Safilo Group’s Proprietary, Licensed Brands Boost Q3 Performance
MILAN — The sales of sunglasses continued to boost growth in Europe and in emerging markets thanks to a buoyant summer season, and a solid prescription frames business in all of Safilo Group’s key markets boosted the Italian eyewear’s performance in the third quarter, improving top-line and profit margins, despite the macro headwinds.
Safilo sales in the three months ended Sept. 30 rose 14.9 percent to 260.4 million euros, compared to 226.6 million euros in the same period last year. Organic sales grew 5.6 percent, driven by the group’s main proprietary and licensed brands. In the period, Safilo’s sunglass sales rose 7.1 percent and sales of prescription frames were up 4.6 percent on a challenging comparison base.
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Licensed brands Tommy Hilfiger, Hugo Boss, David Beckham, Under Armour and Isabel Marant were the other key drivers of the positive organic performance, while the licenses of Carolina Herrera, Chiara Ferragni and Dsquared2, introduced this year in the portfolio, added significant new business.
Chief executive officer Angelo Trocchia during a call with analysts on Thursday at the end of trading touted the strength of the group’s collections, the investments behind the brands “and a continued effort to increase the breadth of the services we offer to our clients.”
In the quarter, sales were also boosted by the tailwind of a strong U.S. dollar.
“Our performance in the period reflected the continued strength of Europe, Latin America and the Middle East markets, the first significant business rebound of Asia, and the North American market holding up versus another tough period of comparison and some logistic delays in the U.S.,” Trocchia said.
Sunglasses remained Safilo’s best-performing product category, but the executive said prescription glasses, a category that was “rebalanced years ago, continue to grow, responding to a bigger demand in the market.”
In the nine months, boosted by the positive third quarter, group sales climbed 12.7 percent to 831.3 million euros, compared with 737.4 million euros in the same period last year. At the end of September, proprietary brands represented 41.3 percent of total sales.
Gross profit amounted to 458.4 million euros, up 20.3 percent compared to the same period last year, with the gross margin improving by 340 basis points to 55.1 percent of sales.
Adjusted earnings before interest, taxes, depreciation and amortization stood at 85.3 million euros, up 24 percent compared to 68.8 million euros last year.
Despite the negative impact of inflationary pressures, the strong price and product mix dynamics allowed the group to see an increase in profitability, which the group partly reinvested in marketing and advertising activities to support business growth. “Without investments, there is no future,” contended Trocchia, saying that investments represented 10 percent of sales in the nine months and 60 percent of that figure is channeled into its proprietary brands.
Sales in the U.S. rose 8 percent to 383.5 million euros, representing 46.1 percent of the total. Trocchia remarked on the “softer mid-tier” range in the region, and a “more polarized market, where luxury is working well and premium performing better.”
Revenues in Europe gained 14.3 percent to 332.7 million euros, accounting for 40 percent of the total. Chief financial officer Gerd Graehsler pointed to Italy, Spain, France and Germany as strong markets for the group in the region, as well as Turkey and Poland.
Sales in the Asia Pacific region rose 11.1 percent to 41.3 million euros, registering a recovery in China in the third quarter and a consistent good performance in South East Asia.
In the U.S. and in Europe, the nine-month period was also particularly favorable for outdoor sports activities, which backed “the extraordinary performance of Smith’s snow goggles and snow and bike helmets,” said Trocchia, driving the sales of the “other” product category to a growth of 20.3 percent compared to same period last year.
Safilo’s business grew significantly in emerging markets, in particular in Brazil, Mexico and the Middle East, which represent most of the area called Rest of the World. That segment’s sales were up 36.8 percent to 73.8 million euros in the nine months.
Trocchia trumpeted a balanced portfolio of brands, including a better representation of the female consumer target with the arrival of the Carolina Herrera license, but, responding to an analyst, he said Safilo is “absolutely and actively looking at brands and licenses in the market to catch new opportunities and reinforce that part of our portfolio.”
Asked about the high costs of energy, Graehsler said that in the third quarter prices stayed “quite elevated,” representing a couple of million euros in the quarter, so “not dramatic, but impacting” the figures.
Other recent developments included the renewal of the licensing agreement with Rag & Bone and the extension of the manufacturing agreement with Kering Eyewear until the end of 2026. “The agreement with Kering since 2017 is working quite well. It accounts for 4 percent of sales in the nine months, it’s fruitful,” Graehsler said responding to an analyst.
In the first nine months of 2022, Safilo’s online sales represented around 14 percent of sales, growing 5.2 percent at constant exchange rates.
As of Sept. 30, net debt was 115.4 million euros compared to 105.6 million euros at the end of June.
Safilo announced the introduction of Eastman Tritan Renew in its polarized lenses, becoming the first player in the market to adopt these lenses, it said, with a bilateral collaboration with Eastman on technical innovation.
