Safilo Concludes Turnaround, Eyes Sales of 1.3B Euros in 2027
MILAN — Safilo closed 2022 with sales surpassing the 1 billion euro threshold two years ahead of plans and concluding four years of turnaround, which contributed to a remodeling of the Italian eyewear company.
“Last year we completed our first, fundamental turning point, fully overcoming important portfolio challenges thanks to a particularly strong organic growth, especially of our proprietary brands, the acquisition of two American brands [Blenders and Privé Revaux] in 2020, which have also allowed us to strengthen our digital business and capabilities at a crucial time in the market, and thanks to the entry of new license partnerships,” said chief executive officer Angelo Trocchia, flanked by chief financial officer Gerd Graehsler during Safilo’s capital markets day on Friday.
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In the 12 months ended Dec. 31, adjusted net profit more than doubled to 58.3 million euros, compared with 27.4 million euros in the previous year.
Safilo sales amounted to 1.07 billion euros, up 11.1 percent compared with 969.6 million euros in 2021.
In the year, organic sales grew 7.7 percent at constant exchange rates.
In the fourth quarter, revenues rose 5.7 percent to 245.4 million euros.
Proprietary brands represented an important driving force behind the group’s overall performance, in particular Smith, while Carrera and Polaroid also posted another year of double-digit growth, with Carrera far exceeding pre-pandemic levels.
Proprietary brands accounted for around 42 percent of the business.
In 10 years, proprietary brands have doubled their share of sales, growing more than 9 percent in four years, said Graehsler.
Safilo also produces eyewear collections under licensing agreements for brands ranging from Chiara Ferragni, Isabel Marant and Jimmy Choo to Marc Jacobs, Missoni, Moschino and Tommy Hilfiger, to name a few.
No license now accounts for more than 10 percent of revenues and “the brands don’t belong to the same group,” Graehsler said.
Over the years, Safilo has had to deal with the exit of brands including Gucci and Givenchy, with ending up being produced by Kering Eyewear, and Fendi and Dior, manufactured by Thélios, controlled by LVMH Moët Hennessy Louis Vuitton.
Combined, they contributed to missed sales totaling 200 million euros in 2019. This was partially offset by agreements with brands including Carolina Herrera and David Beckham, among others.
Trocchia did not rule out adding other licenses to Safilo’s portfolio, but said “we are not obsessed because our owned brands must account for more than 50 percent of sales by the end of the new plan running until 2027.”
Home brands include Carrera, Smith and Polaroid, in addition to Privé Revaux, Seventh Street and Blenders, whose sales more than doubled since the acquisition, Trocchia said.
He is also open to buying one or more brands, seen contributing around 1 percent of Safilo’s forecast compounded annual growth rate in the new plan.
“A list of possible acquisitions and targets” is ready, he said, based on three criteria: they must have either a solid direct-to-consumer business, a strong presence in North America, or value to strengthen either the prescription or sports segment. “But you can’t go to the altar on your own,” he quipped, “and nothing will happen in the short term, although we are working on this intensely.”
Aiming for sales growth with a balanced business portfolio by brand, geographical area and distribution channel, Trocchia said group sales are expected to reach about 1.3 billion euros in 2027, with a five-year compound annual growth rate of around 4 percent driven by sustained growth of proprietary brands.
In 2022, adjusted earnings before interest, taxes, depreciation and amortization climbed 24.2 percent to 101.2 million euros, or a 9.4 percent margin, improving by 100 basis points compared with 81.5 million euros in 2021.
Adjusted EBITDA margin is expected to reach between 12 and 13 percent of sales by 2027, mainly thanks to a further improvement in gross margin driven by a richer sales mix and additional cost optimization.
Last year, adjusted operating profit totaled 53.5 million euros, up 62.8 percent on 2021.
The improvements in performance were attributed to an increase in volumes and improved price and product mix, and thanks to the completion, during the year, of the structural cost of goods sold savings plan. These levers allowed Safilo to counter the pressure from the increased costs of transportation and energy.
The year 2022 confirmed the good recovery of the sunglass business and a strong resilience of prescription frames, growing 9 and 2 percent, respectively.
The acceleration of Smith’s snow goggles and snow and bike helmets led to 22 percent annual growth in the “other” product category.
Sales of prescription frames accounted for 40 percent of total revenues. Sun represents 48 percent of sales and sports 12 percent.
During the year, Safilo’s online sales represented 15 percent of total sales, up around 4 percent on 2021.
Europe remained the key growth driver in 2022, and Safilo cited surging business in Turkey and Poland. Sales in Europe rose 12.3 percent to 424.9 million euros, and represented almost 40 percent of total revenues.
During the year, the North American market benefited from the strengthening of the dollar against the euro, closing up 6.8 percent to 497.7 million euros, and accounting for 46.2 percent of sales. At constant exchange rates, sales in the region were down by 4.7 percent.
Revenues in the Asia Pacific region rose 9.8 percent to 57.7 million euros, while revenues climbed 33.1 percent to 96.4 million euros in the Rest of the World area.
As reported, Safilo’s management has given a mandate to explore alternative solutions for its storied Longarone site, in Italy’s Veneto region, which has almost 500 employees. Asked for updates, Trocchia said Safilo “is now in the process of evaluating a potential transfer of the facility to potential third parties with a view to preserving the know-how of the site and minimizing the social impact on the territory.”
Trocchia said a potential buyer could come from the eyewear industry, given the strategic location, a storied eyewear manufacturing hub, or from the fashion world. The plant’s expertise is in the craftsmanship of metallic components since the ‘60s, but Safilo does not use much metal in its production, Trocchia explained. “It is only right to ensure a future for this company,” he said.
However, the executive underscored the importance of Made in Italy production for Safilo, which counts 1,800 employees in the country, emphasizing the importance of the Santa Maria di Sala and Bergamo production sites, and of the Padua center, where more than 200 employees develop the collections and where the company continues to invest. In fact, Safilo is building an academy in Padua to further grow its digital skills.
As of Dec. 31, net debt (a combination of bank borrowings and loans) stood at 113.4 million euros, compared with 94 million euros recorded at the end of 2021.
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