French-Italian eyewear brand EssilorLuxottica SA (FR:EL) fell short of Q3 sales expectations amid the slowdown in demand in its key market, China. The company posted revenue of €6.44 billion in the third quarter, missing analysts’ estimates of €6.58 billion, as per Visible Alpha consensus. Nonetheless, the Q3 revenues were up 4% year-over-year on constant currency. Following the results, EssilorLuxottica shares gained 0.19% on Thursday.
EssilorLuxottica boasts some of the most widely recognized eyewear brands, such as Ray-Ban, Oakley, Crizal, and Persol.
Luxury Brands Grapple as China’s Boom Fades
China, once a key growth driver for luxury brands, is now showing signs of slowing demand amid economic and social shifts.
Recently, French luxury products company LVMH (FR:MC) also missed Q3 forecasts on China Weakness. Meanwhile, French luxury house Kering (FR:KER) expects a 30% year-over-year revenue drop in the second half of 2024. Kering is set to release its Q3 results on October 23.
The recent sales decline witnessed by these brands signals mounting challenges for the sector as a whole. This indicates a major change, showing that Chinese consumers’ luxury shopping habits have evolved.
Ray-Ban Meta Wearables Shine Amid China Slump
EssilorLuxottica reported a 1.6% sales increase in North America, boosted by Ray-Ban Meta wearables, which emerged as one of the quarter’s strongest growth drivers. In September, the company announced a new long-term partnership with Meta Platforms (META), enhancing its focus on smart eyewear with AI (artificial intelligence) features. However, in North America, growth was affected by the poor performance of the sunglasses category, reflecting the overall uncertain macroeconomic environment.
Meanwhile, Essilor’s revenue in the Asia-Pacific region grew 5% at constant exchange rates in Q3, slower than the 9.8% growth reported in the previous quarter. The company reported weak customer traction in China, where it holds licenses for major luxury brands like Chanel, Prada, and Armani.
Additionally, China witnessed negative comparable-store sales in the Direct-to-Consumer segment due to market conditions.
What Is the Target Price for EssilorLuxottica?
Overall, EL stock has received a Moderate Buy rating on TipRanks, backed by four Buy and four Hold recommendations. The EL share price target is €215.86, which is almost similar to the current trading level.
