much led to a strong recovery in our Chile operation. And this promising trend, that's a good news, it's also continuing during the month of July. With that, let me hand it over to Paul that will give us more color around the great initiatives that we're building up with respect to our mission and sustainability.

Thank you, Stefano. Good morning to you all. It's great to be here and together with Francesco to be able to share such great results and momentum. Now I would like to focus on a topic that is very important to EssilorLuxottica and to [ us all ]. Mission and sustainability. Sustainability is deeply rooted in EssilorLuxottica DNA. And both companies have a long history of corporate responsibility. It is very much part of who we are. Today, we are proud to announce that building on our past momentum, our teams have defined a single company-wide sustainability approach that ties into our mission. It is a wonderful milestone for us, and I would like to thank our team for their outstanding effort, work in combining their expertise and delivering a clear and unified road map. This is a great example of the progress we have made in our integration, another proof point on how we are working as one company. The approach, named Eyes on the Planet, structures our new sustainability road map around 5 pillars: carbon, circularity, world site, inclusion and ethics. Each of these topics are deeply rooted in our organization. You can find more information on the new sustainability section of the company website. I would like to touch on 3 of these pillars today. Starting with carbon. Our contribution to fighting climate change. Together with Francesco, I am pleased to announce that EssilorLuxottica has set a target for itself to achieve carbon neutrality at its facilities by 2025, starting in Europe, by 2023 for Scope 1 and 2. A lot of progress has already been made in reducing our carbon footprint in recent years. And with this pillar, we will continue to do so by focusing on key areas such as producing and procuring renewable energy wherever we can. We will invest in new processes that reflect our commitment and continue to update our equipment and technologies with energy usage in mind, in addition to investing in initiatives to protect and restore natural ecosystem, to name a few examples. The second pillar I would like to highlight is circularity, with our strong intention to improve product design and function with management and materials we use. We will continue to make bold moves across the entire production cycle, including a shift from fossil-based materials to bio-based materials, which produce pure emissions and are easier to recycle. This is also reflected in the recent investment in Mazzucchelli to develop and produce a highly sustainable type of acetate. And I would like to conclude with our world site pillar, which, in line with our mission, aims to bring good vision to everyone everywhere. We remain committed to our goal of eliminating uncorrected provision by 2050. It is frankly an anchor for the industry, and we have some of the best financial big partners and NGOs around the world partnering with us to achieve this goal. I would like to take this opportunity to highlight the news announced last Friday. All 193 member states of the United Nations have unanimously passed a resolution committing to making eye care accessible for the billions of people living with preventable vision impairment by 2030. The inclusion of eye care in the sustainable development goal supports EssilorLuxottica own ambition and road map launched during the U.S. General Assembly in 2019 to make uncorrected provision in a generation. As we celebrate this milestone, I would like to thank all our teams for their contribution over the past decade in elevating good vision on to the world health agenda. So as you can see, EssilorLuxottica today not only has a fantastic and clear mission, which is now officially supported by the UN. We also have a clear sustainability approach through which we plan to contribute to some of the key societal issues of our time and continue to make a positive impact for everyone around us. From all you have heard here this morning, I'm confident you can see the momentum which we have been able to create for us and for the industry. And with that, I would like to hand over to the operator for the Q&A. Thank you.

[Operator Instructions] We take our first question from Graham Renwick from Berenberg.

Just first on the first half margin, which was 130 bps ahead of the 2019 base. How much of that was boosted by the one-off cost measures, which you expect to roll off? And therefore, how much of that was a real underlying improvement in margin versus 2019? So in other words, what would have normalized margin would have looked like without those temporary measures? And then secondly on GrandVision. Now that's been successfully completed, are you able to expand a little bit more on the opportunity you're seeing there? And are you able to give us a sense of the size of the revenue and cost synergies you think you can derive from that deal? And also, are there any sort of upfront integration costs or any phasing of synergies we should be aware of there?

Graham, let me take the first answer here. With respect to our first half margin, you remember last time that we spoke, we said that we were entering into 2021 with a very good control of our cost base. That control of our cost base has been very much put in place throughout the first half of the year. So we have that very much as a solid control. In the second quarter, we released certain investments, in particular to get ready for the sort of same reason. And again, overall, I would say that this is a good underlying trend, not very much impacted by one-off activities in that respect. With respect to the GBI?

I would like just to tell something more general on GBI maybe to prevent also some other questions. GBI, as you know, is a way we complete our footprint worldwide. It was something missed in our organization. Let me say, maybe it was a mistake that we have done many years ago. And so now we have the opportunity to fix that mistake. Now we have a new footprint, it's almost the same around the world. We have something left on Asia that we are looking to fix also that part. And GrandVision is mainly more than just an improving for our revenues and margin and so on. It really is the opportunity to deploy the model that we have in mind, the omnichannel approach everywhere in the world and also in Europe. This is the main sense of our acquisition. That is the reason why the price was important, but not the only things that matter on that operation. So now I leave to our CFO, answer on cost and synergy.

Yes. I mean it's early to very much have a comprehensive picture on revenue and cost synergies. Some of the worst streams that we're going to undertake are the one that we have been pretty disclosure, and we've been pretty open to talk about. But again, we will, in due course of our journey of converging with GrandVision, we might provide more color on that. But again, it's at this stage, a bit early to say.

We take our next question from Elena Mariani from Morgan Stanley.

Congratulations on your results. So I will speak to the 2 questions. The first one is on your outlook. So your top line guidance assumes a slight deceleration into the second half of the year versus the growth you recorded in Q2. I just wanted to understand if this is a function of you being relatively cautious due to the uncertain macro picture? Or do you actually expect the pace of top line growth to sequentially decelerate? I'm asking this because you founded in your presentation as if the exit rate was quite good, given that June has seen a further acceleration in many areas. And still part of this question, just a clarification on the back of the previous question. So is it fair to assume that your EBIT margin in the second half should expand as much as in H1, given that you are expecting another healthier, with sales growing at a mid-single-digit pace? And then my second question is more a strategic one, probably for Francesco and Paul. You've talked about GrandVision as being a key transformational deal that allows you to have a new footprint. And actually now, you're slightly unbalanced, if you compare Europe and U.S. versus Asia. I know it's very early and how you have a lot on your plate, but what would be your strategy to further expand your footprint in Asia? So do you potentially envision acquisitions there on retail chains? Do you expect to grow more organically? So if you could share your very long-term view on this part of the world, that would be great.

Thank you, Elena. I'll take the first question on the outlook. I would say there are top line assumption here, it's pretty consistent with the trend that you've seen in the first half of the year. I mean if you look at our top line, it's around 6%. We are landing on a full year guidance of mid-single digits. So we are there. With respect to the EBIT margin, let me put it in a kind of different angle. Our updated guidance clearly indicates that we have a margin expansion for the full year. That guidance implies a margin expansion for the first half of the year as well as for the second half of the year. In particular, for the second half of the year, we wanted to keep the flexibility, I would say, to release investment that we believe are strategic for the company when we do see that we have the proper market condition to do so. And that is the reason why we kind of release the guidance in that way. We have some important strategic investments, the Olympics again in Tokyo. We're going to have a major and important media boost plan on the lens side. We have the back-to-school season. And obviously, in the fourth quarter, there's going to be the holiday season with the Black Friday. But again, we want to have the flexibility to release investment when we have the proper market condition to do so. But again, it would be a margin expansion. There has been margin expansion in H1, and it will be margin expansion for the second half of the year.

To Asia expansion. So the question is really complex because we divide Asia in different parts, and we have a different strategy. Say that we are already the biggest operator in that area as retail and wholesale lengths and frame, so is not big as we are in the other area of the planet. But at the same time, we are still there, and we know very well that market. Now we are approaching in a different way, China, India and the rest of Asia. And in China, we have articulated footprint that we have planned. So we have strong wholesale, we have retailers in the premium places. And now we are really focusing on the extension of our presence on the clinical hospital part with the Stellest operation, this strong relationship that we're having with the doctors there. And that is -- it will represent the main drivers for our growth in the next 1 or 2 years. And that means also a different approach to retail strategy. You know that one of the biggest retail organization is really represented by stores that are inside hospitals. They are fully connected with the clinical part when the site visit, a major and so on. So that is the part where we are focusing in China and at the same time, we are integrating our strategy with e-commerce approach and new interaction with China's consumer. For India, we are planning to have a really strong strategy to present there to -- you know that there are some constraints to run a multi-brand retail in India, so we are talking with many partners. And we are pretty sure to find the right one and start really to have a stronger strategy in India. For the rest of Asia, we have some good presence. We are looking at some really small, midsize acquisition to reinforce our footprint. And we weight -- we have really to weigh the evolution of those countries. And we have to start when also the countries and the channels that will be ready to manage our kind of product and lenses. That is the view that we have.

Our next question comes from Luca Solca from Bernstein.

I would like to focus my questions on the direct-to-consumer portion of the business. I wonder how satisfied you are with the space productivity, with sales per square meter in the retail chains. And if you could give us maybe your perspective on the different parts of the retail business. I imagine that LensCrafters in the U.S. might be benefiting from the very strong resurgence in demand. But I wonder about Sunglass Hut and other retail activities we have worldwide. Secondly, you have achieved actually an almost 10% digital sales this year. What is your ambition? And how do you see this business proceeding going forward? Is it fair to expect that it could be significantly more material considering your activity in sunglasses?

Luca, I'll take the first question and then Francesco will comment the question on the online business. We are quite happy in respect to the productivity that we are seeing in our stores. Still it's a journey. It's a journey of continuous improvement. It's a journey of continued investment in our store footprint, which is not only, let me say, a matter of size of the store. With the material and important role that the online is playing, with the role of omnichannel that Francesco very much described before, it's going to be very important, and in a way, fascinating also to understand how our productivity of the stores, which now encompass physical element as well as the digital element that come in to play in an omnichannel relationship can be effectively measured. And this is something that we probably didn't face that strong a few years back. I think what is very important is that we continue to invest to make our stores up to the latest and greatest technology. But more important that we continue to invest to converge and create that omnichannel proposition that is very much the quintessence of our growth in physical as well as digital. That is very important. And I think this will imply also a different way of looking and measuring productivity within the physical retail environment. Francesco, on the other...

Yes, online, is a big question. But I believe we have to better understand the strategy and understand how our strategy will impact on online business. So I don't care how big it will be, but how relevant it will be in our complete omnichannel strategy. Sales -- online sales, we are, of course, we are happy with the growth. We are happy with the relativity and is the way to push branded lenses and frame around the world. But it's not that point of our online. Really, we are focusing more on full integration between online and physical footprint. And that is not just for our store, but for the store of our customer, wholesalers and small ECP or big retailers. So this is the deal that we have. And now we are really focusing more on optical business that -- and Sun business. Sun business is already quite big, profitable. Is what we as a Luxottica part, we now better manage. And always, we had a good result. But really, the challenge now in the omnichannel is there is in the optical part. And when we see at the online and many banners that we have and when we integrate fully and we already start is that the question and how big will be the number of customers that they will start the journey in online, and they will end on the physical store. And if that number will be big, that is why we are increasing the brick-and-mortar footprint. Because at the end, to have an omnichannel approach that is effective, you need to be almost everywhere. And the challenge for the future for us is to use our network as one. So no matter the brand, no matter the assortment that you have in the store, what matter that our customer, they will find there someone that can take care of them. And so we leverage this capability. And when we think of the future, the one that can take care physically of our online customer could be also an ECP or a wholesaler and not just us to be our network. And this is also where our philosophy and strategy of to be more a network than just a producer is coming out. So I believe that in the future, you will see big changes on the market. And also segmentation, it will change completely the meaning because the segmentation start on online. And when you look at the store as a delivery, as a place where you have to deliver something or to fix or to assist really, if you think deeply about that, you understand that the concept of the store and the assortment, the store, it changed completely its meaning. And that is the big news that will arrive on the market, it will change deeply the way we look at the market and the way we take care of our consumers.

We take our next question from Susy Tibaldi from UBS.

My first question will be on the top line. We have been hearing on the various geographies and how the trends were during the various months of the quarter. Could you just please clarify at a group level, when it comes to June, was the June exit rate actually improving compared to the overall quarter that you delivered? And also, are these trends continuing into July? And secondly, on the EBIT margin, which saw a significant improvement. It would be helpful to understand how much do you think this is due to operating leverage, which is something that you clearly state in the release? And how much is this helped by the integration, by the synergies? And related to this, is -- do you see much risk of when it comes to inflation in the market, especially in North America? Could that be a risk for the second half of the year?

Susy, I'll take your questions here. Let me say top line. Yes, the second part of Q2, we've definitely seen an acceleration. Clearly, the acceleration of the vaccination campaign in North America as well as in Europe create, let me say, safer conditions for deconfine the population. We see that trend continuing in the month of July, in particular in North America, as we say. In Europe, we see progress of improvement, although the pace is lower than one we see in North America. With respect to Asia, it's still a very challenging environment, probably with the only exception of China, Mainland China, here through the southern part of the region. Australia, it's in a very challenging situation at this stage with the lockdown that will impact the New South Wales region for the next 4 weeks. And in Latin America, we see some encouraging signs, which come at a good time because we know that second half of the year will imply the high season in Latin America. So we're looking at that second half, obviously, with a careful attention. But we have some trends that we see, in particular in the month of June that will continue in the month of July. With respect to the operating leverage, clearly, when you do have a solid top line, when you do have a good control of cost base and you see synergies realization coming through and you also made the proper investments, the results that you see is what we got. So that's something that obviously is continuing to see. But again, as I said before, we will continue to keep that flexibility, understanding when market condition will allow us to release strategic investments for the group. So all in all, in North America, we have a pretty optimistic view. I think we see that some of our key channels, like sports channel, the independent ECP are very different, I would say. But the overall market in North America is pretty healthy. So, so far, so good.

We take our next question from Cedric Lecasble from Stifel.

I have 2 actually. So first one linked to the change in governance since the AGM and the implementation of this new organization in terms of people, in terms of organization. Can you tell us what has changed internally. And if you have seen any flexibility to improve the speed of integration and synergies? And the second one is on the achievement. Could you maybe update us on your best integration achievements between -- excluding GrandVision for the time being, between Essilor and Luxottica, both on the supply chain side and on the product side? And if you could also confirm your target of EUR 300 million synergies by end '21? And what kind of cost it implies, if we should understand it as growth on net synergies?

Governance. It seemed to be back 2 years ago, but it's fine. Integration. We don't have to change the speed of the integration. Integration is already done. We decide who's leading the group. I'm here with Paul on my side, and we really -- we integrate all the fundamental decision that had to be taken in the future. Now there is a little bit of execution. That is the part left. We are really in a good position. We believe that before the end of the year, we will unify many managerial position in the country, we really moved to the new idea of complete also in the sales organization. That means to have wholesale lenses and frame under the same responsibilities. Then we already started with all the technical integration, all the IT systems are really -- in the execution part, we believe to have one common system before the end of next year. And many countries, the most relevant, it will be ready at the end of this year. So this is the view that we have on integration and governance. We believe and we know that the governance now is totally fixed. We are a normal company with a normal management team, and I believe the part of results that we had are coming from that decision. The Board is voting any time mostly at the unanimity, and this just shows that really we are just one company. GrandVision is the next step is much more easy. It's not a merger of equal, it's an acquisition. So it will go through the normal process of acquisition and integration at really maximum speed. And they will be realized at, I hope, in the middle of the next year since we have to wait the end of the year for the NPL. That is what I can exchange on that.

Yes. And with respect to the synergy and integration activities, Cedric, the pace it's really good, I would say, fully aligned with our expectations. With respect to some of the major achievements. One of them is very much what Francesco just described on the IT infrastructure system. I mean we are progressing at a very high pace with a progressive rollout of one ERP platform around the group. From a front-end perspective, the experiences that we are getting with the Ray-Ban authentic lenses that very much complement our frame assortment is a successful rollout story in the U.S., in Europe. And some of the relationship that now we have been able to establish on a joint effort basis in North America, we're now planning to roll them out also in other regions. Some of the learnings from the EL 360, for example, in North America, it's something that with adjustments, we might think about leveraging in other parts of the world, especially in some of the developing countries. So this is something very important for us, but I think even more important for us is the fact that we are very much on track with our synergy delivery.

Our next question comes from James Grzinic from Jefferies.

Francesco, Paul and Stefano, 2 very quick ones. I guess the first one for Francesco. Can you perhaps clarify, is the SAP rollout in the U.S. already in place? So is that something that you see before the end of this year? Is that one of the key markets you were talking to? And I'd be curious to see if you've got any insights to share in that process. And to Stefano, that half 2 swing factor from a margin perspective, is that entirely coming from your options on reinvestments into the business? Is there anything else going on perhaps in terms of what you see in supply chain costs, raw material costs or wage costs? Or is that, given what you expect on top line, not much of a consideration for you?

So SAP rollout in North America is proceeding quite well. We believe that the financial part will be in place for the end of the year. And then we move to logistics, that is the one that is more relevant for our full functioning in the market. But at that time, financial numbers and sales will be already unified. And so we will have a faster understanding of the market, and we will align also the Essilor side at the same model of control that we have already in Luxottica part. So it's not just North America. We are trying to integrate some big business in -- that now are a little bit more isolated in the Essilor side. And we are trying to integrate the big market in Europe, like France and Italy. And those projects are the most difficult because we are building a prototype. Then after that, it will really improve the pace. And we believe next year, we will close all the integration. And in the meantime, we are already planning how to integrate the 7,000 door of GrandVision.

And with respect to the second question, James, not sure I would talk about margin swings between H2 and H1. If anything, I would say, margin expansion in H1, margin expansion in H2. If we're going to have a difference and we're going to see a difference between the first half and the second half margin expansion, the reason for that could be some of that flexibility that I was describing before. With respect to the cost inflation pressure on our margin, no, we don't see it. I mean, that's very marginal, and it's very well managed by the business. So no impact on that standpoint.

So this does conclude the end of our Q&A session. So I will hand back to our speaker team to close.

Okay. So thanks very much to everybody. I understood that you are more than 100, and that is amazing at the end of July and in Friday. So we appreciate a lot of the patience that you put in your job and how you are interested in our company. Thanks a lot, and happy holidays to everybody.