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Safilo Adjusted Profits Rise in Q2

Profits and revenues declined from the year-ago period, following a series of one-off effects that impacted the bottom line and the Armani license termination.

Polaroid

MILAN — Safilo Group Spa on Thursday reported a decline in second-quarter profits and revenues from the year-ago period, following a series of one-off effects that impacted the bottom line and the impact of the Armani license termination, which — coupled with a strengthening of the euro — weighed on the top line.

Excluding the sales from Armani brands not renewed at the end of 2012, the company reported a 6 percent increase in organic sales growth in the core sunglasses and prescription frames segments for the period, on the back of “good performances recorded in a number of countries in continental Europe, in key accounts and the travel retail business,” Safilo said after the close of trading in Milan.

In the three months ending June 30, net profits were 6.7 million euros, or $8.7 million, down 30.1 percent on the year-ago period. However, adjusted net profits, which strip out one-off factors like the chief executive officer succession plan unveiled by the group on June 19 as well as some restructuring costs in the European market, came in at 12.2 million euros, or $15.9 million, up 27.3 percent on the second quarter of 2012.

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Net sales in the period at the group — which produces eyewear under license for brands including Gucci, Marc Jacobs and Bottega Veneta as well as house brands including Safilo, Polaroid and Carrera — dropped 7.2 percent on the year-ago period to 301.4 million euros, or $391.8 million.

Thanks to “efficiency improvements” and other measures, the company’s gross profit margin increased in the period to 63.8 percent from 58.9 percent in the three months to end-June 2012.

Dollar amounts have been converted at average exchange for the periods to which they refer.

In the first six months of the year, Safilo’s net profit was 20.1 million euros, or $26.3 million, down 6.7 percent on the year-earlier period, while net sales decreased by 2.4 percent to 598.4 million euros, or $783.9 million. However, again stripping out one-off factors, net profit in the period climbed 18.9 percent to 25.6 million euros, or $33.5 million.

Outgoing Safilo ceo Roberto Vedovotto said he was “very proud of Safilo’s performance during one of the most challenging semesters in the company’s history in light of the full impact of the Armani licenses termination.”

Vedovotto pointed to 8 percent growth in the company’s “go-forward brands,” to the “continuous success of all our main licensed brands” and to the “expansion of the Safilo brands, including the development of the Polaroid brand in the American and Asian markets.”

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Safilo’s net debt in the first semester dropped by 13.1 percent to 200.8 million euros, or $263 million, “with the further decline in financial leverage reaching a record level in Safilo’s most recent history,” Vedovotto said.

In geographic terms, Safilo said that its “turnover continued to perform best in Europe, thanks to the strong performance of its organic business” in its core continental markets, especially France and Germany, as well as in the U.K. and Russia.

Crisis-hit Spain and Portugal showed “signs of recovery,” Safilo said, although sales through independent opticians in the company’s home market of Italy “further declined.”

Organic sales growth slowed in the quarter in the Americas, following a “slowdown in the U.S. and certain Latin American markets during the month of June,” Safilo said. In particular, retail sales slowed in the region, while Brazil was affected by in part by civil unrest that broke out toward the end of the quarter.

However, Safilo said, the period was “positively influenced” by the launch of the Polaroid brand, with the new Polaroid Plus collections and by “general growth in the prescription frames segment.”

In terms of sales channels, travel retail and key account channels “continued to drive the growth of Safilo products in stores.”

In terms of brands, the company reported “highly satisfactory progression” by the portfolio of principal licensed brands, like Dior, Boss and Céline in the high-end segment and Boss Orange and Marc by Marc Jacobs in the fashion segment.