MILAN — Safilo SpA on Wednesday reported a 40 percent drop in net profits in 2013, to 15.5 million euros, or $20.6 million, as one-off costs related to the company’s management succession plan, restructuring expenses and provisions for an audit by Italian tax authorities weighed on the bottom line. Excluding one-off costs, net profits for the full year would have been 39 million euros, or $52 million, up nearly 51 percent on 2012.
Dollar amounts have been converted at average exchange for the periods to which they refer.
In a statement released after the close of trading in Milan, Safilo — which produces prescription and sunglass frames for licensed brands including Alexander McQueen, Banana Republic, Dior and Marc Jacobs, as well as for its own brands including Safilo, Carrera and Polaroid — said the results confirmed the group’s “financial and operational strength…in a year of business transition and continuing economic fragility in a number of its important markets.”
Total revenues fell 4.6 percent to 1.12 billion euros, or $1.49 billion, hit by exchange rate movements and “the phase-out of certain brands, which actually led to the improvement of margins, reflecting an enhanced sales mix,” Safilo said.
Gross profit for the year reached 683.7 million euros, or $909.3 million, compared with 679.7 million euros, or $876.8 million, in 2012 — equivalent to a margin of some 61 percent, compared with 57.8 percent in the previous year.
For 2013, chief executive officer Luisa Delgado said the priority has been to “grow organically so as to replace as much as possible the Armani licenses through broad-based organic growth, focus on the profitability of our business and consolidate the group’s financial strength.”
The company said its net debt at the end of the year amounted to 182.5 million euros, or $242.7 million, down from 215.3 million euros, or $277.7 million, at the end of 2012. The company’s adjusted leverage ratio dropped to 1.5 times, from 1.9 times the year before, “a new record low.”
Safilo said the “chief executive officer succession plan,” which in October saw Delgado take over from former ceo Roberto Vedovotto, led to 6.2 million euros, or $8.3 million, in nonrecurring costs. The company said “restructuring initiatives in Europe” cost 3.9 million euros, or $5.2 million, and an audit for 2007-11 by Italian tax authorities resulted in a 14 million euro, or $18.6 million, one-off provision. (On Feb. 27, in its full-year results statement, eyewear giant Luxottica SpA also said it had made provisions for Italian tax audits for the years after 2007.)
In terms of channels, Safilo said the wholesale business saw sales drop 4.8 percent to 1.04 billion euros, or $1.38 billion.
The group’s Solstice retail business recorded sales of 80 million euros, or $104 million, down 0.9 percent, but an increase of 2.4 percent at constant exchange.
The company said that the leading brands in the high-end category, Gucci and Dior “excelled,” while Jimmy Choo and Céline “made strong progress across all countries.”
In geographic terms, the company said sales in Europe were slightly higher on 2012, at 470.8 million euros, or $626.2 million, and were characterized by double-digit organic sales growth. The company said it saw improvements in crisis-hit markets like Italy, Spain and Portugal in the fourth quarter.
Sales in the North American market, at 457.9 million euros, or $609 million, were down 6.3 percent on 2012. In Asia the drop was more pronounced: 10.7 percent for total turnover of 177.5 million euros, or $236.1 million.
Looking ahead, Safilo said 2014, its 80th year, will be “a year of continuity and further expansion of the brand portfolio, recently enriched by the launch of the Fendi brand in our principal international markets.”
The company also said it was committed to “strengthening and injecting new vitality into our main areas of business, so as to guarantee…lasting and profitable growth, starting with our Safilo brands, the main emerging markets and the distributions channels with the greatest growth potential.”
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