LensCrafters 2004 Annual Report Download - page 65

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64
due to increased sales of the Ray-Ban, Prada and
Versace lines, and partially offset the impact of the
depreciation of the U.S. Dollar against the Euro. The
impact of this devaluation on wholesale sales to
third party clients for 2004 was approximately Euro
12.7 million.
By region, in 2004 sales in the U.S. and Canada
totaled Euro 2,083.5 million, or 64.0% of Luxottica
Group’s total sales, reflecting an increase of Euro
134.1 million over 2003. This increase was primarily
attributable to the integration of Cole National fourth
quarter sales for Euro 240.5 million, and partially
offset the impact of the devaluation of the U.S. Dollar
against the Euro (sales in the United States and
Canada were up US$ 399.5 million compared with
2003). Sales in Asia-Pacific for 2004 were Euro 435.1
million, representing 13.4% of total sales, up Euro
181.3 million compared with 2003. This increase was
primarily attributable to the integration of results of
OPSM Group for the year (twelve months as
opposed to five in 2003). Sales in the other countries
where Luxottica Group operates were Euro 736.7
million, up a 13.5% increase over 2003. The increase
in sales in these regions was largely due to strong
performances in several countries in Europe and
Latin America.
In 2004, sales of the retail division accounted for
72.1% of the Group’s total sales, compared with
71.1% in 2003.
COST OF SALES
Cost of sales for 2004 increased 15.2%, to Euro
1,040.7 million, compared with Euro 903.6 million in
2003. Cost of sales for the retail division increased by
Euro 103.4 million, primarily as a result of the
consolidation of Cole National in the fourth quarter of
2004 and the consolidation of OPSM Group for the
entire twelve-month period. Cost of sales for the
wholesale division increased by Euro 32.5 million, as
a result of the increase in sales. As a percentage of
sales, cost of sales increased to 32.0%, from 31.7%.
Production costs for the year were up 6.6% to Euro
256.9 million, from Euro 240.9 million in 2003. As a
percentage of sales, production costs for 2004
decreased by 7.9% from 8.4% for 2003, as a result of
the inclusion of sales of Cole National, where
production costs as a percentage of sales is lower
than at other companies of the Group. In 2004, the
Group achieved an average daily output at its
manufacturing plants, including production at the
Chinese subsidiary Tristar, of approximately 123,000
frames, as in 2003.
GROSS PROFIT
As a result of the factors discussed above, operating
expenses increased 13.7% in 2004, to Euro 2,214.6
million, compared with Euro 1,948.6 million in 2003.
As a percentage of sales, operating expenses
decreased to 68.0% in 2004, compared with 68.3%
in 2003.
OPERATING EXPENSES
Total operating costs increased 13.5% in 2004, to
Euro 1,721.8 million, compared with Euro 1,516.8
million in 2003. As a percentage of sales, operating
costs decreased in 2004 to 52.9%, from 53.2% in
2003.
Expenses for sales, publicity and royalties increased
by 11.4% in 2004, to Euro 1,376.5 million, compared
with Euro 1,235.8 million in 2003. Approximately Euro
88.0 million of this increase was attributable to the
consolidation of OPSM Group over the entire twelve-
month period, compared with only five months in
2003. Approximately Euro 110.2 million of this
increase was related to Cole National results for the
fourth quarter of 2004. This increase was, however,
offset by the devaluation of the U.S. Dollar against
the Euro, which resulted in lower sales costs for
advertising and royalties of Euro 97.9 million for
subsidiaries whose financial results are expressed in
U.S. Dollar. As a percentage of sales, these
expenses decreased from 43.3% in 2003 to 42.3% in
2004. This decrease was primarily due to the
significant increase in sales at Luxottica Retail North
America without a corresponding increase in these
MANAGEMENT’S DISCUSSION AND ANALYSIS