Hello, welcome to the Q3 results call of EssilorLuxottica. I will now hand you over to your host, Paul du Saillant, CEO of Essilor International, to begin today's conference. Thank you.
Good morning. I'm delighted to welcome you to our Q3 conference call, together with our Co-CFOs, Stefano Grassi and David Wielemans, as well as our IR team. Today, we publish solid numbers which were made possible by the commitment of our teams. First, I would really like to start with a word of gratitude to them on behalf of Francesco Milleri, our management teams, and I. During COVID, and again today with its re-acceleration in Europe, our priority is to keep a high team spirit and everybody safe. All our employees have responded with great resilience, commitment, and adaptability. Thanks to that, we have got many good news to share today, while fully realizing the complexity of the world around us. A clear mission and purpose to address the need for good vision, particularly well-suited to the current well-being needs of billions of people. See more, be more.
Structural resilience of vision needs. Enhanced consumer awareness for eye care since people spend more and more time on screens. New product services, well-suited to the new environment. More than 95% of our stores, Stefano will go back on this, are open. An amazing entrepreneurial spirit of our 400,000 ECP customers who have been managing this crisis and the reopening of the store with great agility. A very strong acceleration of digitalization. COVID has been a clear catalyst, and it has been a clear catalyst for our market, but also for us at EssilorLuxottica to deepen our integration, simplify our organization, and accelerate decision process. All this while controlling strictly cost and preserving cash. As a first introductory comment, I really wanted to lie in front of you those key ideas. Now, a few highlights before Stefano goes in more detail on the business review.
Our Q3 revenue was down very slightly at constant currency, only 1.1% negative. Most important is to notice that most activities back to growth. This with a positive mix in terms of product, channels, and countries. If you look by division, the lens and instrument was up year-over-year, driven by increased consumer awareness for eyewear, appetite for branded product, and some pent-up demand. Wholesale bounced back very nicely thanks to the independent channel and the timing of new models. Retail significantly narrowed its decline thanks to optical models and lenses, which were all up during the quarter. You see an interesting dynamic when you look by division. By channel, e-commerce up 40% year to date to a record close to EUR 900 million of sales, driven by the proprietary brand platforms like rayban.com, oakley.com, sunglasshut.com, but also by multi-brand sites like eyebuydirect.com, which performed very strongly.
Another channel driving the growth has been the independent ECP, leading the recovery through their entrepreneurship, accessibility, and product assortment. Very important and interesting dynamic in our channel. If now you look by countries, developed markets have been back to growth, with North America and Europe showing very positive performance. While emerging market are improving and have been improving month by month through the quarter, with some of them, like China, clearly being back to solid growth, in the quarter. Last but not least, if you look by product, we saw strong demand for our value-added solutions. Ray-Ban, Oakley, Varilux, Crizal, Transitions GEN 8, Eyezen, the new precision instrument, VR800. Our new consumer experience, Avancé. The product mix has been a very interesting and positive one.
As this product mix was at work, we also had strong activity in new launches, like the Ray-Ban Authentic that was launched in Italy, or the new myopia management lens, Stellest, which was launched in July in China. All of this supported by increased partnership programs for independent ECP. Some of you might have noticed that we launched this EssilorLuxottica 360 program in the U.S. back in July. A very important dynamic in between the division, the channels, the product, and the geography, which show the full breadth of presence and deployment of EssilorLuxottica worldwide. As we were managing this rebound, I want to insist on the importance of the way the integration work has been at work, and I will come back to that after Stefano. We have been able to manage this V-shaped rebound and the integration work while controlling cost and preserving cash.
You see that through our strong free cash flow in the quarter that led to a cash position of EUR 8.8 billion at the end of September. These were a few highlights I wanted to share with you, and I will now hand over to Stefano, who is going to give you more color on these good trends.
Good morning, everybody. Before we start our journey across our division, across our region, there are two highlights that I want to share with you today. First of all, our revenue trend, as Paul mentioned, clearly outlined a V shape in our recovery curve from the first wave of the pandemic outbreak. You all might remember that our sales started to decline in the month of March, when we posted a - 33% at constant FX basis, deepened down in the month of April at - 70%. After that, we had a progressive and fast pace of rebound. May was - 52%. The month of June was - 19%, and the first quarter was just a touch below 2019 level at - 1% on a constant FX basis.
Clearly, we proved that the resiliency of our business model was very much instrumental to this fast pace of recovery that we observed in the recent months. The second highlight that I have for you is regarding currencies. Our performance was - 1.1% on a constant FX basis, while on the current FX sum, our revenues declined 5.2%. We had about 4 percentage points of currency swing. Those currency headwinds very much derived from the devaluation of the U.S. dollar. It was about 5% during the course of the third quarter, as well as the devaluation of the Brazilian real. That during the course of the third quarter, devaluated approximately 30% against euro. At current FX level, we do expect those headwinds to continue during the course of the fourth quarter as well as during the first half of 2021. We now start looking at our different divisions.
I'll begin with the biggest and best performer one, that is the lens and optical instrument. The lens and optical instruments posted revenue up 2.7% during the course of the third quarter on a constant FX basis. While in the first half of the year, you might remember, the lens and optical instrument sales declined 23%. We are very happy with the solid growth that we saw in Europe as well as in North America from this division. We experienced solid product mix thanks to the anti-fatigue, the blue cut lenses, as more and more people in the population worldwide get exposed to electronic device during the pandemic outbreak. We also got pretty good support for the more recent launch of products. One perfect example is the Transitions GEN 8.
You might remember it was rolled out last year, and whenever it was launched, it was a very successful story worldwide. Sunglasses and reader, -4% on a constant FX basis for the third quarter. We moved from the first half of the year, where sales declined 29% on a constant FX on the sunglasses and reader. We are very pleased that with the Bolon back to double-digit growth on both optical as well as sun. The FGX business showed some remarkable improvement during the course of the third quarter, but we're still trending here on a negative territory. Really good to highlight, first of all, that the e-commerce was up on the double-digit territory during Q3, and we observed very positive sell-out data on readers in North America. This is obviously a very promising indication as we get into the fourth quarter.
Overall, I would say that both Bolon and FGX show again their complementarity in the EssilorLuxottica brand portfolio. Now let's move to wholesale. Wholesale, it was -1% on a constant FX basis. I think it's important here to remind you, where do we come from? The first half of the year for the wholesale division was -43%. In particular, during the second quarter, wholesale was -64%. We are observing a very material rebound in our wholesale performance from -64% to -1% on a constant FX during the course of the third quarter. Happy to report double-digit growth in North America, very much led by independent channels. Happy to see Europe solid positive, and Asia and Latin America still on the negative sales trend. The last division is our retail division.
Retail was -5% on a constant FX basis, while on the first half of the year, we reported -28% for our retail division. As Paul mentioned, over 95% of our store base was open as of the end of the third quarter. Comp sales just for the stores that were open during the period were down 6%. Within that number, we really observed two different velocities. On one side, our optical stores, they were flat, while the remaining part of our store network was down on the negative territory, on negative sales. The last touch is on our direct branded eyewear e-commerce that grew during the course of the third quarter over 60%, proving once again, a very strong track record of growth throughout 2020. Now let's have a quick snapshot of our performance across the different regions.
I won't spend too much time on this page, but just want to share a couple of things. First of all, the first two regions that you see on this page, namely North America and Europe, that during the third quarter represents 80% of our total revenue, are the two regions that posted positive sales growth on a constant FX basis. Asia, and more so Latin America, are the regions that are still lagging behind from positive trends, clearly as a consequence of our COVID outbreak. I will skip the first nine month trend, and I will go directly into the region journey. I will start with the biggest, and actually the best performer region, that is North America. You see on the headline, 2.5% at constant FX rate for our North America performance.
Our B2B channel, lens and frame, was very much supported by a strong demand of independent channel. If we look at our sales division, sales to independents on the lens side was up mid-single digit. Also, thanks to our partnership program that Paul described before. Partnership programs like Vision Source, like EL 360, like Essilor Experts, that every day engage more than 8,000 ECPs across the United States. From a product standpoint, happy to report solid growth on Transitions, Varilux and Crizal lenses. Also pleased to share with you that innovation never really stopped on the lens business. As a matter of fact, during the course of the third quarter, we introduced Varilux Comfort Max in the United States, and in the month of September, we launched Crizal Rock in Canada.
Two important launches on which I'm sure will be a very successful story in the months to come. On the wholesale side, we're very excited about the double-digit growth that we've seen in our wholesale. That double-digit growth was very much led by a strong revenue in independent channels, but also in the key accounts and through our third-party e-commerce websites. While the department stores remain still on a negative sales trend. Retail now. Retail sales were slightly negative in Q3. With optical retail comps, they were flat in the quarter, and that was also supported by solid price mix, in particular, thanks to the lens. That obviously is worth to be highlighted because it very much witnessed the tighter partnership that is happening between EssilorLuxottica in ensuring high degree of penetration within our optical retail store network.
Sunglass Hut was negative in Q3, very much challenged by the lack of touristic traffic. The best performer channel in North America for Sunglass Hut was Bass Pro 160 store, that was very much due to the booming that we observed in North America of the outdoor activities. Last but not least, our branded eyewear e-commerce. Sales in North America were up 70% approximately, with rayban.com up 85%, sunglasshut.com up 100%. We doubled the business on the Sunglass Hut division, that was very much leading the way for our brandedeyewear.com in North America. Now let's switch gear and let's look at another region that has been delivering a positive growth rate on constant exchange rate. That region is Europe.
Europe was up 1%. You remember, Europe comes from the first half of the year, where sales were negative 32%, still on a constant FX. Italy, Germany, and Turkey were all in the positive territory, while U.K. and Spain were still lagging behind on negative sales trends. The lens business posted positive high single-digit growth rate in Europe, thanks to a solid growth of branded lenses, and very much thanks to a solid support by online business, very much driven by the prescription glasses that had a very strong delivery in Europe during the course of the third quarter. Wholesale was solid positive, with sales up around 4% on a constant FX basis. We had very solid support from both prescription frames as well as sun. This is very good indication.
Retail in the third quarter posted negative sales, very much driven by the sunglasses business that suffered in Europe the lack of touristic traffic flows, especially in several capital across the European region. Salmoiraghi, the Italian retail chain, was still on the negative territory from a sales perspective, I want to highlight here that the prescription part of Salmoiraghi was up mid-single digit during the course of the third quarter, proving again the resiliency of the business model on the prescription side of the business. Now let's move to the east part of the world. Let's look at Asia, Oceania, and Africa. Our overall picture here is negative. Sales declined 8% on a constant FX basis during the course of the third quarter, but I want to share with you a couple of good things that we observed during the third quarter.
First of all, China overall was flat during the course of Q3, and mainland China, in particular, was up mid-single digits on a constant FX during Q3. The other good news that we want to share is Australia. Australia delivered a + 7% performance during the course of the third quarter. Conversely, Korea, India, Southeast Asia, and Hong Kong reported negative sales results during the course of Q3. I want to draw your attention in China for a second, because in China, the lens business posted double-digit sales growth, and this is obviously very important for our presence and our development in this key part of the world. We have a showing in this page. You see that on the right-hand side of this page, a showing that very much celebrates the launch of the new Stellest lens.
The myopia management lens that was piloted in July in one region in China. We started there, but we've seen very good success, and now we're progressively rolling it out to the remainder part of this country. You'll hear us more and more, Paul and the rest of the team talking about Stellest, and we observe positive orders intake on a sequential improvement week after week in China. Very promising for the remainder part of the year and 2021. On the retail side, very pleased to report that optical Australia retail sales were up on the double-digit territory despite the shutdown of Victoria State, which we are very pleased in recent day has been lifted. All the fundamentals in optical Australia retail were very positive, conversion, multiples, and price mix.
This was also thanks to the launch of the new Eyezen and Varilux lenses in the optical Australia retail network at the end of the first quarter. Let me close our journey across the different regions with the region that was really the most challenging one, Latin America, - 22%. The overall picture here shows a very challenging environment due to the COVID outbreak. Brazil and Mexico were negative double digits, but happy to report that in September, Brazil reported an encouraging positive growth on the lens business. The other positive signal that I want to highlight here is the positive order intake and sales that we posted and we observed on the wholesale B2B side of EssilorLuxottica. A pretty good indication despite a challenging Q3 in Brazil, pretty good indication as we get into the fourth quarter for Brazil.
Argentina was up double digits. Our GMO, our optical retail chain in Latin America, reported negative comp sales just for the stores that were open. Again, a positive signal here that starting in the month of September, our trend showed positive comp sales for the stores that were open. Last note before I hand it over to Paul is a quick snapshot of our retail footprint in Latin America. We enter into the third quarter with about 60% of our stores that were open in the region. At the end of September, we have over 93% of our store base that is open in Latin America.
With that, we concluded our journey across the different region, and I'm obviously passing back to Paul that will give us more color around the integration process, and then will share with you some closing remarks. Paul, please.
Thank you, Stefano. Thank you, Stefano, because I think you gave us a great illustration of this amazing growth dynamic that is at work in between the different divisions, the different geographies, the different activities, product categories, brands. I think it's a great illustration of the breadth and the reach of EssilorLuxottica, and the combination of product, brand, go-to market, local presence that we have. That our teams are deploying with great agility in so many countries geographies. Great illustration. I wanted to share a few words on the integration, which is, of course, a key topic, at work, in the construction of EssilorLuxottica. First, we are fully on track to deliver our synergies of EUR 420 million-EUR 600 million by 2023. I wanted to start by laying that in front of us.
Francesco Milleri and I are taking more and more decision together, sharing many points of views, and working efficiently with each other with our integration team that Pierluigi Longo and Eric Léonard are animating, our key executives and full commitment of hundreds of our team around the world. The COVID-19 pandemic has proved to be a catalyst to accelerate our decision, simplify our organization, and deepen our unification. We now have 28 integration work stream against the 20 that we had at the beginning of our journey. We have increased the number of topic, whether they are top line or cost or project, specific project. The new environment supported cost synergies with key achievement in the field of procurement, back office, lab unification and IT. On IT, we just went live with the key financial module that was rolled out in Italy in October, a key milestone.
Many activities in the area of cost. Also on the revenue synergy, while temporary, they were delayed during the lockdowns, but we saw them recovering nicely in the last five months, including in October with great contribution. We reach important milestone on complete pair with Ray-Ban Authentic launch in June in Italy. The new joint ECP program, first of a kind, EssilorLuxottica 360 that, as I said before, was put in place by our leaders and teams in the U.S. in August. Many, many cross-selling activity, development of Varilux at Salmoiraghi & Viganò, OPSM, David Clulow, LensCrafters. Deployment of Transitions in all of our banners. Increased penetration of Ray-Ban, Oakley, and many Luxottica frame brand at Essilor Experts and Vision Source members.
Many activity both in the cost dimension, in the building of EssilorLuxottica and in the top line synergies, which is a big credit to the team because despite the complex situation that we face operationally, actually, the level of activity has not slowed down. On the contrary, it has increased. This is a few key thoughts I wanted to leave with you. A few thoughts before we go to the Q&A. I would like you to keep in mind a few key points. First, and we have said it, but it's very important, is the resilience of our industry, which address a fundamental need. Vis-à-vis this fundamental need, we have a company which has a full set of global assets but benefits from a very granular local presence, key in the current period. This gives us agility to mitigate the volatility of the near-term business environment.
We are prudent about the second wave of COVID in Europe. At the same time, we remain confident about the structural need for optical product and solution and the fast recovery post-outbreak. I think you got from Stefano explanation the profile that we have witnessed with the first wave of COVID and the V shape that we have witnessed in so many countries. This is really confirmed about what we saw in the last six months. Remember that optical activities represent 70% of EssilorLuxottica revenue. This COVID has confirmed the need for good vision and has increased the consumer awareness about the need of having good vision solution. Second, we have powerful assets to lead the transformation of the eye care and eyewear industry and outperform this industry.
A vertical open business model, a unique portfolio of brands, strong innovation, and a global local supply chain and distribution. I want also you to keep in mind that M&A remains a key pillar of our growth. Francesco Milleri and I are taking decision to build a strong combined group during this crisis by deepening this integration, accelerating our digitalization, continue to innovate, and leverage our global supply chain. All of this while controlling our cost and preserving the cash. To conclude, I would like to remind you how important our strong human values are for us and for all of us at EssilorLuxottica. This has kept a great team spirit in the company in this difficult and uncertain environment, and I really want to recognize this attitude of our teams.
We will continue all our initiatives around our mission, including new business models, very promising, and deploying employee shareholding. They form a strong foundation on which to build EssilorLuxottica and to embark teams, customers, and consumer.
With this, I would like that we go in the Q&A session with Stefano and David. Thank you very much.
If you would like to ask a question, please press star one on your telephone keypad. Please ensure your line remains unmuted locally. Our first question is coming from the line of Graham Renwick from Berenberg. Please go ahead.
Good morning, everyone. Thank you for taking my questions. I just have three please, if that's okay. Firstly on trading, assuming that there was a sequential improvement through Q3, was your constant currency growth positive at the end of Q3 in September? You're able to give us a little bit of color on how that has developed through October or Q4 to date. Secondly, on cash flow, you've seen very strong free cash flow generation there in Q3. Can you talk us through the moving parts of that? Is it actually fair to assume that you've grown profits in the quarter, or is there any sort of big working capital efficiencies or CapEx savings in there that help that?
Finally, just on GrandVision, is it possible for you just to provide an update there? Can you remind us of where we are in the EC approval process? I think you previously said that you were hoping for a decision in Q4. Is that still the case? Thank you.
Thank you very much, Graham. I propose, Stefano, that you take question one and two, and I will take the third one.
Absolutely, Paul. Absolutely. Graham, the trend during the course of the third quarter was pretty homogeneous if we look at the overall performance. We got a marginal difference across the months, but I think the overall trend was fairly consistent throughout the quarter. With respect to what we observed in the month of October, we observed a further acceleration in our trend, and we are now solid positive for the month of October in terms of business results. Clearly, going beyond that is obviously a bit more of a question mark, because we need to observe and understand the evolution of the pandemic outbreak, in particular in Europe. This is something that obviously we'll better understand and deep dive into the following days. Again, no major difference across the months.
October moved into solid positive, again, close look into what's happening in the month of November and December. With respect to cash flow, I would say the primary driver of the free cash flow generation was very much a very solid and strong management of working capital. Paul, with respect to the third question on GV?
Yes. Thank you, Stefano. On GV, like we have told you, and always confirm, the strategic rationale for the GrandVision acquisition is confirmed and makes sense for EssilorLuxottica. We have always confirmed that the interest of this and the complementarity of these assets. On the antitrust process, it's progressing. We are actively working on the three remaining authority with the three remaining jurisdiction, Europe, Chile, and Turkey, making good progress. The legal aspects are proceeding. You will understand that I don't make any comment on those. We are confident at EssilorLuxottica that there will be favorable outcome on those legal and arbitration proceedings. We are confident it makes strategic sense. The antitrust process is progressing like expected.
That's great. Thank you very much.
The next question is coming from the line of Julien Dormois from Exane BNP Paribas. Please go ahead. Julien Dormois, you can unmute your line.
Sorry, guys. Can you hear me now? I guess you can. Sorry, I was on mute. Sorry. Thanks for taking my questions. I have three. The first one would relate to the sales trends into Q4. Stefano, thanks for giving us the October trends that you saw. I just have one question here about what's happening now in Europe in terms of the lockdown. I just want to make sure that opticians across the countries which are under renewed lockdowns can remain open. I think that makes a difference compared to the spring events. First of all, can you confirm that the optician shops can remain open there?
Second question is actually a focus on Stellest. This myopia lens that you launched in China, I think in July. I'm just interested to get your thoughts on whether that could become a major sales driver anytime soon. Typically, what are the key hurdles you will need to overcome there to convince patients? Is that the pushback from the parents? Is that the training of opticians? Sort of really keen to get your thoughts here, and also what is a reasonable timeframe goal for launches ex China.
The last question relates to the dividend. I can see in the press release, you are delaying the decision on dividend distribution to early December. I'm just curious whether this can still be paid by the end of the year, by end of the calendar year, because my understanding is you need shareholder approval and possibly an EGM, and that probably takes a bit of time to be organized. I'm just wondering whether there is still a chance of the dividend being paid before the end of calendar year. Thank you.
Thank you very much, Julien. I propose to take the two first one, and Stefano, if you are fine, you take the third. On four in Europe, like Stefano told you, first we are pleased with the trend in October, which is solid growth in Europe and the U.S. all the way to the end of the month. You are right, Julien, that the way the lockdown is being implemented, and we are day by day following that very closely country by country, of course, including France. It is a lockdown, but in which the opticians are considered, rightly, as an essential needs. It means that they have the right to stay open. As I pointed earlier in our comment, the optician is a very proactive, dynamic group of individual.
In the restart back in May, June, July, they were very dynamic and finding many different ways to serve the consumer. Now they can clearly stay open. It's a question more how will the traffic will get to them. I think we have to observe how will the rendezvous be taken. I think they will try to plan to welcome the consumer. They may be more proactive and see how they can make more remote service. I am quite confident that, of course, we are going to see a lower trade than what we have seen in the recent weeks and months, which was very strong. Now, how much of a slowdown and for how long will we see? We will observe. Clearly, it should be maybe less drastic than what we saw in April, May, June.
I think you have, Julien, anyhow, to look at it in a different angle, which is, it's a structural need, and anyhow, we have learned from the first lockdown, the V shape, and the very strong restart, in which actually the store were extremely active to serve the customer. Of course, we have to see how much the traffic is slowed down with the store staying open or partially open. What is important is that we have demonstrated in the recent months, in the last five months, the robustness of the need. Stellest. Stellest is an innovation. Norbert Gorny, when he talks about it, our head of innovation and research at Essilor, when Norbert talks about it, he says it's a totally rupture innovation, because the concept of the lens, and we don't have enough time to go through it.
It's to create this defocal effect in front of the retina, peripheral defocal effect in front of the retina with a very complex design on the surface of the lens with microlens that are sitting in front, very small aspherical lens. It's as disruptive as was maybe the progressive lens invention 60 years ago by Bernard Maitenaz. We are creating a full new platform of design and solution, like a new category that is addressing a problem that is not solved, which is this myopia management, myopia development in between the age of 4- 12. To establish that category, you have to create the awareness. You have to work with eye doctors and cohort of children to see the effect. You have to organize the training in the store, the dispensing to work with the parents, like you said.
It's a full holistic approach that we have, of course, started to do a few years back in China, where the myopia management issue is the biggest. We launched it in July. It's extremely promising. We are now working with other key geographies, for example, key countries in Europe to, in 2021, start the deployment of this solution, work with the key opinion leaders, with the ophthalmologists, the eye doctors, the opticians. It's a journey, starting with extremely promising results that we have witnessed after 12 months of wearing those new lens. We will have the confirmation after two years in a very short period of time. This is what we could say in a few minutes on Stellest, but disruptive innovation to create a totally new technology platform and category for children.
Stefano, on dividend?
On dividend, all I would say is, the decision again, will be taken in the course of the month of December and is technical doable.
Okay. Thank you very much, guys.
Thank you.
The next question is coming from the line of Veronika Dubajova from Goldman Sachs. Please go ahead.
Good morning. Thank you for taking my questions. I also have three, please. I appreciate we're kind of fairly early on. My first one is around the lockdowns and how you're thinking about sort of the drop-off in demand. I know we're very early on, but I'm just curious maybe from your own retail experience, what you have seen in the last couple of days. Are you seeing customers who are canceling appointments? Is there a drop-off in forward bookings? If you can give us any indication. Obviously, it's very hard for us to know given that the opticians are staying open, and this is a very different lockdown to what we had seen earlier in the year. It would be great to get your thoughts on how you're thinking about the potential downside in places like France and Germany. That's my first question.
My second question is just an update on the CEO search, wondering what you can share with us. My third question is a bit of a financial one, looking at the second half of the year. Obviously, very nice rebound in revenues, also you have mentioned throughout the press release and your prepared remarks today, positive mix in terms of the types of products that you're selling and also geographically. Just curious kind of how you're thinking about the implications of that on the gross margin and overall levels of profitability in the second half of the year. Thank you.
Stefano, would you like to take a few remarks on our own retail, very early signs or observation? I can make a few more comments on France. I will take the second one, and maybe you take the third one, Stefano.
Sure, Paul. Absolutely. Just a quick touch on retail. As you know, Veronika, on the retail side, the vast majority of our presence in Europe is very much on the sun side. There isn't much of the dynamic with respect to optician, at least on the direct operated stores. We do see challenges in optical retail in Italy, where we do have a certain kind of restriction. For example, in the capital region in the northern part of Italy, where we have restriction for accessing in shopping malls during weekends. We see probably consumer shopping during weekdays. We need a little bit more time to see how that kind of restriction are impacting the stores.
Again, I think it's important to highlight that no matter what and where we are in the vast majority of the country, our optical retail stores are considering dispenser of essential eye care needs, and therefore the store can be open. Got to be honest with you, we are used to live in 2020 with a traffic decline on a double-digit territory. I think the consumer profile that we see shopping our optical retail store is probably different from the one that we used to see in the past. Meaning that we have a consumer that is much more convinced that by getting into the store, he wants really purchase something that represents an eye care need. The reason why you do see pretty much consistently across the different region, conversion improvement, it very much witness what I was just saying.
Consumer much more convinced to come into our stores. Again, don't see in recent weeks, recent days, don't see any kind of deviation in the trajectory. I also think that what we're observing in Europe needs to be thoroughly understood in the next few days or weeks. Paul, I don't know if you have a reading on your side, probably more on the optician side.
I think, Veronika, it's really early days. I think nevertheless, the optician and our teams have learnt a lot in the period of March to June. I think, the way they will manage the lockdown, as I said, the optician, the store can remain open. The way they interact, leveraging new technologies, remote booking, just to name that one, and the way they have organized their store is going to, I think, make the impact lesser than what we saw in the second quarter in France. It's honestly, Veronika, just a bit too early. I just feel a lot of entrepreneurship and eagerness of the small stores and the stores in France, you were pointing to France, to stay open and to continue to do business. There is a lot of determination is in maintaining the economical activity going.
I think that's the mindset and solution exists. We have to see day by day, and our teams are extremely close to their customer as we talk. You might want to take the question on the gross margin, Stefano. We talk about the business and then I'll say just a word on the CEO question.
Yes, absolutely, Paul. With respect to gross margin, Veronika, yes, you're right. We talk about positive price mix on wholesale with seen positive product mix support, especially on the more mature markets on the lens side. We do have those constituents that are definitely playing in our favor. We still have, on the negative side, a bit of a headwinds deriving from the under-absorption of fixed cost due to the volume. What I can tell you without necessarily disclosing details on Q3 P&L, because this is really a sales call, but we do see a marginal improvement in our gross margin position compared to what you've seen in the first half of the year.
Paul, not sure you want to comment on the CEO search?
Well, this is a sales call so it's really not very much the topic. Veronika, I think, what we can say is that there is a clear governance in place until the general assembly of May 2021. In that governance, Francesco Milleri and I are working closely together, are leading together the company and managing each of us, Luxottica and Essilor. I think it's a very strong and solid setup to navigate through the pandemia and through this complex year. We have around us a top quality group of executive and teams that we're working with. We have a clear operational governance in place. It's robust, and it is serving the purpose very well.
Second, there will be, as you know, a new board elected in May 2021 at the end of the combination agreement, at the end of the equal power setup. That new board will decide about the top of the house organization with its CNR and board members. That's what we can say today, and I'm certainly not in a capacity to comment on those. It's a board topic, with very clear date and rendezvous.
Good. Thank you, Paul. Stefano, can I just clarify quickly a comment you made earlier. You said October was positive CR growth for the group as a whole, or for Europe and the U.S.? I was a little confused, and I just want to make sure I got it right, and then I'll jump back into the queue.
Absolutely. It was a solid positive for the group.
Fantastic. Thank you guys so much, and stay safe.
Thank you. You too.
You too. To support Stefano in this is a very powerful information that we are positive solid growth territory in October.
The next question is coming from the line of Antoine Belge from HSBC. Please go ahead.
Yes. Hi, it's Antoine Belge at HSBC. Three questions. Actually, I'd like to come back on the question of the CEO search, because I think officially, that was a search which was and before the end of 2020. Listening to you and mentioning the May 2021 AGM and on the process that you described, isn't it fair to say that now the news about the new CEO might be more aligned with that AGM date? Second question relates to the incoming U.S. election regarding the different outcomes, what could be the impact on the health policy in the U.S., do you think that there could be different outcomes in terms of how the eyewear industry could be impacted?
Thirdly, coming back to Stellest, thanks for the update. What is the competitive landscape for Stellest, first of all, in terms of other lenses launched by your competitors, but also in terms of competition from other products than just lenses? Thank you.
On the first question, Antoine, I'm not going to go any further. There is a very clear, it's a board topic. I'm not here to comment on the CEO search. It's a sales call, you will understand that I'm not here to comment on this matter. I told you the fact, they are very clear. I think they are very important data point for you on this matter. On the U.S. election, that is certainly not a matter we can comment. What we can say, Stefano, you will complement. What we can say is the need, the optical market in the U.S., the need for good vision is something that for decades has been a very important matter in the U.S., it's a market that has developed itself well. It's the largest market worldwide. It's a growing market.
The need for good vision is well known. There is many vision care provider. There is a full set of stores of all kinds. There is internet offering. There is a lab network to serve the industry. There is all the brands that you want to have, frame brands, sunglass brands. It's a well-developed market, under-addressed, that is key. The key categories are not so well penetrated. I think that's the way we look at this market. Actually, throughout the year 2020, we have seen, like it was very well explained by Stefano, a very solid rebound from the month of May, and a nice third quarter and month of October. I think the fundamentals of the market are good. In whichever scenario, this need for good vision, this need for brand is there. The go-to market, all the channels are largely deployed.
Maybe, Stefano, you can give some color also on this matter. Stefano?
Yeah, sorry, Paul. I know that we have some variables that determine a pretty good level of uncertainty. If I had to judge what we're seeing in the U.S. compared to the behavior that we've seen so far in Europe, obviously, in the U.S., we probably see a level of restriction that is probably to a lower magnitude than the one that we are experiencing in Europe right now. We do see on the prescription side a pretty consistent trend, as Paul mentioned, of positive growth. I think that demand is going to be there no matter what, no matter who is going to win the election. We have planned for the fourth quarter a pretty good amount of activities around our optical retail store, in particular in LensCrafters. We're going to go on TV campaign for two times between October and November, four weeks, two waves.
This is something that we haven't done last year. We have a pretty solid CRM campaign that will very much encourage people to anticipate some of the insurance benefit, not at the very end of the quarter, but to probably widespread that throughout the quarter in order to avoid massive queue of people at the year-end. We're doing a lot of work to also address consumer behavior, address what the customer is looking for in light of this pandemic outbreak. I don't think those trends on the optical side will change, whether it's going to be one or the other contender that is going to win the election.
As we mentioned before, the trend for October was positive. It was positive in optical retail in North America, in particular in LensCrafters. Those are pretty good indications. We continue to observe what's happening. We will obviously continue to monitor the results of our TV campaign and our CRM efforts. Again, we're confident of the exercise and the investment that we're putting in place.
Thank you, Stefano. Antoine, a few complementary information on Stellest. First, I think we have to go back to the magnitude of the myopia topic. Today, 2.6 billion people on Earth are myopes. We estimate, and we shared that with you at the capital market day, that by 2050, 4.7 billion people on Earth will be myope. In those 2.6 billion today, 400 million people are high myopes. If I just go to China, 40% of the population is myope. The question is that there is a few solution at work. There is atropine, which is eye drops. You have contact lens solution, and then you have eyeglasses. We think that this new concept of a lens is bringing a new kind of a solution to slow down the development of myopia in between the age of four to the age of 12, 13.
Yes, the industry is very active at trying to crack these different approach, different technologies. I think the matter is really how do we deploy those solution fast enough and with the proper awareness, the proper explanation to the eye doctor, to the optician, with the proper ramp-up market by market. It's an industry challenge, and the more solution there are, the better it is, because the topic is massive. It is an industry issue that for us, that we provide fast enough good solutions. That's the way I look at it, Antoine.
Thank you very much.
The next question is coming from the line of Luca Solca from Bernstein. Please go ahead.
Yes, good morning. I have a question on LensCrafters. It seems to me that on the one hand, COVID-19 is pushing digital, as you say, also reporting about your business. On the other, your continuing innovation is shifting your mix towards more complex and more sophisticated lenses that cannot be produced or cut or serviced at the point of sale. I wonder about your progress in rightsizing the average store footprint at LensCrafters and how far advanced you are at this stage in shaping LensCrafters and making it ready for the future. If you are in the initial steps of this process or if you see that you have accomplished much, as you said about post-merger integration.
The second question is about STARS. You report continuing growth of this business and importantly, significantly better organic growth in comparison to the average of the wholesale and retail businesses. Yet, the penetration of STARS is still below 20%. How do you anticipate that this will proceed going forward? Do you expect an acceleration in this development, how is your desire to move further into retail, especially in Europe, going to change the background for the development of STARS?
Last but not least, you said that you're progressing well on GrandVision and on the antitrust investigation in the European Union and in other parts of the world. I wonder how you're looking at this acquisition today after COVID-19, after seeing digital grow so much. Is this still a strategic move for you, and is it still worth the same, or is by contrast, the recent template between LVMH and Tiffany a good template to try and anticipate what is going to happen between you and GrandVision? Thank you.
Stefano, can you take the two first ones?
Absolutely, Paul, good morning, Luca. Let me start with LensCrafters. There's no doubt that there is a digital journey, a digital transformation that we need to do in LensCrafters. I would say in optical retail, generally speaking. We need to leverage our own retail store to very much represent the benchmark for optical retail stores evolution into a more digital era. We started this journey outside the United States, Luca. We started this journey in two countries, where I think now we've pretty much completed. One is Australia, the other one is Italy. The two retail chains that we decided to begin with, OPSM as well as Salmoiraghi & Viganò, are the one which we experimented, we worked a lot, very hard to launch new digital innovation, whether it's appointment booking, digital eye examination, and really take that to the next level.
For LensCrafters, we've done some work in the last couple of years, no doubt, the journey hasn't been completed. Now, if you ask me, where are you on that trajectory? It's hard to make a percentage in a way, we still have way to go. In the next, probably couple of years, we'll still need to invest. We know the direction. We know exactly what we need to do. We know some of the fundamental pillars which we believe are still going to be there. In LensCrafters, we completed, for example, from a product assortment standpoint, the evolution of our lens assortment. Now we have pretty much completed. Our LensCrafters lens assortment of branded and unbranded lenses is very much supplied by Essilor, this is an important accomplishment. You might remember that we started this journey a few years back when we were about 50%. We've pretty much completed with that.
We need to renovate still a good amount of stores, because we believe that some of those stores will require an upgrade to make it more up to speed with the recent technologies. The frame advisory is one perfect example. The leverage of the artificial intelligence on one side, the leverage of the virtual mirror technology on the other side will allow some of our consumers that shop into LensCrafters to pre-select some of the frames, even the one that they don't necessarily have in the store. The telemedicine is the other evolution that we're having right now. We are piloting this in those months. In 2021, you will see us be more discreet about a rollout and the investments for telemedicine, which is in the early stage of rollout in LensCrafters in North America.
Some of the stores are still big. Some of them, no doubt. I think some of them have opportunity to be probably right-sized, meaning to become a little bit smaller than what they are. Remember, all the new stores do not have in-store lab any longer, and this obviously creates a difference in terms of store size. Clearly, the investment is an important one, but the return that we see from the LensCrafters stores of those investments are pretty promising. With respect to STARS, I think STARS it's really a good story, but a story that is still, to me, very much Europe-centric in the vast majority. What we need to do now is take the remaining part of the world, in particular, South America, Central America, United States, to the next level, in terms of STARS evolution.
I think some of the partnership program that we launched have been very successful. STARS can take further tailwinds from the launch of those programs, in particular in the region outside Europe. I would say North America and South America should be our priority. That's very much for LensCrafters and STARS.
Paul, you want to comment on the third question on GV process?
Luca, I will just confirm to you, to your question, is that, as I said, and as it has been said by the group, the strategic rationale of the GrandVision acquisition is unchanged. We confirm that it makes sense to make this acquisition for EssilorLuxottica. One thing, I bounce on this question because you pointed, you sort of opposed a bit the digital growth or the online growth and the offline growth. I think one of the aspect, and I'm looking out of GrandVision question, that we could illustrate by our third quarter is that we have been able to grow online and offline nicely in the third quarter and in the whole post-COVID or restart. Of course, we had very strong online performance, e-commerce performance in the second quarter. The market was down in the store.
In the third quarter, the market restarted, like we've been talking for the last hour a lot about, and at the same time, we continue to have strong online performance. I think that's something is a key takeaway for today, is that the group is able to with its open model, with its go-to-market strategy to stimulate, to support the growth dynamic of the industry, both with the independent, with the key retailers, with our own retail, and with our online platform in an omnichannel approach more and more. What is good is that all the channels have their proper dynamic, leveraging our brand, our product, our assortment, our categories. I think it's a very important learning also of this year to keep in mind.
Thank you.
The next question is coming from the line of Susy Tibaldi from UBS. Please go ahead.
Hi. Thank you for taking my questions. The first one, I wanted to ask a little bit more about the sun category. Clearly, it's a smaller part of your business, but 30% is still quite significant. I think the reasons for the weaker performance are very well understood. I was wondering if you can give a little bit more detail on how much of a drag it really is, and what do you expect there in terms of shape of recovery, and whether in recent months you have seen any change in trend for the category. One question on synergies. Are you able to quantify the level of synergies that you have delivered year to date? You have mentioned that you have clearly changed some of the priorities internally when it comes to maybe prioritizing some of the cost synergies versus the revenue synergies.
Are you seeing a direct cost benefit from these initiatives, or do you think it's still too early? I am trying to understand if the cost of implementation currently is offsetting the benefit or you are already seeing some net benefits. Just if you could, just a few words on this Ray-Ban initiative, this Complete Pair. Since you have launched in Italy in June, how has the take-up been from customers? Also what are the plans for the other markets? Thank you very much.
Stefano, are you okay to take the two first ones?
Yeah, the question on sun, absolutely. Dealing with traffic drops that it's quite material on the sunglasses location, which is really the major constituents on the sun for retail. We have been challenged quite particularly in touristic location, in theme parks, which is creating a challenging situation, more so in Europe than in the United States. In Europe, we have about 50%-60% of our sunglasses location, that it's more exposure to that touristic traffic across the main capital in Europe. In the U.S., we have more of a core part of business that is still more resilient than the one exposed to touristic traffic, that it's proving to be, again, probably stronger than the touristic traffic part of sunglasses. We now have an important period, that is the holiday season, in particular in the United States.
From a timing perspective, we probably have a slightly longer holiday season than we had last year, a couple of days more. We need to observe how things are developing. Again, I think our investment should be very much around the stores in order for them to serve more and more local needs rather than international traffic flows, because we don't think that is going to come in the near future. Again, we continue to observe that booming activity in the outdoor world due to the Bass Pro . For what pertains to the B2B channel on the wholesale side, I got to tell you, we had a good summer season. In particular in the month of August, and in particular in Europe, it was a pretty good sun season.
In that respect, we believe that as soon as there is a restored confidence in the consumer to take some activities outside their own home or apartments, I think they will naturally come as a counter there. We have the assets ready. The stores are ready to host new clients. We have the right product launches in the stores, so we feel good about it. In terms of synergies, I think the progression is coming pretty well. We've been challenged during the course of the second quarter due to the outbreak. The challenge was probably more the sales side than on the cost side. During the third quarter, we accelerated some of the initiatives on the cost side as well as on the commercial side, like the EL 360.
Paul confirmed the synergy target that we have, and I think you will see already some benefits into our profit and loss, very much deriving by the course of those initiatives. Targets aren't changed at this stage. We follow very closely the evolution of the following months. Again, there's no reason for us to change target at this stage.
Thank you, Stefano. A few word on Ray-Ban Authentic that we launched in June in Italy. First, you see the concept. The concept is a great one, is to have the same experience with a prescription Ray-Ban than you have with a sunglass Ray-Ban, in sun and in clear, with the lens being optimized optically and cosmetically with the frame. It's a great consumer offering. We see very good interest in Italy, where we are in our own store at Salmoiraghi and in the wholesale activity with optician launching the product. We are in the early days, months. That is the current market where we have put it, we have launched it. We will launch it in the U.S. next year, that is a very important rendezvous. We are studying with the European teams, which will be the next countries in Europe, after Italy.
This is where we are, and I want to just refresh on the concept which is behind it, which is a powerful concept.
Thank you very much.
The next question is coming from the line of Domenico Ghilotti from Equita. Please go ahead.
Good morning. I have four very quick question. The first is on the synergies. You said you are on track for the 2023 synergies. What about the confidence on the 2021 target you gave initially? The EUR 300 million-EUR 350 million. Second, on the free cash flow generation, Stefano, you were mentioning that working capital was a strong contributor, but is also less predictable for us. I understand. Could you provide a sense of what is the trend that you expect or the level you expect at year-end in terms of free cash flow or net debt, as you like?
The third question is a follow-up on the second wave risk. If I understand properly your comments on the U.S. market, you are at less concern on the reaction on the trend, current trend in the U.S. because you have clearly lower restriction despite having a second wave that is relevant as well. If you can comment. The last question is on the dividend. I'm trying to understand, first of all, what are the KPIs that you will consider to propose a dividend payment and if the payment will be just, say the payment of the dividend that has been suspended initially, so the full year 2019, or if you can expect a totally new proposal, so a new amount?
Stefano, are you okay to take one, two, possibly four, and I can take the third one, if that's okay with you?
Yeah. With respect to synergy, Domenico, no reason to change our target at this stage. This is really where we are. Clearly the mix between cost and revenue has changed. The mix contribution between different work stream has changed, but, as we said, no reason to change our goals at this stage and neither the medium term or the longer term one at this stage. With respect to working capital and the free cash flow in general for trend into Q4, there are two things that I can tell you. Cash flow generation is for many obvious reason, concentrated during the month of December as we're going to have the ramp up of our retail for holiday season for insurance period.
The second thing that I can share with you, is that the month of October from a cash flow standpoint has been positive and we're good to go in that respect. These are the two things that I can share at this stage. Obviously we need to observe how the evolution is going to go, especially in the month of December. With respect to dividend, the first thing that we look at very much so is the solidity of our balance sheet. You look at our net financial position. You look at it, and I'm sure many of you have made a comparison with what we've seen in the first half of the year, and you could do the math directly of where are we.
We had a strong cash flow generation during Q3, and this is an important KPI, the solidity of our balance sheet. That is there. Clearly, we look at also P&L performance, and obviously we'll have a discussion within the board of directors to really take the proper decision. Paul, do you want to take question number three on second wave concerning U.S.?
Well, I think currently the U.S. stays quite dynamic, but we have to observe if there is partial lockdown, what is the form of this lockdown. Through the months of October, we saw up to days like yesterday, very good dynamic, in all of the lens-related activity. I think wholesale frame, also sunglasses was good. Stefano, maybe you are better with more recent data than me. The dynamic of the business at this point is robust, Domenico. We will see if this change, but the situation is drastically different from what we see in Europe in terms of the way the government are acting in Europe. Those decisions in the U.S., I remind you, are very local by the federal structure of the country. To be followed closely, but so far so good.
Okay, thank you.
The next question will be the last one. That's coming from the line of Delphine Le Louët from Société Générale. Please go ahead.
Well, thank you very much. I hope everybody's fine and safe. If we stick in the U.S., Paul, Stefano, can we get the breakdown in term of revenue regarding department stores and ECPs? Second question will deal with the Essilor 360 program. I try to understand, is it going to be the new backbone of the commercial marketing activity dedicated to ECPs? Shall we see that as an umbrella where we're going to have, the Essilor Experts, the STARS program. How would that fit? Is it a part of the new synergy and one of the 26 ongoing strategic program? Finally, can you ensure us when we look in the next six months, and it's going to be very different for the next semester with the end of the combination agreement.
Can you assure us that we're going to have a smooth transition from where we are now regarding the management, and I'm talking about all the managers of EssilorLuxottica, to the new company. If I hear you well, Paul, I'm just saying myself that you already had the selection of your CEO, and it's definitely internal one. I want to be sure that we will not have to wait for six, 12 months with the new CEO to get a new plan for a new company. Thank you very much.
Stefano, do you want to take the first one? I can make some comment on the EL 360.
Good morning, Delphine. We're all fine, thank you, and I hope it's the same for you. On the breakdown of revenues among the ECP. Give or take, you're looking at anywhere between 40%-50% on the B2B side of Essilor on a combined. It's definitely the biggest channel that we have. While if you look at the department stores, that is primarily on the wholesale side, we're looking at a single-digit presence from a department store standpoint on the B2B side. Obviously we have presence as part of a retail network, but that's different. I think you were more referring on the B2B side. Paul, do you want to give more color on the EL 360?
Yes, I'm happy to do so, Delphine. The EL 360 is you have to go back to, we have key program with our ECPs, and we have often talked to you about the Essilor Experts program, for example, on the Essilor side, there is STARS program and other programs on the Luxottica side. If I just cover the Essilor Experts in the U.S., it's 7,000 Essilor Experts that we have. Some of them are in our doctor alliance company, some other are just purely independent ECP. The EssilorLuxottica 360 program is an extension of this Essilor Experts, and actually many of the first Essilor 360 partners are coming from Essilor Experts, and it's bringing offers, programs coming both from Luxottica and from Essilor as a common program. It is managed as a common program at EssilorLuxottica level.
I don't think you should look at it as an umbrella program on top of Essilor Experts. It's an extension where in which there is more features, more commitment on both parts, business commitment, product commitment, and access to the product service capabilities of our group. The start of the program is very encouraging when we talk with Fabrizio Uguzzoni and Rick Gadd in the U.S. This is impressive, what they've been able to achieve in just over two months. On your last question, as you have a sense, in the last month, with Francesco, we really are managing together, with the real objective of steering the company and the team in this very complex time, successfully in a smooth way, but also in a decisive way, taking decisions and not waiting for any magic date in 2021.
Just managing the company, taking decision, accelerating integration, connecting our teams, delivering on project, common project, more and more of them. I will, as I said earlier, I will not make any comment. It's not appropriate for me to do so. There is an AGM in 2021, and a board whose responsibility is to take care of those matters. For sure, together with Francesco, we are very pleased to work together and more than work together to take decision and build EssilorLuxottica, which is for the years to come and decades to come.
Thank you, Delphine. I think that was the last question. I think we will wrap it up here, Stefano, except if you have one more comment. Otherwise, I think we're just going to conclude. Thank you very much for attending our call. We really appreciate all of your question and interest. We will see you on March 12th. I think that's our full year result analyst call. We look forward to it, and we thank you very much for being with us this morning.