Luxottica's ceo discusses q1 2014 results Good afternoon.This is the chorus call conference operator.Welcome and thank you for joining the luxottica group first quarter 2014 results conference call.As a reminder, all participants are in listen only mode.After the presentation, there will be an opportunity to ask a question. (Operator instructions) At this time, i would like to turn the conference over to ms.Alessandra senici, group investor relations director of luxottica.Please go ahead, madam. Before we begin, first, i have a couple of quick items to cover.As a reminder, a slide presentation which we will informally follow during this call is available for download from our website under the reading investor relations, presentation section.Securities exchange act.Further information, including additional information required by regulation g is also available in luxottica group's press release relating to its results for the first quarter of 2014, which may be found on our website, under the reading investor relation, press releases section.This conference call is being recorded and is also available via audio webcast from our website. During the course of today's call, certain projection or other forward looking statement may be made regarding luxottica group's future financial performance or future event.We wish to caution you that such projection or statement are based upon current information and expectation and actual results may differ materially from those projected in the forward looking statements.You can read more about such forward looking statements on page two of the slide presentation.These filings contain additional information concerning factors that could cause actual results to differ materially from those contained in management projection or forward looking statements. We will begin with andrea guerra. Thank ray ban outlet online you, alessandra.Welcome to all of you to our q1 2014 business review.It's one of those quarters where underlying results, performances, behaviors, motivation, feelings are better than the numbers.Fortunately if we needed to have a challenging quarter really appreciate the fact that it happened in q1. Currencies have been tough.Weather has been tough in some sheets and calendar change some performances and results between march and april.Having said this we have been able to grow like for like 4.2%.I really think that this is an outstanding result.And like for like growth as operating profitability level another 60 bps of improvement. And this is normally a quarter where our generation of cash normally has been flattish because this is one of those quarters where we create inventory for the season.We have done a really great work and generated 60 million free cash flow this quarter.So, 4.2% like for like growth currency neutral plus 60 bps operating profitability currency neutral and 60 million of free cash flow.Looking at the two business divisions, all sales delivered another great quarter almost 8% like for like with europe above expectation and i would say all the rights of the regions http://www.lepetitfournil.co.uk/ at level we expected. Orders taking is some of our emerging market has been great, but we shifted a little bit less because at the end of 2013, i would say december probably some of this customers were shifting, some of these countries shifted a little bit more than needed.Ray ban has been in great shape.Same thing we could say about oakley.And really successful with the heritage collection celebrating and marking 30 years of history of oakley, s o ray ban and oakley always leading the pack. In terms of retail, let's start from lenscrafters, q1 slightly negative comps with two regions out of five really hit by freezing temperature.Finished minus three.North and central finished in the minus four and with the segment of more matured consumers remaining home for entire weeks.As weather changed, as we are progressing with our jobs and projects for like for like growth in april has been plus two.We began updating you about lenscrafters journey in october in cincinnati many differencing have been completed and now we are ready to execute.We have a totally new store segmentation in a more clear way based on consumer profile with a new product location and new supply chain with different price points and some absolutely more convenient. Again, our lens performance consumer segments are those asking for more convenience in q1 with household income less than $70, 000.I think that we are approaching this topic pretty well and i am pretty optimistic looking forward.Optical retail is the rest of the world did a great job.Lenscrafters china double digit like for like for the third in a row and a great performance in latin america and good performance in asia pac. Sunglass hut never stops.A plus three and three and moving to another 6% including april therefore having easter neutral between march and april like for like, year to date sunglass hut end of april plus 6%, very positive in europe, asia and latin america. So, all in all, we are happy, challenging we have to work harder and ready for the season.I would love now to turn to enrico and give you some more numbers, some more colors and then i will come back. Thank you, andrea.So let's have a little quick look at our key numbers and as andrea said.We had like for like total group sales growth of 4.2% of constant forex.One of the important basis negative one.So more than 5% point has been negative effect of forex sale, we will see the details in a minute.Strong performance in wholesale close to double digit and overall 2% of for like growing a little bit more in the(Inaudible)By division we had africa, north america, slightly negative.Australia positive on a gross single digit and then outstanding performance for our energy market chain china double digit and latin america close to double digit.We have sang ourselves overall worldwide in the high single digit.And australian dollar, brazilian rhea, chinese and japanese yen and i've shown to you for clarity the impact of the devaluation of those currencies during 2013.Certain during the first quarter of 2014 and as you can see a size of the devaluation of those currency in this first quarter has been very much in line with what we've experienced during the second half of 2013.It has been much worse than in the first half. Now, if i look for the balance of the year, and i compare what is the average exchange rate of those currencies today as compared to what it was a year ago so in order to prepare to project the impact of those currency in the second quarter, i see more or less the same impact that we have experienced in the first quarter.So, i would expect the second quarter broadly in line with the first.While the head win that should diminish quite substantially in the second half of 2014, so i hope that by june, a stronger head win will diminish. So, not surprisingly the impact in our sale and the impact in our ebit margin in the first quarter 2013 has been pretty much in line with what you have seen in the second half of 2013.So, as we said, we have lost 5.5% point of sales and we have lost 60 basis points of the EBIT margin better than 90 basis points that we are in the second half so the situation is likely improving but probably we will continue to be negative as I said also in the next quarter, the current one. So, if i look at our operating performance our profitability with debt currency impact i think we are satisfied with the numbers.We were flat on the reported basis of the group level, 14% of operating margin but as i said, excluding the head win of the currency, we have grown by 60 basis points.That is a satisfactory performance given our 4% sales increase like for like. Looking by division, outstanding result in wholesale 90 bps of like for like improvement, so again flat on a reported basis but 90 basis points has been the impact of currency and this is very good result.I would say in line with our 8% growth on a like for like basis and this has been also helped by reduction in manufacturing cost and in that particular area clearly the devaluation of the chinese or one time helped. Looking at retail, is a more mixed situation.Overall on a reported basis, we have declined our profitability by 20 bps, but it is exactly the other way around if i looked on a like for like basis, though 20 bps up.The currency head in this division has been 40 bps in total. If i look at our profitability on a like for like basis by division again is more or less is in line with our sales results.So, in north america where our comps has been slightly negative, our like for like profitability has been in line with last year.So, we have been able to preserve our profit margin in our key regions for retail division.Also we did slightly declining comp.All other regions in the retail division have seen their profitability growing by substantially in the emerging markets china, latin america.They have grown in excess of 200 or 300 basis point a year ago and our more established mature retail division like sunglass hut or australia optical grow in the region(Inaudible)Percentage point each with the comps that are assets. So, moving to net income.Again, we have been flat on a reported basis by the improvement of 50 basis points on a like for like basis.I would say that the most outstanding result as mentioned this quarter has been our cash flow performance.You might recall that for seasonality our first quarter is one of the weakest quarter of the year.Sometimes we have been it has been a cash negative quarter or flattish a bit.So, i see the 60 million british flow, 60 million euro british flow generation the first quarter is one of the best results of our group and we have to go back more than five years to see the first quarter bigger than 60 million euro.It was 2009 but that was due to extraordinary measures that we put in place five years ago because of the financial crisis. So while these 60 million has been the kind of organic or non performance of which we are very satisfied.One of the key contributor has been the inventory reduction.We have been we have decreased our days in inventory versus a year ago by 17 days.That is clearly an exceptional result quite outstanding.I would say part of it is explained by the(Inaudible)Year ago some of you might recall that our dsi increased versus 2012 by eight days.And that was due to their money and the sap introduction in our factories. So now we have done 17 days.If you want we are fully record of debt build up and we are adding another nine days of reduction again i think this has been quite a very good performance and is a performance that was expected to certain extent.You might recall that inventory is one of the components of the working capital from which we expect a large contribution this year. I would like to finish just refreshing the rule of thumb.As we said, we think the rule of thumb will be valid also in 2014 and these results in q1 are fully in line with the rule of thumb.On a like for like basis our sales has grown 4%, our operating income 8% and our net income by 10%.So even if the sales growth has not been in the high single digit region and more in the mid single digit still we are able to leverage our operating profitability in order to preserve our targets. Thank you, enrico.Q1 has also been pretty intense in terms of building our future, shaping our future and helping the industry to really engage with new things happening in the world.It's a great asset for our future, great people, great culture and a very good e commerce platform and great pieces of that launch.

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