MILAN — Italian eyewear-maker Safilo Group SpA on Wednesday reported a slight improvement in financial results for the just-ended year but warned of the impact the coronavirus was beginning to have on sales, especially in Europe.
During a conference call Wednesday evening, after the company released its full-year results, Safilo chief executive officer Angelo Trocchia said the company had a “good start to the year, with January and February ahead of our expectations.” But since the beginning of March, sell-out has begun to show signs of decelerating in Europe — especially Italy — and even in the U.S. “We expect sales in the second part of March to register a significant drop, which will flatten out the improvement we had been recording so far,” the executive said.
Answering an analyst’s question on how the supply chain was being impacted by the global virus — which the World Health Organization declared a pandemic on Wednesday — Trocchia said the company’s factory in China is now running at 85 percent capacity. In Europe, Trocchia said he had seen some delays from components suppliers, but that for the most part those have been overcome.
Separately, when asked if he considered the current decrease in sell-out as a temporary delay in sales or lost sales, Trocchia said the answer depended on the duration of the outbreak. “If the situation is going to improve within April, I think these orders will be recovered. If the phenomenon will be longer, then some orders will be lost.” He said that the situation depended to a large extent on whether COVID would pick up in main cities, “which would make the situation worse.”
For 2019, the Padua-based firm recorded a net loss of 4.0 million euros — compared to a 14 million euro net loss a year earlier — while net sales inched up 3.1 percent (up 0.9 percent at constant exchange rates), to 939 million euros.
The reported full-year result for adjusted EBITDA was 51.8 million euros, or 5.5 percent of sales, in line with earlier guidance.
Among other things, adjusted results strip out expenses such as the non-cash impairment of some 227 million euros in goodwill (booked in the first half of the year), write downs of deferred tax assets, worth some 22 million euros, and expenses related to business restructuring, the company’s chief financial officer Gerd Graehsler said on the call. Including such expenses, Safilo would have reported a group net loss of some 328 million euros for the year, according to a statement.
Wholesale revenues for 2019 increased 3.0 percent.
In the fourth quarter, Safilo net sales were down slightly on the year-earlier period, to 230.4 million euros. Part of the drop in the quarter was due to a deceleration in sales of Dior eyewear, which occurred after the announcement that the license will expire at the end of this year, and part due to the Kering supply business, which was down 40 percent on the year-earlier period, Graehsler explained.
Adjusted EBITDA in the fourth quarter was down nearly 40 percent, to 7.9 million euros. The drop in profitability was largely due to the fact that the year-earlier comparable included 9.8 million euros for the early termination of the Gucci license. The company didn’t issue a net result figure for the fourth quarter.
Beyond the numbers, Trocchia pointed to the success of Safilo’s own collections — Carrera, Polaroid and Smith — as drivers of continued portfolio growth. And the executive said recently launched licensed collections David Beckham, Levi’s and Missoni were receiving “amazing feedback from the market.” Trocchia was confident of the new Tommy Hilfiger line, which — with its “strong sustainability dimension” — made the company sure that “this brand and this part of the collection will be very successful.”
Looking ahead, and despite the COVID crisis, Safilo in its statement reiterated its 2020 guidance of full-year net revenues in the range of 960 million to 1.0 billion euros and an adjusted EBITDA margin of some six percent of sales. While the figures include the impact of the Blenders acquisition (announced on Dec. 8), they do not include the effects of the purchase of Privé Revaux, which was signed on Feb. 10. Furthermore, the company warned that the estimates “do not include any potential impact deriving from the current COVID-19 outbreak and spread,” an “extraordinary situation” whose direct and indirect repercussions the company said are “not currently foreseeable.”