EssilorLuxottica: Sales Growth Pace Decelerates, Shares Fairly Valued
We are increasing our fair value estimate for wide-moat EssilorLuxottica EL from EUR 155 per share to EUR 162 per share, largely as a result of time value of money after the company reported some deceleration in sales growth in the third quarter. Sales growth was 5.2% in the quarter at constant exchange rate, and currencies were a meaningful headwind (revenue at actual exchange rates down by 1.6%). This was a deceleration from 8.2% in the first half. Deceleration was quite broad-based across the regions. We see shares as fairly valued at current levels.
Sales in North America were up 2.1% at constant exchange rates largely in line with the second-quarter trends and a marked deceleration from strong postpandemic development, in line with our expectations. The optical segment was more resilient in this market (we believe the optical business is generally less cyclical). Sales in EMEA were up 6.9% versus 10.6% in the second quarter. Integration with Grandvision in this market is on track and more of EssilorLuxottica frame and lens products are sold in former Grandvision stores, which should support profitability and premiumization of its offerings. Asia-Pacific was the strongest performing region with revenue up 11.7% and China the best performing market. Sales in Latin America were up 6.2%, also decelerating from 9.3% in the second quarter.
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