Safilo First Quarter Rises Above Pre-Pandemic Levels

Lifted by U.S. sales, online business and cost-cutting measures, Italian eyewear-maker Safilo Group SpA reported an improved performance on Tuesday. In the three months ended March 31, Safilo’s adjusted earnings before interest, taxes, depreciation and amortization rocketed 342.8 percent to 25.8 million euros, compared to 5.8 million euros in the same period a year earlier. This was a 29.4 percent improvement on its pre-pandemic first-quarter 2019 adjusted EBITDA of 20 million euros.

The group’s CEO Angelo Trocchia said due to strong sales trends in April, he is positive second-quarter results will also show an improved performance over 2019 pre-COVID 19 levels.

“Based on the current visibility on the order book, the Group expects its total next sales for the second quarter of 2021 to normalize compared to the exceptional COVID-19-related decline recorded in the second quarter of last year, aiming slightly to surpass Q2 2019 and constant exchange rates,” Trocchia said during the company conference call. Safilo is poised to offset the negative effects of the exit of the lucrative Dior brand, as well as the Fendi label, which is expected in June of 2021.

In the first quarter, net sales were up 13.7 percent to 251.4 million euros, in line with the “double digit” growth guidance given by the company in March. At constant exchange net sales rose 20 higher than the first quarter of 2020 and 6 percent above the same period in 2019.

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Gross profit surged 15.7 percent to 126.6 million euros compared to 109.4 million euros in the first quarter of 2020, while net debt stood at 181.3 million euros before the accounting code IFRS 16, compared to the 179 million euros reported in March.

In addition to its own brands Carrera, Polaroid, Smith and Safilo, Seventh Street Blenders and Privé Revaux, the group produces and distributes eyewear for labels such as DB Eyewear by David Beckham, Missoni, Marc Jacobs, Moschino, Tommy Hilfiger, Levi’s and Parisian-chic label Isabel Marant.

On Tuesday, Safilo announced a five-year global licensing agreement for the design, manufacturing and distribution of Dsquared2 eyewear (previously held by competitor the Marcolin Group), representing an opportunity to grow in the fashion luxury segment. The first optical and sunglasses collection for both men and women will be launched in January 2022.

An uptick in sales of accessible brands Privé Revaux and Blenders boosted Safilo’s North America sales, rising 41.1 percent to 119.1 million euros and representing 47.4 percent of the total.

Revenues in Europe stumbled 5.8 percent to 101.5 million euros accounting for 40.4 percent of the total, as Italy and other South European markets were heavily hit by the COVID-19 outbreak, retail restrictions and strict government imposed lockdowns.

The Asia Pacific region also slipped 13 percent to 13 million euros, representing 5.2 percent of the total, largely due to a decline in travel retail. A surge in some Middle Eastern countries helped the Rest of the World category rise by 26.6 percent to 17.8 million euros.

Safilo has been focused on its digital transformation and its direct-to-consumer and business-to-business strategies. In August, Safilo launched its new b-to-b platform in Europe and, in November of last year, it rolled out a new Customer Relationship Management system. As a result of its efforts, the group’s total online sales surged 164 percent compared to the same period a year earlier, thanks to Blenders’ e-commerce sales and the growth of Smith’s direct-to-consumer channel. Safilo’s total online business currently represents 13 percent of net sales, compared to only 5.9 percent in the first quarter of 2020.

As a result of its cost-cutting strategy, Safilo recently announced plans to close two key factories, in response to a reduction in volume due to the termination of the licensing agreements for major brands. In 2020 Safilo began the closure of its plant in Martignacco, Italy, and in March, the company announced the closure of its Ormož, Slovenia, production site, affecting the jobs of 557 employees. During the conference call, Trocchia noted that the company reached an agreement with Ormož’ labor unions.

Looking ahead, the company is expected to continue investing in its digital channels and marketing strategy, as it remains a prudent stance for the current year. Trocchia said Safilo is awaiting further market evidence of a solid sun season and whether or not travel will kick off again within Europe.

“Australia and China are performing well, but [South] Korea is bad. Other countries in the [Asia] region are very bad… We see a strong rebound in the U.K. and saw positive signals from Italy over the last week, but haven’t noticed any change in trends in Germany, France and Spain. We need to get used to this patchy situation.”

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