EssilorLuxottica Société anonyme ($EL)

Good morning and good afternoon, everybody. This is George Yanela from the IR team. Thank you for joining EssilorLuxottic Q1 Revenue Management Call. [Operator Instructions] With that, I hand it over to Stefano.

Hello, everyone, and welcome to our Q1 trading update. We closed 2025 with a double-digit year. The revenue for EssilorLuxottica last year grew 11.2% at constant currency for the full year. And we are now opening up Q1 2026 with another double-digit start. The first quarter saw revenue up 10.8% at constant currency with a well balanced between professional solution and direct-to-consumer, both of them on a double-digit pace. Our regions show North America up 12.5% at constant currency, while EMEA, Asia Pacific and Latin America, they were all up on the high single digit in Q1. Our growth profile is very much driven by our traditional business that posted mid-single-digit growth and capped that on top by a strong demand of AI glasses with a product range to continue to expand sense on the introduction of the new RabanMetaoptics, 2 models, in particular, blazer and Scriber that were specifically designed to enhance our prescription offer on AI glasses. Those glasses together with a few other innovations were all showcased at the switch, the Vision, Innovation Summit that was organized for the first time ever in salutottica history in the month of March in Orlando, Florida. And in the month of April in Monaco, hosting our Asian and EMEA clients and was very much the opportunity to showcase our products and innovation to thousands of clients that were actually coming over to experience at full at the best AsiloLuxottica. If we now switch gear and talk for a second about foreign exchange, -- from an FX perspective, let me share that in Q1, we still experienced some currency headwinds. In particular, you might have seen that we have about 7 percentage points of difference between constant in current exchange results. And that was very much driven by the U.S. dollar that during the course of the first quarter, devaluated approximately 10% against euro in Q1. Now as usual, let's move to the 4 different regions. Let's start by the largest one, North America. North America was up 12.5% in Q1. That represents the third consecutive quarter up double-digit pace with both segment professional solution and Die-to-Consumer that deliver another double-digit quarter. When we look at our professional solution, we experienced a strong growth with the Ray-Bans. And Raymond was very merchant of spotlight for wearables, the trip decide during the course of Q1, but also on Ray-Ban Sun and Ray-Ban prescriptions they both delivered double-digit growth during the course of Q1. On the land side, I would say that our growth on the land brand portfolio was solid, was strong. That was very much driven by Eisen, by Varilux, Shamir and also Nikken. I would probably make a last comment on lenses with respect to Stellest during the course of -- we have about 6,000 doors. There are daily responsing Stellus lands in the U.S. And the Stellus lenses, the myopia management lenses are gaining continued traction, visibility and awareness in the optical industry. When we look at our 2 different distribution channels within the optical channel, I would say that our independents grew solidly during the course of Q1, in particular, the independent that are part of the Vision Source Alliance to deliver a high single-digit growth in the first quarter, but also our key accounts grew in the high single-digit quarter. So overall, our 2 distribution channel within the Optical division were very strong. Also, our e-commerce partners were solid at double-digit pace, while the last distribution channel, the department store were on the low single-digit territory. If we now move to dollar to consumer, I must say the sun shined during the course of Q1 in North America for our Sunglass Hut business. Despite what I would say, weather condition that we're definitely not ideal, in Q1. We delivered double-digit comp sales in Q1 with January, February and March, all at double-digit pace. We had 6 consecutive quarter in Sunglass Sat of positive comp sales, and that's obviously extremely reassuring. We experienced a quarter, the first 1 with positive traffic in stores. with both our international and domestic stores that delivered double-digit comps. And last but not least, the growth profile was not only driven by AR glasses, but we couple that with a strong growth also on our traditional analogical sunglasses. If we move for a second now to the optical part, let me say that we have another outstanding quarter and a high single-digit comp sales in LensCrafters. And that happened despite a tough comparison base as in Q1 last year, we delivered high single-digit growth in LensCrafter. Price/mix examination, they were all positive. And just the last comment on the feet we built the first important milestone on our Mitek journey by opening the first surgical location in LensCrafter stores in North America, in Pennsylvania. And this, I can tell you, will be followed by a few others in the course of 2026. So stitching for more news in that respect. Let's move now to EMEA. EMEA delivered a 9.5% at constant currency, is the 20th consecutive quarter revenue growth in the region. Professional Solutions delivered a mid-single-digit quarter, direct-to-consumer was up double digit. When we look at our different countries across the region, Italy, U.K., Turkey, Poland and Eastern Europe, they're all up double digit in Q1. On the Professional Solutions side, price/mix was the primary driver on both frame and lenses, but also volumes were positive in the 2 product categories. AI glasses were a successful story in Q1 as we continue to expand our distribution, but at the same time, we continue to gain good productivity on the existing doors. Taking a closer look at Frames, I would say very pleased by Raban but also very pleased by our luxury portfolio, in particular, thanks to Mumta in Q1 shine in the EMEA region. On the lense side, vlogs and translation were both on the spotlight for a strong growth in Q1. Moving to the direct-to-consumer. I would say that in EMEA, we had another shining region for Sunglass Hut that delivered outstanding Q1 a double-digit pace with double-digit in Iberia in Italy and in Turkey. The optical counts were up on the mid-single-digit territory for Q1. Vision Express was up double digit, and general uptick was low single-digit comp sales with negative traffic in the quarter. Now moving to Asia Pacific. We had a 9.8% growth at constant currency. We had a strong start in Asia Pacific in China, in India, in Southeast Asia. They were all double digit in Q1. When we look at our Professional Solutions side, in China, the full set of myopia solution delivered an outstanding Q1 at double-digit pace -- while on the frame side, we probably to mention 2 brands -- 1 Bolon and the other is the overall luxury portfolio that was strong pretty much across the boarding with a growth that was in excess of 10%. In India, our Ray-Ban AI glasses has already an important part in our growth profile of the country. And that's obviously very reassuring as we want to expand this product category in fast-growing markets and ideally, to replicate the success story that we already have in very mature geographies like EMEA or North America. If we now move quickly to the direct-to-consumer side. OPSM posted flak comps in Q1. I would say that tough comparison base and a history shift were very much the 2 main driver while China and in particular, Mainland China delivered a double-digit comp sales. But now let's move to the last region in the pipe, and that is Latin America. In Latin America, we had a first quarter a mid-single digit, 6.7% growth at constant currency, high single-digit growth in Professional Solutions mid-single-digit growth in our dollar to consumer. Let me give you just 3 highlights for the Latin America region. Country-wise, Mexico and Argentina up double digit, Colombia, high single digit Brazil, low single digit in Q1. The second important highlights pertain to our largest country, Brazil, -- in Brazil, I would say we experienced a successful launch of Ray-Ban Air glass. As you remember, in recent months, we introduced our AI glasses in both Brazil and Mexico. In Brazil, the launch of AI glasses were very much the opportunity to reengage our clients, in particular, our Oticacrol franchisee on the land side, we had the lens product category that was flattish in Q1. I think we did pretty well in Q1 2025. So we had a pretty, I would say, strong comparison being last year. You remember in '25 Q1, we launched a transition Genesis was a great success story in Brazil throughout 2025. On the Derecho consumer side, happy to report double-digit comps in Brazil, very much driven by Sunglass Hut and for Chalice. The third important part related to this region pertain to Hispanic Latin. We had a double-digit growth in Professional Solutions in Q1 and all the key countries in the region on Hispanic LatAm, Mexico, Colombia, Argentina, they all delivered a double-digit pace in the quarter, with a wide positive trend across all product categories, frames and lenses. While on the door to consumer side, we had a high single-digit comp sales in GrandVision banners and low single digit in GM mill. So that concludes our journey across the 4 geographies. And now let me hand it over to the operator for the usual Q&A session.

Ladies and gentlemen, we will now start the Q&A session. Our first question comes from Oriana Cardani, Endesa Sao Paulo. Please go ahead.

My 2 questions. The first 1 is about the growth trend of the quarter and current rate what has been the growth progression over the quarter? And what are you seeing in April in each region and for the group. And my second question is on the revenue growth profile in the first quarter for the traditional business, you say it was up mid-single digit. Can you provide the split between volume, price effect and mix effect -- thank you very much.

Ryan. Let me answer your 2 questions. I think the first part of your question was about the trend. -- between Jan, Feb and March, I would say it was pretty consistent throughout the quarter. In April, we still haven't closed the month, but I would say ballpark aligned with the first quarter trend. . Your second question is around the profile of growth related to the traditional business. And I would say that probably price/mix was predominant versus volume, but volumes were positive, as I think I mentioned, both frames and lenses.

The next question comes from Hugo Solvet, BNP Palma.

I have 2, please. First, from the use case for SpyGlass did the recent release of the new metal model triggered the change in adoption activation rate or use case. And second on the base business growth in the base business of mid-single digits. Can you share what's the revenue contribution from Stellest Nuance, please? .

So the first question is related to the new met model. Clearly, the new model have been launched in the month of April. So it's early to say. But let me give you an expectation just using common sense here. Those are 2 models that have been specifically designed to be worn as a prescription glasses. So you might expect the de penetration of prescription into the overall product assortment might increase. Just to give you an idea, and I think this is an interesting data point. If we just look at the Ray-Ban matter, which is obviously the most important product that we have. When we look at the revenue of the RevMan the penetration of REX is in excess of 30% already. So it's pretty high. And I believe those new models further increase in our own brick-and-mortar store. That was what I was referring to, it was very much an addition to the penetration that we currently have. The second question was the contribution from Nuance and Stellest. So in once, it's doing well, I would say. We are about 16,000 doors. -- on overall. The vast majority of those doors are on the B2B side of the business. I would say that we have an increased productivity when -- we do have a test performed in the stores, in particular, in our own stores and also on the B2B one. So whenever we have test the adoption of Nuance, it's exponentially higher. So that's obviously very reassuring. I think you will see some new products coming along 2026 in terms of innovation for Nuance. And I think we'll talk about it more during the course of the second quarter first half results. Stellest, I think you're referring more probably to the United States. -- in China. You've seen the success story. In Europe, you've seen the success story, the growth that we continue to post. I would probably spend a bit more time on the U.S. I think in the U.S., it's a good story. I think we're looking at already 6,000 doors. You remember we had 4,000 or ordering Stellus at the end of last year. In Q1, we're looking at 6,000 doors right now. I think there are really 3 priorities for now, continue to establish protocol with doctors. That is the first priority. Remember that TELUS is a journey. It's not just dispensing lens. It's a journey that will accompany kids from the young age 5, 6 years old up to 16, 17 years old. So it's important that the protocol, it's well delivered to the patient, to the families -- the second important thing is increasing awareness. Obviously, we are investing to make sure that more and more people, more and more family understand that sellers exist that is the only lens that today is available in the U.S. market to manage myopia to slow down materially progression of myopia and young kids. And the third important pillar is clearly distribution. Distribution is critical. I would say that between now and the second quarter, early third quarter, we are going to be activating all the top accounts, all the top key accounts in the United States so that we have thousands of doors that will be activated in a ready to dispense status between the second quarter and the second half of 2026. I SP999 The next question comes from Julian Dumont. Jefferies.

Charles Stefano, thanks for taking my 2 questions. The first 1 related to Smart Glasses. Just trying to do the math here. You mentioned that the traditional business has been growing at a mid-single-digit pace. And I would assume that M&A has contributed probably anywhere between 50 and 100 basis points. So is it fair to assume that smartglasses contributed in the mid-single-digit range to Q1 growth. So that would be the first question. And also a housekeeping question on Stellest and more broadly on myopia management. If I'm right, you previously mentioned that China accounted for roughly 90% of myopia management sales. So you posted an impressive 26% growth in Q1 globally, and you precise that China was up 18%. So that will basically China sales have doubled in Q1 versus last year. So wondering whether my calculation is anywhere right and also whether this is only the effect of U.S. growth helping here .

Hello. So let me answer your questions. So with respect to the Smart Glasses growth in the first quarter, the mid-single-digit contribution in constant currency is correct. When we look at the overall contribution of China, that is the predominant 1 in terms of country. Overall, on the myopia solution, myopia management solutions -- what I can tell you is that it's around 30% of the overall revenues in China, and it's growing double digits during the course of the first quarter.

[Operator Instructions] The next question comes from Hasan Aoki. Barclay

A couple for me. Just couple for me, just Firstly, on Stellar, having cleared key milestones previously that you've talked about. It would be great if you can talk about the commercial traction that you're seeing in the U.S. and then expectations over the short to medium term? And then secondly, just on the conflict and what you're seeing in terms of both demand as well as inflation and whether you expect inflation across some of the key buckets to accelerate over the course of the year and how you intend to get this.

All right. So let me take your 2 questions. The first 1 around Stellest. So I mentioned before the fact of what are our priorities, right, in terms of the development of Stellus in the United States. And again, the establishment of the protocol with doctors is critical. It's important the investments and awareness of another important 1 and the distribution. Today, we have an opportunity, which is very much size around the 5 million kits that today correct myopia through single vision lenses in the vast major capital cases. The opportunity for us is to make sure that those kids are equipped with the products that improve the life, structurally improve their lives over the longer term. And this is the message that we are conveying. This is what clinical study clearly prove after years of test done in China and other parts of the world. And this is the understanding that more and more doctors have in the United States. I believe it's a product that it's incredible. I believe it's a product that it's proven to be successful in other markets. And I think it's just a matter of taking this to the next level. And I believe the team is fully committed to get there. And the second question you have is around the situation in the Middle East. So we don't see inflationary headwinds. Just to give you and put things in perspective, the Middle East accounts for less than 1% of our revenue base -- and in the first quarter, closed flattish. And that's obviously a very strong performance in the first 2 months of the quarter and obviously, a negative trend during the month of March as a result of the conflict that took place in the region. I think we obviously give priority to our people, the priority to sustain our clients, and that's obviously what we're currently doing. We'll keep monitoring the situation. And obviously, we will be able to provide you more update as we progress throughout the quarter.

The next question comes from Veronica Dubawai

I'm going to keep it to 2 as well, please. My first 1 is just if you can give us a little bit of a flavor for where you are in terms of your manufacturing not necessary for AI bots I know you don't want to comment on capacity, but just maybe if you can characterize the constraints that you're seeing in the business. Obviously, there's been a lot of discussion in the press about -- some of the models aren't available in certain regions. And so if you can give us some color on how much progress you've made in terms of expanding that capacity and where you stand even quantitative qualitatively apologies that would be super helpful. And then my second question is just following back up on Hassan's query about sort of longer-term inflationary impacts and soup now had elevated oil prices for a couple of months, that tends to be into other things like packaging and freight over time. and see were super successful in maybe getting that back in 2022-2023 for price increases. I'm just curious if you have any high-level thoughts on sort of how much it there is in the world of consumer where you might be able to pass some of these input prices on to the extent that we are in a more persistent inflationary environment.

Let me take your 2 questions here. So the first 1 regarding manufacturing overall supply chain. We we have the machine up and running. We have a service level that has been guaranteed. We don't see disruption in our supply chain. Actually, the companies in marching well. The service levels that we obviously continue to monitor that it's there. It's there for lenses, it's there for frames and it's satisfactory, I would say. Clearly, logistics had to be adapted and adjusted based on the turmoil that we've seen in the Middle East, but we had no consequence with respect to our manufacturing and distribution capacity. One of the big plus of so Luxottica in Barak, you follow us for a long time, you know that that very well is the fact that we have a very widespread network of laboratory, quite network of manufacturing capacity on frames, logistic centers. So we are capable to eventually overcome challenges that we might see or face in certain parts. So that's obviously very important. The second question you have is regarding the headwinds from inflationary situation that we -- they might raise potentially. We don't see it. I mean we have something on commodities, but it's a marginal part of our cost base. And I don't think it's -- we can call out anything here that is material for us -- you might remember the situation on 2022-2023 well. But you know that, that situation was structurally different. It was a widespread incretion trend that hit the labor market primarily. And our reaction in terms of price adjustment was very much the consequence of what happened on the -- especially on the labor market. That's very different from what we see today -- so I would tend to make a distinction really from what happened 3 years ago. And what is the situation today.

The next question comes from Domenico Ghilotti [indiscernible], please go ahead.

Question on my side. First, I'm trying to get your thoughts on how we should look at the comparison for the second half because you will have a tough Q3 and even tougher Q4 the I'm trying to understand if you have launches and new products, new countries to cope with this kind of additional challenges or if we have to assume some kind of natural slowdown going into the second half. And the second question, if you can share any thoughts at this point also on the margin side. I know it's a call on the sales, but any indication would be very helpful.

In Buonasera Domenico. So 2 questions, probably 1 answer here. you're right, second half of 2026 comparison is tougher because last year, we grew around 14% in H2. And the first half was a 7% growth on currency. So no doubt there is tougher. But the answer to your question with respect to top line and also profitability. It's really our guidance. It is the solid growth of our revenue at constant currency year-over-year and is the anchoring of that growth to the profitability, our adjusted operating profit that we expect broadly in line with that. So that's really where we are, and that's where we are progressing to.

the next question comes from Thierry Cota Bank of America.

Usually, they have been mutated, but 1 is left. On the growth of the wearables in Q1, can you give us an indication of price versus volume the price of the new products in September have been much higher than me earlier. So what has been the scale of benefit from the higher prices of the products it.

So the price is helping also wearable progressively. You're right, Terry. That's that's a good point because we have seen progressively products being priced higher because of new future. because they're acted and segmented for customers that needed specific features. And so we do see a higher contribution within the wearable category from price/mix. Clearly, volume continues to be predominant. But just to give you an idea, you remember Ray-Ban store is priced at $299. Now we have a wide range of family that starts at $399 with Oakley Huston gets up to $379. I'm always talking about dollars here. For Rabota, second generation -- then we have the new ones, the Blazon the scriber priced at $499, and we go up to the $799 of Matariya display. So the purpose and the goal that we have is very clear. Very clear. We want to enlarge the product range, and we want to make sure that we properly segment our customers based on usage of the product based on affordability, so purchasing power and based on features. -- that they will require for 1 glasses versus another. And that's obviously extremely important for us. Just to give you another data point, I think last year, we ended up with about 40 SKUs. Today, our product range is made of 11 models and 60, 60 SKUs, and we'll further increase that number in the upcoming months. So it's it's obviously very, very exciting news here. With respect to the scale, I think we're still building up a category. That's very important for us. And we see continuous growth. I think you can clearly witness that from our growth profile, the mid-single-digit contribution from AI glass is there. And again, the higher is that contribution in the growth the bigger is going to be the scale effect in terms of also margin.

The next question comes from Luca Solca Burstein.

I would like to ask you a question -- 2 very different questions. One is on retail. We looked at the acquisition of this new retail sale in Thailand. Can you maybe give us a bit of more detail on how you frame the opportunity there. We saw that the penetration in Europe at Grand vision continue to increase. And maybe you could update us on where you stand on both frames and lenses in this chain. But I wonder what the magnitude of this opportunity in Thailand could be and where you start in terms of siloluxottica product penetration in that business? A question in ad on the new smart silastic category that you have been pioneering -- there's a lot of imitators following you that technology companies following on your footsteps. We often get the questions on how exclusive the agreement we have with Meta is we are assuming that as of exotic could distribute third-party products to third parties mastitis, but may not engage at least for a certain amount of time with product and branding collaborations, but please correct me if I'm wrong in this assumption. Thank you very much.

So let me take both your questions. So top Sharon, it's a very important and strategic acquisition for us otic -- it's a B2B customers for us and important in an important and strategic market that is Thailand with a very promising prescription market. . So we are taking that step into the Thailand market because we believe we could get the proper scale, we could use operon as an opportunity to showcase our products. Clearly, there are different variety of stores that are addressing different customers in the countries. And we believe that is a great opportunity for us in that respect. The anchor to your question on Topcon is the question on progression on integration. We don't talk any longer about the integration of GrandVision because now GrandVision is truly part of EssilorLuxottica. But let me say the penetration of frames and lenses in GrandVision coming from Marcelo Luxottica is now ranging anywhere between 85% to 90%. So we're pretty much done. It's the end of a journey that has been done successfully. And now obviously, we continue to see good traction. We continue to see good performance. And we also have a good profitability that we achieve in Grand Vision. So I would say a very successful store so far, which is not completed in a way because we continue to grow, to develop products, to launch products in GrandVision, and that's obviously very important, instrumental to elevate the consumer journey in our optical retail banner. The second question, I think, pertains more to the relationship between raloxtic and Meta -- and as we probably said a few times already, that relation encompass certain parts that are exclusivity from 1 side and the other side. I can get into the detail of that exclusivity, but it's a very successful collaboration between 2 companies. The other thing that you have to bear in mind with respect to our own retail is that typically, the space that is made available in our own stores for third-party brands is anywhere between 5% to 10%. So remember, if there is something entering into that space, there is something else that is going to go out. And that's really what you have to bear in mind. Then when we'll see new products coming into the market, we'll obviously make the proper assortment according to the desirability and the demand that we see from the market itself. So there are no more questions. I will thank you, everyone, for the participation today, and wish you a pleasant evening or present rest of the day. Thank you very much.