WWD.com/accessories-news/eyewear/safilo-reports-profit-7275970/
government-trade
government-trade

Safilo Swings to Profit in Q3

The Italian eyewear manufacturer on Wednesday reported its first third-quarter net profit since 2007 even as revenues in the period remained flat.

MILAN — Italian eyewear manufacturer Safilo Group SpA on Wednesday reported its first third-quarter net profit since 2007 even as revenues in the period remained flat.

This story first appeared in the November 14, 2013 issue of WWD.  Subscribe Today.

In a statement released after the close of trading in Milan, where Safilo is listed, the company said it had a 1.7 million euro, or $2.2 million, net profit for the period compared with a loss of 600,000 euros, or $750,000, in the same three months of 2012.

Reported net sales decreased 2.3 percent in the three months to the end of September, to 243.4 million euros, or $321.3 million, compared with 249.1 million euros, or $311.4 million, in the year-ago period.

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

RELATED CONTENT: WWD Earnings Tracker >>

At constant exchange rates, Safilo said, net sales were up 2.9 percent, “with the organic business more than offsetting the significant negative impact of the absence of the Armani brands, phased out at the end of 2012.”

Safilo pointed to a 17 percent jump in organic sales growth in the core sunglass and prescription frame segments as proof of its ability to leverage “its wide portfolio to replace the brands terminated in 2012.”

The company — which produces prescription and sunglass frames for licensed brands including Alexander McQueen, Banana Republic, Dior and Marc Jacobs, as well as for owned brands including Safilo, Carrera and Polaroid — pointed to “global growth of the organic sales volumes, combined with improved price/mix effects and lower levels of obsolescence” as elements that helped boost profitability in the period.

In geographic terms, Europe — the company’s second largest market in the quarter, representing some 40 percent of total revenues — remained the lead sales driver, “with France, Germany and the U.K. in the lead,” the company said. Turnover in the region increased by 6.3 percent on the year-earlier period, at current exchange rates, reaching 96.8 million euros, or $127.8 million.

Echoing an issue reported by other companies with significant business interests in North America, Safilo said that its performance in the region was affected by the strengthening of the euro against the dollar. The Americas represented just over 45 percent of total sales in the three-month period.

However, the company said that it “continued to experience organic growth, both in terms of sales of prescription frames through independent opticians…and in terms of sunglasses through the most important department stores,” where results improved versus the second quarter.

Total turnover in the Americas region in the third quarter was 109.7 million euros, or $144.8 million, down 5.2 percent on the year-earlier; at constant exchange rates, sales were up 1.7 percent.

Performance in Asia (14 percent of total group sales in the third quarter) was also impacted by exchange rates, especially the “significant depreciation of the yen versus the euro and by the reduction in sales resulting form the termination of the Armani brands that were of over proportional significance for this region.”