Luxottica Group S.P.A. (LUX)

(20 October 2016)

LUX Business Summary

The Company designs, manufactures and distributes fashion, luxury and sport/performance eyewear. It operates in two industry segments; manufacturing and wholesale distribution; and retail distribution.

LUX Fundamentals

• Price to Earnings: 25.10
• Earnings Per Share: $1.92
• Market Cap: 22.0B
• Current Ratio: 1.37
• Return on Equity: 15.28%
• Dividend Yield: 1.24%
• Total Debt to Equity Ratio: 34.56

Income Statement (Euros in Thousands)

• Net Sales increased 1,184,261.
• Gross Profit increased 923,520.
• Income from Operations increased 218,832.
• Net Income increased 160,859.

Cash Flow Statement (Euros in Thousands)

• Cash Flow Provided by Operating Activity increased 233,534.
• Cash and Cash Equivalents at end of period increased $30,809.
• Net Cash Used in Investment Activity increased 24,063.
• Net Cash used in Financing Activities increased 1,426,558.

Balance Sheet (Euros in Thousands)

• Total Current Assets decreased 338,586.
• Total Assets increased by 54,851.
• Total Current Liabilities decreased 481,840.
• Total Stockholder’s Equity increased 488,940.

Highlights from Report

• On April 16, 2015, the Group acquired the remaining 49% of Luxottica Netherlands for a total purchase price of Euro 19.0 million. The difference between the consideration paid and the net assets acquired, equal to Euro 15.4 million, was recorded as a reduction of the Group’s stockholders’ equity.

• On November 1, 2015, the Group acquired certain assets from Sunglass Warehouse, Inc. (“SGW”). Management determined the transaction to be a business combination in accordance with IFRS 3. The final purchase price paid by Sunglass Hut was approximately USD 23.3 million (Euro 21.0 million).

Entry and Exit Points

• Entry
  • $42
• Exit
  • $65

Final Thoughts & Comments

• Strong balance sheets, income statements, and cash flows.
• Trading right above entry point.
• Since October ’15 high of 72, the stock price has fallen significantly, virtually a linear progression downward, with one brief hiccup from 54 – 56.
• I would buy at these levels and look to sell around $65, which it has traded at twice, reaching a double top over the course of three months apart last year.