MILAN, Jan 31 (Class Editori) - The increasing concerns related to Chinese coronavirus, the Chinese authorities who have updated the mortality rate (more than 200 victims), as well as the stop to air traffic declared by the Italian Government are negatively reflecting on luxury securities overall Europe. In fact, many European fashion companies record a large part of their turnover in South East Asia.
At Piazza Affari, the following brands have been characterized by a negative performance: Ferragamo (-0.97 percent to €16.80), Moncler (-0.96 percent to €39.18), Brunello Cucinelli (-0.48 percent to €32.98), Safilo (-2.65 percent to € 1.03), Geox (-0.92 percent to € 1.08). Just Tod's is increasing (+2.13 percent, to €36.40) thanks to recorded revenues higher than expectations. Meanwhile, at the Paris Stock Exchange EssilorLuxottica is recording a loss of 0.84 percent, to €135.70. As far as the situation in China is concerned, Equita has discussed the topic with the company established by the merger between the French Essilor and the Italian Luxottica.
Nowadays, according to SIM, the most important critical element is related to the production capacity of glass frames located in the Dongguan area, the district which supplies a large part of the industry. The company extended the closing period for New Year's celebrations until February 9, in order to better understand how the scenario will develop.
China is one of the greatest production center of glasses frames for the Group, (almost 40 percent of the total production), as well as for the whole industry, as Equita has stated; it has also added that Luxottica can rely on low cost production capacity in Brazil, but this capacity cannot be compared to the Chinese one (according to SIM’s forecasts, less than 10 percent.) The remaining part of production capacity is mostly located in Italy.
EssilorLuxottica will release results on next March 6, while Equita, which has a rating buy and a target price up to €147 on its security, is expecting a fourth quarter of 2019 able to support its forecasts on the medium-high part of the guidance. "We are expecting that the fourth quarter will show an acceleration in constant currency revenues compared to the first nine months of last year: +4.6 percent compared with +4.3 percent in the first nine months, in order to allow the Group to record results in the medium-high part of the profit growth guidance, namely +3.5-5 percent at constant currency revenues" as Equita note showed.
In detail, "we are expecting an acceleration in the wholesale of Luxottica (+2.8 percent), particularly supported by the USA market, also thanks to the Oakley recovery which is benefiting from the agreement with NFL. We are also waiting for a lower acceleration in the retail sector, even though we are expecting a worsening in same-stores sales in a slightly negative area, because of a less favourable contribution by Sunglass Hut; finally, we are expecting a negative accounting effect related to retail calendar for LensCrafters and lasting negative impacts by Sears, from which the complete withdrawal starting from this February has been announced", the SIM explained.
Concerning Essilor Equita, a continuing growing trend at constant exchange rate consistent with the first nine months of 2019 is expected. This growing trend will be driven by North America, where the contribution given by the launch of Transition Gen8 and e-commerce is carrying on, with an improvement coming from Europe, also thanks to M&A contribution. Meanwhile, APAC area is expected to be similar in the third trimester and Latin America is potentially slowing down by the awaited launch of GEN8 in Brazil, during the first trimester of this year.
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