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Edited Transcript of GVNV.AS earnings conference call or presentation 26-Feb-20 8:00am GMT

Full Year 2019 Grandvision NV Earnings Call

Mar 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Grandvision NV earnings conference call or presentation Wednesday, February 26, 2020 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Stephan Borchert

GrandVision N.V. - CEO & Member of Management Board

* Thelke Gerdes

GrandVision N.V. - IR Director

* Willem Eelman

GrandVision N.V. - CFO & Member of Management Board

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Conference Call Participants

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* Benjamin Lacaille

BofA Merrill Lynch, Research Division - Associate

* Elena Mariani

Morgan Stanley, Research Division - Executive Director of Luxury Goods and Brands

* Jaina Mistry

Deutsche Bank AG, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the GrandVision Full Year 2019 Results Call.

(Operator Instructions) And I also must advise you that this conference is being recorded today.

And I would now like to hand the conference over to your first speaker today, Thelke Gerdes. Thank you. Please go ahead, ma'am.

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Thelke Gerdes, GrandVision N.V. - IR Director [2]

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Thank you, John, and good morning, ladies and gentlemen. I'm Thelke Gerdes, Head of Investor Relations, and would like to welcome you to this Investor and Analyst call to discuss GrandVision's full year 2019 results, which were published this morning.

Hosting this call today are Stephan Borchert, CEO; and our CFO, Willem Eelman.

Before I hand the call over to Stephan and Willem, a couple of housekeeping items to take note of. As usual, please let me remind you of the key definitions we use. Firstly, the revenue and EBITDA growth figures mentioned in our press release and in all comments of today's call are at constant exchange rates. This means excluding foreign exchange rate movements. We define organic growth as the growth of revenue excluding acquisitions and at constant exchange rates. Comparable growth is the sales growth of the stores that were open also for the entire previous year, in this case, 2018.

All comments regarding EBITDA are on an adjusted basis, which means excluding nonrecurring items. Beginning from the first quarter 2020, we will be using adjusted EBITA as our primary measure of profitability, which includes the impact of IFRS 16. And as such, we will discontinue reporting adjusted EBITDA. The comparable base for every quarter has been provided in our quarterly reports since the beginning of 2019.

And finally, I would like to remind you that today's presentation can be downloaded in the results center of our website.

And with that out of the way, I would like to hand the call over to Stephan Borchert for his opening comments.

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Stephan Borchert, GrandVision N.V. - CEO & Member of Management Board [3]

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Thank you very much, Thelke, and good morning to you all. As per usual, I'll begin the call with some key highlights for this quarter and the key performance drivers for the group. I'll also share with you the progress we have made so far on the strategy we presented at our Capital Markets Day back in 2018. Willem will then walk you through our segment and financial performance before we open the call to take your questions.

Let's move to Slide 4. I will share with you some of our key financial and operational highlights for quarter 4 2019 and the year. We are very pleased to report a comparable revenue growth of 4.1% for the full year 2019, which have been our best performance since 2015, and is ahead of our midterm guidance of 3%. For quarter 4 2019, our comparable revenue growth was higher at 4.6%. But please remember that this was partly due to a slightly lower base as Q4 2018 had some negative impact from the yellow vests protests in France towards the back end of 2018.

Overall, we have seen good momentum in all 3 segments over the course of the year as we further improved our customer value proposition and expanded our offering. Our total revenue growth, at constant foreign exchange, was 8.7% for the full year 2019, which include a 3.6% uplift from acquisitions. In terms of profitability, our adjusted EBITDA growth was 5.1%, which is below total revenue growth, as we made further investments behind our digital and product value chain initiatives and also faced some operational challenges in a few markets.

Thanks to EBITDA growth and lower capital expenditures, we achieved a strong cash conversion for the year, and ended the year with a net debt position of EUR 753 million, which is EUR 10 million above last year, despite the acquisitions we completed during the year. Based on our performance in the first year of our strategic plan implementation, we expect full year 2020 revenue and EBITDA growth to be broadly in line with our midterm guidance, the details of which can be found in the press release issued this morning. I will go into more detail on this at the end of the presentation.

Turning to the key operational developments. We've made considerable progress on strengthening our position in several of our markets through small- to mid-size acquisitions, for example, across Germany and the Netherlands, where we acquired more than 40 stores in total, mainly from franchisees. Furthermore, we have advanced the implementation of our digital strategy and started the rollout of our omnichannel platform across several banners. I'll walk you through some specifics later in the presentation.

Also, we have launched our new regional fulfillment hub in Portugal, in October, with currently 5 opcos connected to it. We do already see clear business benefits from this centralized supply chain initiative.

And finally, I'm particularly pleased to report that our Benelux and Italian businesses that recently experienced some difficulties over the past years have now been turned around under their respective new management teams and have started to contribute significantly to our company growth.

Moving to the next Slide 5. As you can see, we delivered strong revenue growth of 8.7% at constant exchange rates. Needless to mention that the entire GrandVision team is proud of having crossed the EUR 4 billion revenue mark this year. As I mentioned, each of our geographical segments have contributed to this growth through various initiatives, and we feel very encouraged that our value proposition continues to appeal to our customers and that we are gaining more and more traction with them. We recorded volume growth in each of our 3 product categories in full year 2019: optical, contact lenses and sunglasses. Among our 3 categories, our contact lens category recorded the highest growth rate, largely thanks to our digital initiatives.

As you probably know, online penetration within the optical retail space is highest within contact lenses. And as we expand our digital presence, we see accelerated growth. For example, our lens store business grew by 46%, driven by strong growth in the U.K. and Germany, and benefiting from recent launches in France and Italy.

We also launched Sightful, in the Netherlands and Belgium, a new and innovative highly user-friendly contact lens website.

Also, as a result of our digital business focus, our total e-commerce sales have grown by 66% versus the previous year. This growth includes existing and new e-commerce websites, such as Lenstore and Zonnenbrillen.com, e-commerce sales from the website of our existing banners and the acquisition of Charlie Temple in The Netherlands. And of course, and equally important, we have continued to expand our store network, which has now reached 7,406 stores worldwide as of the end of December 2019.

Turning to Slide 6, profitability. Our adjusted EBITDA increased by 5.1% at constant foreign exchange. This resulted in a margin decrease of 54 basis points, leading to a 14.9% EBITDA margin for the year 2019. As we have guided in our previous calls or meetings, there are some very specific drivers behind the margin decline of 2019. The implementation of our strategy on digital and product value chain has required certain upfront investments over a period of 2 to 3 years, which has impacted our margins in this period of time. Unfortunately, the U.S. and U.K. operating companies continue to provide us with some bigger-than-anticipated challenges. As we speak, we are confident to turn those businesses around similar to what we did in Italy and Benelux last year.

Turning to Slide 7 on our development in omnichannel. Our vision is to be the preferred and trusted partner for our customers in all aspects of eye care and to create the best customer experience across all our retail channels. Consumers of today are well informed: One, because of a higher emotion involvement with our products; and two, because of a much easier access to detailed information through the web. Therefore, a key focus point for us is the digitally influenced store sales and the online-based pre-purchase decision-making process -- progress -- excuse me, process of our customers. A very recent study we conducted exclusively in the Netherlands and the U.K. confirmed that 56% of our customer base, they set buying decisions on information they obtain online prior to their purchase.

In order to address this major opportunity, we have developed and launched our own global and fully integrated omnichannel platform in 2018. In 2019, we have rolled it out to 10 banners across 8 countries. Among other features, this digital platform supports e-commerce for sunglasses and contact lenses, eye test appointment bookings, store locators, product and promotion pages. The platform has also been connected to an advanced CRM system and other digital marketing tools. In addition, its new content management system and e-commerce back office provide our markets and the local marketing and digital teams with the means to operate omnichannel on a much more effective and efficient basis than ever before. We do feel very positive about the achieved results so far. Our central digital team in Schiphol, not only supports our opcos in several areas of digital acceleration, but also on the further expansion of functionalities and geographical reach.

In 2020, we will focus on adding more customer features and innovations to our websites as well as driving more e-commerce and digital-influenced store sales through our omnichannel banners. In addition to this, we will continue to grow our pure-play e-commerce businesses.

Turning to the Topstore concept on Slide 8. Our stores are at the core of our business as they provide access to our products and eyecare services delivered by thousands of eyecare professionals worldwide. We operate a standardized store concept across GrandVision that covers more than 30 countries. This concept ensures that GrandVision stores around the world deliver the same high levels of quality, customer service and a consistent customer experience.

In 2019, we piloted an enhanced retail store concept with the aim of upgrading the overall customer experience and of incorporating new omnichannel touch points for our mid- to low banners. Obviously, these trials include elements, such as advanced eye exam machines, cutting edge eyecare products and technologies in stores and online in order to capture the latest trends and innovations in our industry. Pilot countries include the Netherlands, U.K., Germany, France and Switzerland. Initial customer response has been very positive. We will start with full rollout of this concept in 2020. Our goal is to make shopping for glasses and contact lenses more enjoyable and engaging for all our customers.

Moving on to Slide 9. I want to take this opportunity to provide you with an update on progress made on the different levers we had outlined at the Capital Markets Day.

Firstly, we have made good steps towards our global -- excuse me, our goal of turning customers into fans and increasing their lifetime value. As you saw on the 2 previous slides, we connected already 10 of our retail banners to our global omnichannel platform and successfully piloted the new Topstore concept, which we will start to roll out in 2020. Our group-wide Net Promoter Score, which measures the willingness of our customers to recommend our products to -- services -- and service to others, improved from 62 in 2018 to 65 in 2019.

Secondly, we have made significant progress in our digital value proposition to several new launches across Europe. Amongst others, we expanded the Lenstore platform also into France and Italy after its successful launch in Germany the year before. Through the launch of Sightful, we developed an innovative contact lens online store in the Netherlands and Belgium with very encouraging results. And we also enhanced our sunglass e-commerce by launching sister websites of Zonnenbrillen.com in Germany and France.

Thirdly, our new regional fulfillment hub in Portugal is processing customer orders for 5 different markets now, with end-to-end production, from cutting of the lenses to mounting or full assembly. This facility is fully connected to operating companies in Northern and Southern Europe. This initiative, in combination with other project value chain initiatives, has already contributed to a significant reduction in inventory levels, and therefore, a double-digit million euro reduction in working capital.

And finally, we've completed 3 larger acquisitions over the course of 2019: Óptica2000 in Spain; McOptic in Switzerland; and Charlie Temple in Benelux. These acquisitions will, and have already, helped strengthen our market position, and are extremely complementary to our existing presence in these markets. The integration of these businesses is already underway and particularly Óptica2000 and McOptic have already positively contributed to our results in 2019.

Dear ladies and gentlemen, 2019 was a busy year at GrandVision, and we are very proud of all that we have achieved. I am confident that, also in 2020, we will continue to execute well against our objectives.

I will now hand over to Willem, who will discuss our segment results in more detail, including a brief update on the situation and the impact of the new 2020 French regulatory change. I will then return with the outlook for the year before we open the line for questions.

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Willem Eelman, GrandVision N.V. - CFO & Member of Management Board [4]

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Thank you very much, Stephan. Hello, and good morning to everyone. I'm happy to be speaking to you again, and hope that everybody has a good start of the year so far.

Once again, I won't spend too much time on discussing the IFRS 16 impact as I'm sure you've all seen this by now as we've reported this consistently also in the quarters of this year.

For the full year, the net impact on this accounting adjustment on the bottom line was EUR 2 million, as you can see on the slide. And just as a reminder and repeat what Thelke already shared with you, we will officially switch to using EBITA as a key performance indicator in 2020, given that we now have comparable results for every quarter. On adjusted EBITA level, the difference between the pre and post-IFRS 16 is EUR 32 million, making EBITA a much better key performance indicator than EBITDA, which is much -- which is more affected by the implementation of IFRS 16, as you can see, EUR 386 million.

Moving to the next slide and G4. We reported strong 6.0% revenue growth at constant ForEx and comparable growth of 3.7% for the year. After a difficult year in the Benelux in 2018, we have successfully managed to win back our customers in the Netherlands, helping us to return to growth.

We continue to see and report solid performances in France and Germany with comparable growth ahead of the segment in aggregates. I will talk a little bit more about recent trends in the French markets on the next slide.

The U.K. business is continuing to present us with headwinds as general consumer sentiment is down, and there is a lower retail footfall as a result. Yet, our Lenstore business, on the other hand, is progressing very well in the U.K. and in the newly entered markets. EBITDA growth at constant ForEx was 2.2% for 2019, representing a 73 basis points margin deterioration over prior year, which is largely down to the headwinds in the U.K., in particular, Vision Express, and stronger commercial activation across the segment. As mentioned, we're working very hard to address the situation in the U.K.

Now some words on specific situation that we're being confronted with in France and that was announced at the end of last year, and this pertaining to the healthcare reform and the impact on the industry at large and our own business.

As many of you are aware, the latest reform of the French public health care system became effective on January 1, 2020. And under this reform, opticians have to offer at least 17 prescriptioned frames for adults, both female and male, and 10 for children, with a maximum price of EUR 30 for the frame and a total maximum entry price offer at EUR 100, depending on the subscription.

As you may have heard, the implementation of this new regulation has led to significant disruption in the industry since the beginning of the year caused by health insurers, IT platforms not being ready to process customer orders. As a consequence, Banque de France has reported a 24% decline in the optical retail activity in January. And GIFO, the French optical retail association, observed an industry decline of 40, 4-0, percent in January.

Needless to say, we also had a weak start to the year in France, but compared to the rest of the industry, we saw only moderate decline in January, with first signs of improvements heading towards the end of the month. We are confident that we will recover these lost sales as the year progresses.

Overall, we are well positioned, especially in the medium to longer term, given our competitive positioning in the mid to low price segment in the market in combination with our strong supply chain. This allow us to offer more choice at these lower price points, and we have, as a consequence, already seeing volume increases in our Générale d’Optique chain in France.

On the operational side, we're the only integrated large chain in the market, and operate with integrated IT and POS systems and a fulfillment capability. This is allowing us to adapt our systems more quickly and process orders more efficiently. It's not the case for independents and franchises with fragmented POS and other systems.

For this year, we're confident that we will recover lost sales as the year progresses, but we have also seen some pressure on gross margins due to the shift in sales mix and pressure on average prices as a result of the new law.

Part of the margin pressure should be compensated by increased volume and operating leverage. We're confident that our resilient and agile business model, we will be able to successfully address these regulatory challenges and changes, as we've also done so in the past.

Move on to Slide 14 and Other Europe. We continue to see stable performance on both comparable growth and margins in this segment. This segment saw a strong contribution from acquisitions, which added 8.3% largely due to Óptica2000 and McOptic in Switzerland and Óptica2000 in Spain. The comparable growth was helped by high single-digit growth in Eastern Europe, while Northern Europe and Southern Europe continued to see steady growth.

With regards to profitability, EBITDA growth was helped by the turnaround of our Italian business, which is moving in the right direction now. Several key markets saw benefits of integrating of operating leverage, such as Spain and Portugal. However, we also incurred integration costs relating to the acquisitions as well as slightly lower margins in Northern Europe, which offset improvements in other countries.

The EBITDDA margin was, therefore, largely stable, declining marginally from 15.4% to 15.5% in the prior year.

Now, to the Americas and Asia, where we have reported another quarter of remarkable performance, with double-digit comparable growth for quarter 4 at 11.1% and 8.8% for full year 2019.

The negative foreign exchange impact for this quarter was 2.4%, once again, largely due to the depreciation of the Turkish lira.

Most of our Latin American countries saw acceleration this year, while Russia and Turkey continue the longstanding growth trajectories. Our U.S. business continues to be the weak spot in this segment. We continue to believe -- to expect the U.S. to be challenging in the near term, and it will take time to further establish a compelling commercial proposition.

At the EBITDA level, profitability increased by 57% at constant ForEx, and EBITDA margin in this segment increased to 5.8% for the year. This improvement is due to the operational performance of this segment, as it took measures to improve profitability of our store networks and local operations.

We've also decided to discontinue our operations in China. Despite the efforts to turn the business around most recently by closing badly performing stores and improving store profitability, GrandVision China remained loss-making.

The potential of turning the business around would have required us to make further investments into the country with an uncertain outcome. This decision will help us to further improve the profitability of this segment going forward as we focus our attention and resources to other markets.

Turning to free cash flow generation. Our free cash flow also saw a marked improvement this year to EUR 296 million from EUR 238 million in the previous year, as our cash conversion increased from 42.8% in 2018 to almost 55% in 2019. This improvement was due to lower capital expenditure in 2019 and improvements in working capital requirements as we better manage our inventory, payables and receivables.

Our leverage is at a historical low, with net debt over EBITDA at 1.2x, despite funding acquisitions through internal resources in 2019, all thanks to a strong cash flow generation.

Capital expenditure for 2019 was at the midpoint of our guided range of 4% to 6%. So in that sense, a normal year. In prior year, we had sizable CapEx associated with the rebranding of the Vision Express at Tesco stores.

Our non-store CapEx in 2019 was up significantly as we opened our first regional fulfillment hub, as already commented by Stephan, and made investments in technology related to the strategic -- to the digital strategy, as also highlighted already by Stephan.

Adjusted EPS performance impacting by group was impacted by U.S. goodwill. And as you can see, when we exclude nonrecurring items, it is flat versus prior year after absorbing items such as the impact of the noncash U.S. goodwill impairment charge of EUR 51 million in quarter 2 of this year.

Now moving on to dividend. Our Supervisory Board has proposed a 2019 dividend of EUR 0.35 per share, which is an increase of 6.1% compared to the prior year and represents a payout ratio of 49.6% of reported -- of adjusted EPS compared to 38.7% in the previous year. This is at the top end of our guided range of 25% to 50%, reflecting our strong free cash flow generation. The dividend proposal is subject to shareholder approval at our AGM on April 24.

I will now hand back to Stephan to provide our outlook before we open for questions.

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Stephan Borchert, GrandVision N.V. - CEO & Member of Management Board [5]

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Thank you very much, Willem. So to summarize, 2019 has been an eventful year for GrandVision. We continue to strive to meet customer needs through our value proposition, advance our growth and be a socially responsible organization. We have made good progress on the path we set out for the company, and would continue to do so in the best interest of all our stakeholders.

We still have some way to go, but the encouraging performance in the first year of our plan has given us a good head start for the medium term. While we continue to face challenges in some of our markets, and I've already mentioned, I am pleased to say that we have made strong progress in others, for example, Italy and the Benelux.

The structural growth drivers of our industry, such as an aging population, an emerging middle class and greater awareness of eye health remained fully intact. We have full confidence in our ability to grow our business in a sustainable and profitable way.

We also expect to further reduce our leverage through internal cash flow generation, as Willem alluded on. Keeping that in mind for full year 2020, we expect to deliver revenue and adjusted EBITDA -- EBITA growth broadly in line with our midterm guidance.

However, the growing uncertainty about a further spread of the coronavirus may well have an impact on our 2020 results. While we are currently not facing shortages on the supply side, a further spread of the disease may have implications on production in China, and therefore, on our supply chain. We are monitoring the situation very closely. I'm in constant contact with our suppliers. However, at the moment, we operate at ordinary course of business. A further spread of the virus in Europe or other parts of the world could certainly also have a negative impact on retail traffic and sales in affected areas.

Finally, with regard to the announced combination of GrandVision with EssilorLuxottica, both companies are continuing to work through the regulatory approval processes, and there are currently no further or new news developments to be shared. In the meantime, I'd like to reassure all of you that our focus remains on business continuity, and in particular, on achieving our medium-term objectives. We firmly believe that the possible integration with EssilorLuxottica will help us to further accelerate the achievement of these objectives.

On that note, I will now hand back to the operator to open up the lines for any questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take our first question. And this comes from the line of Jaina Mistry.

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Jaina Mistry, Deutsche Bank AG, Research Division - Research Analyst [2]

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It's Jane Mistry from Deutsche Bank. And I've got 2 questions related to coronavirus. The first one is whether you can share with us any measures that you've put into place to protect profitability if coronavirus were to spread more extensively in Europe? And related to that, obviously, we've seen that you've got very strong cash generation. Do you see a risk that the net debt limit for the EssilorLuxottica transaction could be exceeded if things deteriorate in Europe?

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Stephan Borchert, GrandVision N.V. - CEO & Member of Management Board [3]

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Thank you very much. Great questions. Look, at the moment, we really continue to operate on an ongoing business assumption. We don't know how the corona, particularly spread in Europe, will pan out and turn out. As you can imagine, as a company of our size, we do have business continuity plans and fallback plans for all type of things that could happen. Here, in particular, our first and foremost objective is to keep our staff in a safe environment. So we monitor the situation very, very closely. At the moment, as you know, we basically have a bit of a hotspot in the Northern part of Italy. Many of these things that are happening, are a bit out of our control sometimes because local governments and authorities will have to decide whether certain shopping centers are closed or things like that. But to reassure you right now, we do not feel massive disruption for the time being, but we have put in place, of course, a lot of fallback plans if the virus would spread further. And Willem is going to take your second question on cash.

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Willem Eelman, GrandVision N.V. - CFO & Member of Management Board [4]

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Thanks, Stephan. Now let me address the question around net debt. As we've reported, our net debt stood at EUR 753 million at the end of the year, which is well below the agreed rate that we have agreed with under the support agreement. We also expect, under normal circumstances, to have continued strong cash generation in 2020. So in that sense, our ongoing assumptions are very robust. In a -- in the moderate scenarios, with the measures that Stephan has already indicated, we are confident that our net debt position is robust. And clearly, that's what we are preparing for, all the measures, and they will then also impact our net debt as we make up for certain profit impacts, if something were to happen. Clearly, there will always be black swan scenarios that we cannot predict. But at this point in time, we're confident that we've done everything required to protect us, both from a profitability point of view and from a cash generation point of view.

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Operator [5]

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(Operator Instructions) And we will now take our next question. And this comes from the line of Elena Mariani.

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Elena Mariani, Morgan Stanley, Research Division - Executive Director of Luxury Goods and Brands [6]

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This is Elena Mariani from Morgan Stanley. A few questions from me as well, please. With regards to your supply chain, you've talked about things being pretty much under control right now. Could you remind us of what percentage of your supply and number of suppliers come from China? So what is the current split? And what's the exposure to the region right now? And in terms of things going back to normal, with regards to production locally, do you see things improving? Or are you still monitoring because you see potential further risks going forward?

And question number two. In terms of your anti-trust approval process with EssilorLuxottica, I imagine there is nothing that you can share, and you've said it clearly that everything is going according to plan. But could you just comment on the fact that the European regulator has given some precise comments on what they're going to look into in more detail. Is this going 100% according to your plans or is there something that has been surprising you during the regulatory process?

And then final question. I've seen that you have discontinued your business in China. Would you consider doing the same for other unprofitable operations, such as the U.S. ones or other countries in general, all around the world?

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Stephan Borchert, GrandVision N.V. - CEO & Member of Management Board [7]

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Thank you, Elena. Thank you very much for your questions. I will hand to the first question over to Willem on the supply chain and take the other 2 ones later.

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Willem Eelman, GrandVision N.V. - CFO & Member of Management Board [8]

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Yes. Thank you very much. Thanks, Elena, for the question. Clearly, we have an extensive supply chain that spans globally. We work closely with our partners, such as Safilo, Luxottica and other frame manufacturers, but also on lenses, with partners such as Hoya, which is well known in the market. And they have their own footprints, but we are in close contact with them and to manage our supply from these suppliers.

The -- we have an extensive supply chain ourselves for our exclusive brands, where we have a network of Chinese suppliers. Here, we are monitoring on a daily basis. We've created a team. We have actually taken mitigation actions. We have a strong pipeline of product and stock in our network, as we speak, and we are actively reallocating where needed and are prepared for that. Actually, we've seen a receding of the risk profile, as a basis of these mitigation steps we've taken over the last week. We are in close contact with all our suppliers. A number of them have already reopened. We expect that that will continue, but all depending, of course, on the further spread or containment of the coronavirus. But we are monitoring this on a daily basis.

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Stephan Borchert, GrandVision N.V. - CEO & Member of Management Board [9]

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Thanks, Willem. To your question on the antitrust process, yes. As you rightly stated, there is not much more to really comment on. Maybe more specifically what you asked, we do understand that the market test made by the case team was very large, and also many answers have been received. It is the normal procedure. The EC has normally 90 working days now to adopt a decision, but subject to potentially tangents. We both -- both companies, however, remain confident about our expectation to close this transaction between 12 and 24 months starting from the announcement date in July last year. So therefore, I think there is really not much more we can say on that. And, yes -- and you need to bear with us also on new news.

On China, quickly. China was a very deliberate decision. We do review all our country portfolio, stock portfolio as well, of course, but country portfolio, according to profitability, but also to potential outlook. And after a couple of tries, we have decided that China does not really represent for us a potential outlook case in several variables. So therefore, to your question, yes, we are constantly putting other countries on the challenge. We do look at this. We do not have concrete -- however, concrete intentions to close other markets right now, also not for the U.S.

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Operator [10]

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(Operator Instructions) And your next question comes from the line of Ben Lacaille.

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Benjamin Lacaille, BofA Merrill Lynch, Research Division - Associate [11]

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Just 2 main questions for me. The first, just on France. So I was just wondering if you could give us a bit more information on exactly what you've been seeing on the ground in January. And specifically, if you've seen people trading down into cheaper frames? I suppose longer term, clearly, there is some disruption already in January. But over the longer term, do you think this will have a meaningful impact on the average selling price within the market? And what kind of impact can that have on your business, but also those of your competitors in the independent sector? Second question, in terms of e-commerce, I was just wondering if you could remind us what the state of players in terms of selling prescription glasses over your e-commerce? And how you might see that evolving over the next few years?

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Stephan Borchert, GrandVision N.V. - CEO & Member of Management Board [12]

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Thanks a lot, Ben. Maybe, I take that 2 things. So just on France, yes, I think Willem has alluded on it before. We also rely a little bit on public figures, as we said. So the industry overall took quite a hit in January. GIFO reported a 40% down. We do hear this also from suppliers. So -- but as Willem said before, quite a big chunk of this is driven by a non-prepared situation between retailers and the insurers on the IT platform side. We also saw this to a certain extent. We felt that we were way better prepared on the -- at least from our side, but faced issues on their side. So that's the one thing.

Secondly, you have to differentiate the market or segment it into 2 kind of new segments. The A market is newly fully reimbursed segment with basic eyecare and very limited frames offer. We do see there, surely, the potential of a further decline of prices. Just to give you an example, consumers, which are now looking for basic eyewear and basic frames, which are interested in this very, very, let's say, economic offer, a regulated pair of glasses for the correction of moderate myopia would be available for roughly EUR 105, fully reimbursed. Opticians previously charged on average EUR 290 for the same basic pair of classes, which EUR 65 was then paid by the customer. So we feel that our prediction is roughly 10% to 15% of French customers would be attracted by this offer. And this could, of course, have possibly an impact on that. Again, as we said, we feel quite comfortable with it because we are well prepared. We are -- we have been preparing for this since long. We operate Générale d’Optique, which is already in this price segment. And overall, we feel quite well prepared there.

On the competitors, yes. I mean, in the long term, these reforms may trigger wider industry shakeup, particularly, again, with disproportionate pressure on independents and small chains, where we have already, after the first regulatory changes, seen a quite significant decrease of the number of opticians there. We feel overall quite comfortable. We see disruptions really in the first 3 to 4 weeks of Jan. But as Willem alluded on before, we are quite confident already last week that we turned back into positive territory in France, which gives us a very confident outlook also for this country.

Then secondly, on e-com. We -- as also alluded on in previous calls, the selling of optical, particularly of multifocal online -- pure online, is still a bit of niche. It is still due to the 2 core touch points that are in this customer journey, which is the eye test where there is no sufficient and real comprehensive virtual eye test or fully online eye test available, and then, it's still fitting at the end of the day. So we have bought Charlie Temple for exactly this reason. We want to learn and we do currently learn how to further improve and fine-tune such a full optical online customer journey. And we made good progress there. So definitely, it is something to watch. We believe, and our internal estimates are, that this could go up to 5% to 7% within the next 5 years of total sales. That's a bit of prediction we have for ourselves and that's also what we are working against.

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Operator [13]

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(Operator Instructions) It seems like no further questions that came through. Sir, you may continue.

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Stephan Borchert, GrandVision N.V. - CEO & Member of Management Board [14]

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Thank you, John. Ladies and gentlemen, we thank you for your questions. Thanks a lot. It was a pleasure to talk to you again. We'll come back to you again on April 24 when we publish our Trading Update for the first quarter of 2020.

Thank you very much for your participation, and have a great day. Goodbye.

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Operator [15]

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Thank you. That concludes our conference for today. Thank you all for participating. You may now disconnect.