EssilorLuxottica Société anonyme (EL) Earnings Call Transcript & Summary

Welcome to EssilorLuxottica Q4 Revenue and Full Year '21 Results Call. [Operator Instructions] I now hand the call over to Giorgio Iannella, Head of Investor Relations.

Good morning, everybody. I'd like to share with you the company's statement we published yesterday on social media. We have been deeply saddened by the tragedy unfolding in Ukraine, and we stand in solidarity alongside all those impacted. At this difficult time, the safety of our people remains our priority, and we are providing all the support possible to our affected teams in the region. Due to uncertainties and significant disruptions, we are temporarily restricting our operations in Russia. In line with our mission, we are committed to continue providing essential medical vision care services. We will monitor the situation and adapt our response accordingly. With that, I leave the floor to our CEO, Francesco Milleri.

Good morning all, and thank you for joining us. Today, we are proud to share with you EssilorLuxottica results for 2021, an extraordinary year in which we achieved a lot. We succeeded not only from a financial perspective, but we also completed some of the most strategic projects over the last few years that will shape the future of the company and all the industry for the years to come. Despite a still challenging environment, EssilorLuxottica embarked on a remarkable recovery journey in 2021, growing sales and profits compared to prepandemic levels. The company met the guidance on sales, and beat its twice upgraded targets on the operating margin. North America was the key driver, thanks to our excellent execution in both professional solution and the direct-to-consumer segment. On top of that, all the other region accelerated in the fourth quarter, closing the year on a positive note. Our ability to translate the business growth into operating margin expansion drove up our profit and generate an all-time record amount of cash flow. Stefano will further elaborate on all these trends later. If we look behind the pure financial results, 2021 was also an outstanding year in terms of transformation. With the interim period now behind us, we kicked off the next stage of integration. Company structure were merged, and leaders for each of the business segment worldwide were appointed. This has given way to an experienced and talented top management team able to fulfill and execute our vision. We have finally completed the acquisition of GrandVision, which after the successful mandatory tender offer and the consequent delisting, is now fully consolidated in EssilorLuxottica's accounts. We are now a EUR 21.5 billion company, with an adjusted operating margin of 16.1% and net profit of EUR 2.3 billion. A dream has come true. On the product side, we brought to the market yet another groundbreaking innovation: Ray-Ban Stories, the next generation of smart glasses in partnership with Meta; and roll it out to new market, Stellest, our lens innovation that slow the progression of myopia. The group is at the start of the new year. We are now richer in resources, faster in taking decisions and ready to lead the evolution of the industry for higher standard of vision for people worldwide. You have heard us talk about the concept of network company. While we continue to compete in our market, we also keep building a network connecting to many other players to share with all the best we have and accomplish our mission of promoting good vision everywhere. At the same time, we delivered strong result to our shareholders and stakeholders. With that in mind, I would like to underline the great progress we have made reaching our mission as well as our commitment to sustainability, thanks to the Eyes on the Planet program. The improved ECG (sic) [ESG] ranking of the group reflect all the hard work done so far, and Paul will tell you more about our initiatives as a key pillar of our identity. Last, we are updating our long-term guidance for the next 5 years. Until 2026, we are targeting to achieve mid-single-digit annual revenue growth and an adjusted operating margin in the range of 19% to 20% at the end of the period. And with that, I leave the floor to Stefano and Paul.

Thank you, Francesco and good morning, everybody. As you remarked, 2021 has been an outstanding year for EssilorLuxottica, and the results on this page very much confirm that. On the upper part of the slide, you have a summary of our 2021 results, including the impacts of GrandVision, while at the bottom of the page, you have the results reported, excluding the impact of GrandVision. On a full year basis, our top line grew on a high single-digit territory at constant currency, with a strong acceleration in the fourth quarter, where our top line accelerated in a double-digit pace, 11% on a pro forma basis, including GrandVision; 11.8%, excluding the impact of GrandVision. Actually, Q4 has been the best quarter for the group with and without the impact of GrandVision. Last comment on our operating profit, where you can see that we accounted for a marginal dilution of approximately 90 basis point by including GrandVision into the EssilorLuxottica result. And therefore, on a pro forma basis, we're looking at an adjusted operating profit at 16.1% for the full year 2021. But now let's look at our results for 2021 comparing those results with the target provided at the beginning of the year in March and upgraded twice throughout the year. On a full year basis, we guided for a top line growth, mid- to high single digits, and we actually delivered 8% growth rate for the full year 2021. From a profitability standpoint, we actually guided for an adjusted operating profit versus 2019 as a percentage of revenue that would improve up to 100 basis point. We actually delivered 130 basis points of margin improvement compared to 2019. Therefore, our 2 KPIs were either fully met or exceeded for our target with respect to 2021. But now let's leave behind 2021, and let's look at future and a bright future for EssilorLuxottica and share with you a revised long-term outlook for the group. An outlook that is a story of top line growth as well as margin expansion. And you can see here that our top line growth expectation for the period 2022 to 2026 is to grow our sales in a mid-single-digit territory. From a profitability standpoint, we have an expectation of an adjusted operating profit to land at between 19% to 20% by year 2026. And just to qualify a little bit more our outlook for the period, I want to share with you that the figures provided today are at constant currency, that we included bolt-on acquisition as part of our top line growth, and from a profitability standpoint, our operating profit is fully loaded with synergies as well as investment activities that the group will undertake during the next 5 years. But now let's start looking at a little bit closely our 2 different segments before we start our journey across the 4 regions. In the Page 8 of the presentation, you have the fourth quarter results for professional solutions and direct-to-consumer. And you can clearly see the professional solutions segment reported a top line growth of approximately 7% at constant currency, with EMEA, North America and Asia Pacific around mid-single-digit territory, while Latin America posted a double-digit growth during Q4. From a channel mix standpoint, our growth was very much driven by key accounts, online partners and by a tighter relationship with our ECPs around the world, thanks to specific programs like the EL 360 we are now deploying in different parts of the world. On the direct-to-consumer side, very pleased to see our brick-and-mortar division on a double-digit pace while our e-commerce grew in excess of 60% during the course of the fourth quarter, with all the 4 regions at double-digit pace. But now let's start our journey across the different region, beginning as usual, in Page 11, for the biggest one, North America. In North America, we posted another outstanding quarter in top line growth. 14% was our growth, very much in line with what we've seen during the course of the third quarter, with both professional solution in mid-single digit and our direct-to-consumer at the double-digit pace. If we look at closely at our professional solutions performance during the course of the fourth quarter, we're very pleased to report the Ray-Ban and the Oakley brand delivered double-digit growth while our branded lens portfolio grew on a mid-single-digit territory with Transitions, Varilux and Eyezen that all delivered positive growth during Q4. If we now move to the direct-to-consumer segment, our brick-and-mortar part was up double digit. LensCrafters and Target Optical were high single digit, very much supported by a strong lens mix. We are pleased to report that Sunglass Hut posted a third consecutive quarter at double-digit comps, finally supported by international location as the U.S. border reopened to the international tourist. Last touch on e-commerce. E-commerce was up 75% versus 2019 after a strong holiday season with Oakley, Sunglass Hut, LensCrafters, EyeBuyDirect that all doubled the size of their business during the course of the fourth quarter. But now let's move to Europe, and very, very happy with the 8% top line growth on the fourth quarter. Again, another performance in continuation with the delivery that we've seen in Q3. In the professional solutions side of Europe, Italy, Scandinavia, Turkey, Eastern Europe, they were all up double digit. United Kingdom was up on the mid-single-digit territory, whereas France that was slightly negative, very much due to a deceleration that we experienced in our frame business. While our lens business was actually up on the high single-digit territory for Q4. From a channel mix standpoint, our growth was strongly driven by key accounts, buying group, ECP, while our travel retail business was on a negative territory due to the restriction that we still experience due to the COVID. Moving to our retail brick-and-mortar now. Very pleased to see top line accelerating close to the double-digit pace after the first 9 months of the year we were flat on a pro forma basis. Salmoiraghi & Viganò, our optical retail chain in Italy, performed on a double-digit pace with October, November and December, all of them on the double-digit territory. The U.K. business of GrandVision posted a top line growth, up 20% during Q4. And finally, Sunglass Hut delivered comp in the positive territory for the last quarter of the year. But now it's time to move east. Let's touch on Asia Pacific, where we're very pleased to see our top line on a positive territory at constant currency after 2 consecutive quarters of sales decline. Our growth in the region was very much driven by the professional solutions segment, where our direct-to-consumer segment was slightly negative. In professional solutions, our 2 key countries, India and China, delivered both double-digit growth. In particular, in China, we sold approximately 350,000 pairs of Stellest lenses, and Stellest lenses today represent approximately 50% of the revenue growth in our lens business. In the fourth quarter, we also experienced strong delivery of our frame business, also thanks to a strong double-digit pace of our Bolon brand in China. If we now move to direct-to-consumer, I want to begin from the Australian retail business. You remember that Australia, softer or stronger lockdown and restriction during Q3 and the earliest part of the fourth quarter. And as we exited from the fourth quarter -- in the fourth quarter from the restriction, we actually experienced an acceleration and restart at a strong pace of our business. OPSM, our leading retail chain in Australia, delivered a double-digit comp in Q4, very much reassuring that demand in the market is still there. While conversely, if we look at China, we're still in a negative territory due to localized lockdown that impact the Mainland China as well as Hong Kong. And now let's complete our journey around the different geographies with the last one in line, Latin America. We see and observe in Latin America a very different page between the first half of the year, where our top line was up 1.6% versus 2019, still on a pro forma basis, and the second half of the year, where we delivered plus 18% top line growth, with the fourth quarter in further acceleration at plus 25%, with both segment, direct-to-consumer and professional solutions on a double-digit pace. On the professional solutions side in Brazil, the biggest country, we posted a strong growth on the prescription business, both lenses and frames, with our ECP, which accounts for about 50% of our business, that very much led the growth in the country. In Brazil, we also experienced a successful pilot of the EL 360 program, where we had, at the end of 2021, about 1,000 doors were rolled into the program, and there will be more in 2022 as we're going to go on a larger scale in Brazil for this initiative. With respect to the other geography, Mexico was up on the high single digit, thanks to independent channel as well as department stores. Argentina was up triple digit, thanks to a strong price mix but also supported by volume. If we move now to the direct-to-consumer segment, our GMO was up double digit, thanks to a strong lens mix and volume growth. And last but not least, our Sunglass Hut business in the region that posted double-digit comps in Andes as well as in Mexico and high single-digit growth rate in the Brazil -- in the Brazilian Sunglass Hut business. But now let me close our chapter on financials, and let me close up with cash. In 2021, the group delivered EUR 2.8 billion of free cash flow generation, approximately EUR 1 billion more than the free cash flow that we generated in 2019 and in 2020. And that, despite the currency headwinds that we experienced in 2021 and that despite the higher capital investment profile that we had this year with a CapEx, they were slightly over EUR 1 billion for the full year. Excluding the impact of GrandVision, our free cash flow generation would be approximately EUR 800 million higher than the one they recorded in the last 2 years. So very pleased to get into 2022 with a very strong balance sheet position. But now let me hand it over to Paul that will walk us through our support to the EssilorLuxottica mission.

Thank you, Stefano, and good morning to you all. You have just heard from Francesco and Stefano about all the great things we have accomplished and the strength of our performance in 2021. I believe it was made possible, thanks to 3 things: first, the incredible passion and engagement of our 180,000 people around the world; second, continued trust of our customers and consumers; and third, our commitment to our mission and sustainability, which are strongly intertwined with our business strategy at EssilorLuxottica. Sustainability has always been deeply rooted in both founding companies. So one of the first things we did in the construction of EssilorLuxottica as one company was to embed sustainability at the core through our Eyes on the Planet program. Since launching it in July last year, we have made good progress in each of the 5 key pillars. On the first pillar, Eyes on Carbon, we announced today that we have become carbon neutral across our direct operation in France and Italy, our 2 historic home countries. This is an important milestone on our journey to reducing and neutralizing the carbon footprint of our direct operation worldwide by 2025, starting with Europe from 2023. We did this through a constant monitoring of our energy consumption and investments in renewable energy, with a focus on safe production close to our facilities. Residual emissions are compensated by 2 important reforestation projects: one in Italy near our site in Agordo; and the other one in the rural region of [ Lian ] in China. In addition to protecting and restoring natural ecosystem, this project supports the well-being of local community. The second pillar, Eyes on Circularity, aims to reduce our impact on the planet through the 4 R approach: research, reduce, reuse, recycle. In particular, we are stepping up our investments to create circular products from the very start of the innovation process using ecodesign principle. A great example in the -- is the collaboration with Mazzucchelli on the joint production of more sustainable acetate to be used in the production of frames, focusing on waste by directing our effort on reducing waste generation and [ valorizing ] it with circular closed loops. Another initiative is the recent partnership with ESSEC Business School, outside of Paris, joining L’Oréal and Bouygues to launch the first international chair devoted to the circular economy. As we build a sustainable future for all, last year, we made a lot of progress on our journey towards eliminating poor visions by 2050, in line with our mission. This is what the third pillar, Eyes on World Sight is about. Despite the ongoing challenges linked to COVID, we provided 50 million people in developing communities with access to vision care, thanks to our inclusive business and philanthropic efforts. In total, we created 7 million new wearers in 2021. We also trained more than 1,600 new vision care entrepreneur in that year, providing them with a livelihood. In addition, last year, OneSight successfully opened 18 vision centers in China, Liberia and Zambia. As we are building one company, we are also working on consolidating all our philanthropic and advocacy actions globally. The fourth pillar, Eyes on Ethics, is at the heart of everything we do. Our vertically integrated model makes us quite unique as it gives us full visibility for our whole business, from raw materials to end consumer, as a result, a greater control of our standards. For instance, in 2021, we continued to leverage, unify and extend our supplier sustainability standards and initiative, ensuring they adhere our commitments in the area of ethics, labor, health, safety and environment. And finally, Eyes on Inclusion, the fifth pillar. EssilorLuxottica is a diverse and inclusive company by nature as we are the combination of Essilor, Luxottica and now GrandVision. We want to provide our community of over 180,000 talented people of every nationality, gender, age and ability with an environment in which everyone can thrive, feel valued and respected and constantly learn. This commitment extends to the communities in which we operate, eye care professionals, customers and supplier. A tangible, practical advancement in this respect has been the launch of Leonardo, our innovative learning platform open to employees but also to the vision care industry as a whole, offering a wide selection of state-of-the-art content in over already 15 languages. In recognition of our efforts around diversity and inclusion in recent years, we recently earned a spot on the Financial Times Diversity Leaders list. We are determined to continue to develop in this area. Our International Women's Day, like any day of the year, we honor and celebrate the strength, intelligence, art and tenacity of our women colleagues and all women around the world, even more so in the difficult moments we are living. We are honored to have some great women leaders at the helm of some key geographies and function, like, for example, Chrystel Barranger leading Wholesale in EMEA, one of the 2 largest regions of the group. Last but not least, our employee shareholding is another key way for us to promote inclusion as it fosters a sense of belonging and ownership among employees. It has been present in our culture for decades. Following the success of our latest employee shareholding plan in 2021, 67,000 of the group's employees in 85 countries now hold a financial stake in the company. You can see sustainability is at the heart of the construction of EssilorLuxottica, part of our new culture and fully embraced by our teams. I hope that what we have shared with you this morning gives you a sense of the momentum that is carrying us forward. And with that, I would like to hand over to the operator for the Q&A. Thank you very much.

[Operator Instructions] We now take our first question from Elena Mariani from Morgan Stanley.

Congratulations on your results. I'm delighted to kick off this Q&A session. So I will stick to 2 questions. The first one is on your new long-term outlook. Your mid-single-digit growth target is pretty much in line with what you had communicated before. But your adjusted operating profit outlook looks [ positively ] ambitious. Can you help us bridge the starting point, which is the pro forma 16.1% margin with this 19% to 20% target? So how much of these improvement in profitability is due to the synergies coming from the GrandVision deal, how much from the remaining EssilorLuxottica synergies? And what are quantitively the moving parts so that we can understand the progression? Perhaps, it's the gross margin, or more -- it's more on the OpEx line. So anything that you can give us to bridge this target would be very helpful. And my second question is on 2022. You have not provided any outlook or any guidance. And I appreciate it's a tough year with a lot of volatility. But if we think about how the year is going to shape out, I suspect you've had a pretty good start of the year, but then the comp base starts to get very difficult, particularly in the U.S. market. Is it fair to assume that for this specific year, you're going to be, perhaps, below this mid-single-digit target that you have in the medium term and it's going to be also more difficult to see some margin progression? Or given that you're continuing to gain market share, you have more synergies coming through FX tailwinds. Perhaps, also, this year is going to be in line with these medium-term growth options, and you could see also some further margin expansion.

Let me answer your 2 questions here, first of all, with respect to our long-term outlook for the next 5 years. Clearly, this is an outlook that includes an important part of synergy deliveries. As you remember, in our journey of delivering synergies, we have a first check point, very much at the end of 2021, where we expected our synergy delivered to be in the EUR 300 million to EUR 350 million range on an EBIT adjusted basis, and we actually exceeded that target for 2021. So there would be a portion incremental to that, that will derive and lead us to the EUR 400 million to EUR 600 million. On top of that, there will be a synergetic contribution from the inclusion of GrandVision into the EssilorLuxottica platform. And that will obviously contribute to the progressive margin expansion that I'm sure you've seen it moving from the 16% through the 19% to 20% range. At the same time, I can tell you that it will be a reinvestment profile that will be important to ensure support and evolution in fast-growing market, to ensure further investment in increasing awareness of our brands, to increase further support in myopia management, in the investment for Ray-Ban Stories around the world. And those are critical initiatives or product innovation and market expansion that we'll obviously support, and they are fully loaded in the target that we've seen over here. From a gross margin perspective, we don't expect a material lift in our margin. In that respect, we might see a contribution from price mix, although the primary driver of our growth is going to be volume. And remember, the price/mix clearly will be a help in the gross margin, but at the same time, we have to take into account the dilution that will derive from the insurance business, in particular in North America. So the net of the 2 pretty much land on a gross margin that will have material lift versus the numbers that you're seeing today. For 2022, you're correct. We are not guiding for this year. But what you can expect to see is it's a story of top line growth and margin expansion. And that story would be very much aligned with our journey to hit the 19% to 20% top -- operating profit and the mid-single-digit growth rate.

Our next question comes from Susy Tibaldi from UBS.

I would like to have a follow-up on your last comment. So you decided not to guide for full year '22, but you mentioned that there is going to be top line growth, margin expansion. We are clearly in quite a volatile environment. But would you say, overall, are you more uncertain about your top line progression or margin progression for '22? And I guess that also links to the fact that we are seeing an environment with high inflation. So is that perhaps a factor that prevented you from providing a guidance for '22? And then also to, again, just another clarification on your comments for '22. So how has the start of the year been because you clearly saw quite a nice acceleration to the end of last year? So should we assume that these trends have continued to be quite resilient also in the first couple of months of the year because your tough comps really start from Q2? So it would be very helpful if you can help us understand how to think about the progression this year.

I just start. Then I leave the floor to Grassi. As you can understand, we feel quite uncomfortable right now commenting result and commenting forecast while a war is going on not far from here. This is the kind of situation that I experience now. So we try to respond to all your question. We are confident, quite bold on the future of this company. We really -- we set the car in the last 3 years. And from now, we start to drive, and we like to accelerate. Say, that situation is not as usual. Really, war is not something that we had faced in the past. And we -- really, we cannot forecast what will be in the near future. So all our estimation, all our forecasts are under this condition. Say that -- Grassi can tell you a little bit more.

Thank you, Francesco. So Susy, it's very much here. So when we say growth and margin expansion assumption is that there is no material deterioration to the current situation, geopolitical-wise and inflation-wise. Clearly, we are a large company. We play in different countries and regions. But obviously, we have an assumption of a situation that is pretty much the one that you see today, and we don't get further deterioration to that. With respect to the starting of the year, the year started pretty well. I mean the trajectory, it's pretty much in line with how we closed the fourth quarter last year with a good traction on both professional solution and the direct-to-consumer side of the business that it's running in a double-digit pace. Within e-commerce, that is double digit, and we have all the different regions on the positive territory. So we got some good momentum, conscious of the fact, again, that there is a war and a maritime situation in a specific part of the world.

The next question is from Graham Renwick from Berenberg.

Just have 2. Just again on the midterm guidance, I think you said that the revenue growth guidance did include bolt-on M&A. So I was just wondering if you could give us the rough building rate. How much market growth would you be assuming each year? How much should bolt-on M&A roughly contribute per year? And therefore, how much you're assuming for synergies and market share? And then over the last 3 years, your ASP growth has been a big driver for sales and margins to the pandemic. I just wondered how confident you are that the consumer will continue to trade up in a period, whether it's sharply rising inflation or, in the worst case, a recession this year. And do you see any risks that the consumers could actually start trading down again?

Graham, with respect to our top line growth, clearly, the underlying business growth is going to be the primary driver of our top line expansion. And the bolt-on now would be a nice add-on to our growth. In certain markets, we still have a long way to go, which is really where we see the opportunities in countries like China, India and even Brazil, where we have a fairly marginal footprint. With respect to price mix, as I said, we continue to see support from price mix, but I don't foresee price mix to be the primary driver of our growth in the future. And obviously, that is, in a way, a change in certain parts of the world compared to the trend that we've seen before. But again, volume will be the primary driver of that -- on that respect. With respect to consumer trading down, I mean we see in North America being still a very, very competitive market. But clearly, for example, LensCrafters continues to stand out for service level for the value proposition that we offer to consumer and for the quality of the product. So I think we have all the assets that allowed us to play even in markets where there's a higher degree of competition.

Our next question is from Veronika Dubajova from Goldman Sachs.

I have 2, please. The first one is just -- would love to understand the bridge stepping up from the 16.1% margin to 19%, 20%, not necessarily by components within the P&L but the timing of that. Would you expect that, that margin progression is pretty even? Is it more front loaded? Is it more back-end loaded? If you can help us understand the shape of that, that would be really helpful. And then my second question is just sort of a follow-on to some of the inflationary questions that have been asked and consumer behavior. And I guess what I'd love to know is how do you guys think about just how defensive the business is if we do see a slightly tighter consumer. You have been running optical for a long time, and I just would love to get your sense from what are you watching the most closely as risks to consumer behavior and demand.

So with respect, Veronika, to the top line growth, clearly, the operating leverage with the top line and mid-single-digit territory is going to be the primary driver of the margin expansion. There will be years in which the margin expansion will be higher and the year in which that margin expansion will be lower. It will also depend on the velocity of 2 variables: one, the synergy realization; on the other side, the investment that we are taking on some of the initiatives that we've been talking about for quite a while, investments on our supply chain, on our lab network infrastructure, the investment to become more visible in certain countries, the investment on new brands, in product innovation and new initiatives that we're launching around the world. So the velocity on how we unlock certain investments will guide the operating levers and, ultimately, the margin expansion. With respect to inflation and the impact in sales growth, we haven't seen material changes in that respect. So no, really nothing major to report at this stage.

The next question is from Julien Dormois from BNP Paribas.

Two questions. The first one would relate to an update on myopia management. You guys have been deploying quite a lot of efforts on that side, either internally with the launch of Stellest but also by doing some external deals with Cooper. So would just like to understand where you stand particularly in China, where I think you have started to draw out the partnership with Cooper and interested to know how you're going to sell, at the same time, Stellest, SightGlass and MiSight as a distributor. So just curious how you see the situation going forward in that category. And maybe also if you could update us on the sort of timeline that we should see in the U.S. for all those products to be approved, that would be particularly helpful. And my second question relates to GrandVision. So it's now been nearly 9 months of integration of GrandVision. How do you see right now and having your -- having now had the business in-house for several months, how do you see the main opportunities and challenges for a successful integration, let's say, in the next 2 to 3 years more operationally, I would say than financially maybe?

I'll try just to give you some color about myopia management. That is really a new category that we are adding to our portfolio. Its results are very good, are really in line with our expectation, focused on China. That is what we planned more than 3 years ago, just we are executing. But what we see is that we are repositioning our portfolio towards doctors. That is the big change with myopia management. First, we were a company more talking to optician and final consumer. Now we are giving something in the hands of doctors that can really fight myopia. That is big change. I believe that in the future, we will deliver more products on that area, and they will be one of main part of our result. So we are very happy with that. We feel that we are helping people. Especially in this case, we're helping kids to improve their life. And that is really fully in line with our mission. Then maybe Grassi can give you some numbers or maybe more detail on that. Regarding GrandVision, we really -- we just delisted the company. We are now starting reorganization of the different branches and integrating really the company in our operation. We see opportunity, of course. If we paid EUR 8 billion because we saw opportunities, and now we confirm that our decision was very good, almost indispensable. GrandVision, more than just add business, added a footprint in Europe for our omnichannel strategy. Our strategy around the world is pretty clear. We announced that more than 2 years ago. We will become a network company, really sharing our capability with all the players in the market. To do that, you need digital infrastructure, you need e-commerce, you need your wholesale, but also, you need physical footprint with your retail that can show and drive consumer and ECPs and other partners in the way we want. So that is why we are more than happy to close that deal. And in the next 2 years, you will see how important it is. We'll really try to change the shape and the perception of the eye care market in Europe. And to do that, stores in the ground, it will be absolutely indispensable. Stefano?

Yes. Thank you, Francesco. On the myopia, just to give you a couple of data points here, we built, in 2021, a business that is worth a retail value south of EUR 150 million just in China. And that business didn't exist up to a couple of years ago. And just to give you a further magnitude on how well we are performing with Stellest lenses, you have to bear in mind that just in the first 8 weeks of 2022, we sold more Stellest lenses than what we did last year during the first and the second quarter of 2021. So we have a very rapid progression and expansion, meaning that there is a high degree of acceptance on that respect of the Stellest lenses. Clearly, in the future, we'd love to talk more about myopia solution. And obviously, in that respect, we have new assets that are coming on board. We have the new contact lenses that is starting to be distributed. And obviously, we'll be -- we'll give more disclosure in the following touchpoints. But clearly, we have a family of products and solutions that will become material for our growth in China but in only there.

Next question comes from Frederic Lecasble (sic) [ Cedric Lecasble ] from Stifel.

Most of my questions have been answered, but I have a follow-up maybe on the positives and negatives in the one-offs in '22 versus '21. Could you please tell us if you still -- what kind of one-offs you still had in your EBIT margin in '21 in terms of integration costs, the kind of cost coming from still the consequences of the merger and GrandVision acquisition that would disappear in '22? And could you maybe help us a little bit on one-off costs that could be linked to the current situation in Russia and Ukraine, assuming no progress, if things didn't improve rapidly from here, just to have the kind of trade-off between positives and negatives here? And the second one, a follow-up on Stellest. On your more recent launches, there was a rollout of this outside of China. Can you comment on your first results? Are you happy how fast is it going into other countries? We're mentioning in another question there was a mention of the U.S. Maybe you can, beyond China, tell us where you have the greatest hopes for the myopia management.

I just comment on the second question, Russia and Ukraine. We are not concerned about business, as you can understand. Business is materially irrelevant for us. It's below EUR 200 million, less than 1% of our revenues. Right now, our concern is for our colleague. As you know, we have almost 1,600 people in Ukraine, and we are trying to protect as much as we can as we have colleague in Russia. And we still have a concern how we can help and I can support. We cannot comment much more than that. We really -- we have some information on our institutional social media because, as you know, since we have colleague in dangers right now, any words can change our result. Say that, Stefano can comment on the other 2.

Thank you, Francesco. With respect to the one-off, figures are provided on an adjusted basis. Therefore, adjusting items are excluding from our guidance and outlook in that respect. With respect to the Stellest lens, I don't know, Paul, if you want to give some color with respect to the launch in Italy and in France and the U.S. potential.

Yes, sure. Thank you. Yes, so we have been launching in Europe progressively at Stellest, starting in France, Italy, last year, midyear, middle of the year. We are now expanding progressively also to U.K., Germany, Spain. We also launched -- are in the launching in Brazil, starting LatAm. So as you see, we're expanding progressively the Stellest rollout. But like it was explained by Francesco, it is extremely important to establish well this myopia management capability to work with the eye doctors and, of course, the optician before launching. And so there is a solid work done by our team with the doctors in each of those countries ahead of the launch. So, so far, if we take France, for example, we are having very good results. Of course, it is not of the magnitude of China because China has the population of young myopsis, as you know, is by hundred of million. But it's an important new capability that we're setting up and very positive results. And as we do that, we are working also on the SightGlass Vision new product through the JV with Cooper. And there, we are piloting the market in Canada, in the Netherlands and starting to prepare also for a launch in China. So as it was said, it's a suite of different solution that we're progressively rolling out in each geography. The U.S. is -- we are in the FDA approval process, both for the SightGlass Vision technology and to come also for the Stellest technology.

Our next question is from Domenico Ghilotti from Equita.

Two questions. The first is a follow-up on the situation, maybe expanding a little bit more away from Russia and Ukraine, but just to say how much is your exposure to Eastern Europe, and you have seen an impact on the sentiment and the business in markets that are closer to the situation. And the second question is on the Ray-Ban Stories. If you can give us a feeling and update on how it's been, the commercial launch and what is the rollout in general. So what is the opportunity there over the medium term?

Okay. So Domenico, with respect to our exposure to, overall, Eastern Europe, we're looking at around 1% of our total revenue. So it is barely and fairly marginal. And right now we don't report any material deterioration, obviously, with the exception of the 2 countries involved in the conflict. With respect to Ray-Ban Stories...

Yes. Ray-Ban Stories, we really are happy about the launch, the positioning, the perception that the public demonstrate to those products. I would like to underline one thing, so the positioning that the company took in the launch. We had 2 chance, bring the optical business in the electronic market and really using all the trend that we had and leveraging the high connection of Facebook and Meta Group to really push our sales. But our decision has been slightly different. We bring electronic into the optical store that show our approach. We are here to reshape the market to improve optical market and let the optical market evolve. And electronics, it will be a big part of the future for store and for product sold in the store. So that is how we see this start. Ray-Ban Stories first edition is, first of all, a wonderful sunglasses. Now we are trying to position much better also, as in high glasses with correction and optical lenses. In the next 2 or 3 years, we will start to evolve: first, with a new solution and evolution of the capability that Ray-Ban Stories already have; and then, as you know, we will launch in the future, something more based on VR and that would be really the gate for a new totally new future. But so far, very happy. And one number that I saw is that 1 of our 3 Wayfarer are Ray-Ban Stories. Thank you.

The next question comes from James Grzinic from Jefferies.

Yes. Just had 2 quick questions. Firstly, should we essentially take away that you're not seeing a change in consumer behavior in the U.S. from what you're saying today? And second, Stefano, I understand the ebbs and flows of investments to develop new market against timing of synergies. And what you were saying -- I would normally expect a front-end loading, of course, with the synergy benefit. Are you essentially suggesting there's a front-end loading on the investment to develop new markets as well that is a net offset against that?

U.S., we don't see big changes. U.S. is so big market. We have demand for high end, for the low end, for almost all type and segment of product. We are really leading the market, and we are really guiding the market to better solution and better product. That doesn't mean that we are guiding the market to higher price. So far, we really -- we cover all the segmentations of the market. All segments are very, very well covered by our product and portfolio since we are the biggest organization there, we are one of the biggest insurance there. And you know that insurance really cover more than 50% of the market. So, so far, we are working very well in U.S., is still one of our best market. And we have a lot of space to take. We are now reinforcing our reps in the ground. We are bringing and pushing new products. Just to mention 2, BOG Eyewear and Arnette, brand new for the market. Now they can deliver a strong sales network, and they can count on strong communication. But we have still space for improving revenues on Ray-Ban, and we are experiencing an amazing result on Oakley. Same for lenses, branded lenses have very big space to gain in U.S. Transition, Varilux, Eyezen, Crizal, any brand is still underpenetrated in the market. So we see, really, a big opportunity in that market. At the same time, we know that now we have 2 big part of the world that are consistent, Europe and U.S., and the focus really to develop also all the other part, Asia and South America.

And with respect to the first question, James, with -- sorry, the second question, actually. With respect to the front-end loaded, back-end loaded of our investment profile, let me tell you, yes, we are in a hard core part of our integration journey. No doubt that from an investment perspective, just to give you an idea, there are 3 critical areas that are important for us. IT infrastructure is clearly an important one. The other important part is the investment in our supply chain. The diversification of our manufacturing footprint clearly require quite a bit of investment. And last but not least is our continuous investment in digital, digital in the stores for the store renovation, investment in digital for our online platform. And this is obviously very important for us to continue that journey of the omnichannel proposition, the progressive convergency of physical and online. But at the same time, we also have the first year of integration of GrandVision into the EssilorLuxottica platform. We also have the last mile, let me say, calling in that way of the synergies that we'll derive from the combination of Essilor and Luxottica. So the additional synergies that we're going to get out of that integration will come very much between this year and next year. So we have a lot of good constituents to be, let me say, optimistic also in terms of margin expansion.

This now concludes our Q&A session. Today's call has now come to an end. Thank you all for joining. Please disconnect your lines.