MILAN — Safilo Group SpA said Tuesday that preliminary sales decreased 16.4 percent to 1.04 billion euros last year, compared with 1.25 billion euros in 2016.The Italian eyewear company attributed the decline to the loss of the Gucci license, which has become a supply agreement, representing 155 million euros, down 12 percent, and to the implementation of the new Order-to-Cash IT system in the Padua, Italy, warehouse early in the year. This generated delays in deliveries, and “while operationally recovered from mid-year,” it impacted orders, and dented revenues and profits up to and including the fourth quarter, causing “exceptional external costs of approximately four million euros,” the company said.The Gucci license ended in December 2016, two years earlier than planned, following parent company Kering's decision in 2014 to develop eyewear in-house, establishing Kering Eyewear.Safilo produces and distributes eyewear under license for brands including Fendi, Dior and Jimmy Choo, as well as house brands Carrera, Polaroid and Safilo. Final full-year and fourth-quarter figures will be released March 13.The company also said “Dior collections experienced a decline after several years of extraordinarily strong growth.”The total of all other licenses, as well as Safilo's proprietary brands, grew single digits.Sales of the "going forward" brand portfolio decreased by 3.9 percent at constant exchange rates.The company said it “is expecting profitability for the year to be impacted by the somewhat larger decline in sales than planned in the fourth quarter, leading to adjusted preliminary full-year earnings before interest, taxes, depreciation and amortization of 38 to 40 million euros.” The adjusted EBITDA excludes certain non-recurring costs and includes the accounting compensation for the early termination of the Gucci license.In the fourth quarter, sales totaled 249.2 million euros, a contraction of 53 million euros at constant exchange, compared with the same period in 2016. The net effect of the loss of the Gucci license accounted for 44 million euros of the decrease, while sales of the “going forward” brand portfolio declined by 3.7 percent at constant currency.In the 12 months ended Dec. 31, sales in Europe decreased 12.7 percent to 469.3 million euros, representing 44.8 percent of the total.The north of Europe started its turnaround in the fourth quarter, now also up double digits, while the south of Europe still suffered from the tail-end of the issues at the Padua plant with fall collection sell-in restrained by the late deliveries of the spring collection.Revenues in North America dropped 17.1 percent to 422.3 million euros, accounting for 40.3 percent of the total. The performance was impacted by the wholesale business, while the performance of the Solstice stores in the U.S. improved, showing a 2.7 percent hike in same store sales performance at constant exchange rates.Asia-Pacific was down 43.9 percent to 64.3 million euros, or 6.1 percent of total.Separately, as results were released after trading hours in Milan where the company is publicly listed, Safilo shares closed down 4.36 percent at 5.05 euros on Tuesday after spiking as much as 8 percent on Monday in the wake of a La Repubblica report speculating that majority shareholder Hal Holding was considering raising its stake in Safilo. A Safilo spokeswoman said that "as of today Hal Holding has no intention of changing its shareholding" — which drove shares down on Tuesday. Hal Holding has a 41.6 percent stake in the eyewear company.Also, Safilo is holding talks with the unions to find a solution to "a 15 percent production surplus," the spokeswoman said. This is due to a readjustment following delays in production impacted by complications relating to Safilo's new warehouse system in Padua and to the slowdown of Dior eyewear sales.
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