Safilo Group Reports Continued Growth in Europe in Q1
MILAN — Safilo on Wednesday reported that revenues in the first quarter of the year amounted to 287.2 million euros, up 1.6 percent compared with 282.6 million euros in the same period last year.
At constant exchange rates, sales edged down 0.4 percent.
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Adjusted earnings before interest, taxes, depreciation and amortization, excluding non-recurring costs of 3.1 million euros related to special projects and restructuring expenses, amounted to 32.4 million euros, or a margin of 11.3 percent, in line with 32 million euros in the first quarter last year.
Chief executive officer Angelo Trocchia said during a conference call with analysts that the first quarter of the year “broadly met our expectations for the beginning of the year, reflecting the continuation of some of the main business drivers that had characterized the second half of last year.”
Organic sales rose 3.2 percent at constant exchange rates, benefiting from the good performance of Safilo’s proprietary brands and its core licenses, with Carrera, Polaroid, Carolina Herrera and David Beckham still up double digits, and Hugo Boss and Tommy Hilfiger showing good progress. On the other hand, Safilo reported still-soft order taking in the U.S. and on the products positioned in the entry and mid-tier price points.
In the first quarter, the organic sales performance by geographical area was particularly strong in the European markets and in the main countries of Latin America and the Middle East, driven in all cases by both sunglasses and prescription frames.
Asked about current trading, chief financial officer Gerd Graehsler said April and the beginning of the second quarter were showing “similar conditions” as the first quarter in the two main markets, while the U.S. “has not yet picked up,” and Europe, “despite the strong comp, remains very positive.”
In the three months ended March 31, sales in North America decreased 3.4 percent to 124.7 million euros. Trocchia said that “the U.S. wholesale market continued to register sustained demand for premium and high-end products, while the propensity to purchase by independent opticians remained weak in the entry and mid-tier price points.”
Trocchia noted that in the quarter, Smith “had a very positive performance in the direct-to-consumer channel, but was less dynamic in sports shops, due to the high comparison base with the corresponding quarter of 2022, in particular on bike products.” He noted it was still early in the season to judge the bike performance, though, given the “cold and bad weather” reported in the U.S.
In its lowest-season quarter, Blenders sunglasses were impacted by bad weather conditions on the California coast, he added. The sponsorship of the Formula 1 Red Bull team will “help brand equity” of Blenders, contended Trocchia.
In Europe, sales in the period rose 3.8 percent to 121.6 million euros, boosted by growth across the continent’s main markets, and particularly strong increases in independent opticians and chains, which allowed the group to more than offset the expected, significant decline in revenues of almost 70 percent generated through the GrandVision chain.
In Europe, sales of Carrera and Polaroid grew by about 20 and 10 percent, respectively.
In the Rest of the World area, revenues climbed 20.3 percent to 28.8 million euros, lifted by the group’s strong commercial development in Brazil and in particular in Mexico. Sales in India and the Middle East also posted significant growth rates, as the group continues to invest in focused events to engage with the main local wholesale partners, as well as on the development of online channels through internet pure players.
In Asia and Pacific, sales decreased 3 percent to 12 million euros, reflecting the still-soft business trends recorded in the Chinese market due to prudence of wholesale customers. A trend change is expected starting from the Shanghai optical fair this year held in April. In the quarter, sales instead grew in the travel retail channels thanks to the reopenings in China and the gradual recovery of tourist flows, and in Australia, where Safilo’s sport business kept expanding.
Gross profit amounted to 167.8 million euros, up 7.9 percent compared to 155.5 million euros in the same period last year.
Selling, general and administrative costs increased by about 9 percent compared to the corresponding period of 2022 driven by investments in marketing and advertising and the advancement of the group’s digital roadmap.
Trocchia said the goal was to be “consistent,” deciding to “keep investing in our own brands in the first quarter,” with “interesting activations” such as partnering with Coachella.
As reported, Safilo closed 2022 with sales surpassing the 1 billion euro threshold two years ahead of plan and concluding four years of turnaround, which contributed to a remodeling of the Italian eyewear company. Proprietary brands represented an important driving force behind the group’s overall performance, in particular Smith, Carrera and Polaroid.
Safilo also produces eyewear collections under licensing agreements for brands ranging from Chiara Ferragni, Isabel Marant and Jimmy Choo to Marc Jacobs, Missoni and Moschino, to name a few.
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, and Trocchia said during the company’s Capital Markets Day in March that a potential buyer could come from the eyewear industry. Asked for a comment on Wednesday, Trocchia said Safilo was “in discussions with unions and institutions and shortly we will be in a position to update the market on concrete steps.”
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