MILAN — “Parting ways is never easy,” but Safilo Group is looking ahead into the future, said chief executive officer Angelo Trocchia, referring to the expiration of the Dior license at the end of next year. “After 23 years, this is a piece of our heart — some of our workers grew up with the brand, all produced in-house, but we look ahead and to growth.”
The licensing agreement for the Dior and Dior Men collections of sunglasses and optical frames will end at its expiry date of Dec. 31, 2020. During the more than two decades of the license, Safilo sold more than 30 million pieces of Dior eyewear and, in the fiscal year 2018, the Dior license accounted for roughly 13 percent of the Italian eyewear company’s total sales.
The market did not react well to the news, and Safilo shares on Monday closed down 5.97 percent to 0.86 euros.
Trocchia once again emphasized Safilo’s focus on proprietary brands, from Carrera and Polaroid to Smith and Safilo. “It’s feasible, it’s not only a statement,” he touted, adding that the company will continue to work in the luxury segment, ticking off “important” licenses with Max Mara, Marc Jacobs, Hugo Boss and Fendi, among others, and the recently renewed agreements with the likes of Kate Spade New York, Tommy Hilfiger, Havaianas and Fossil, as well as the new licenses with Levi’s, Missoni and David Beckham. “There is a contemporary premium 10 billion-euro market that is growing at a rate of between 3 and 4 percent and there are big business opportunities,” Trocchia said.
The ceo admitted the end of the Dior license “was in the air,” in view of the vertical integration of parent group LVMH Moët Hennessy Louis Vuitton and the establishment of a joint venture with Marcolin, called Thélios, inked in 2017. “Let’s not forget there is another year and a half, and we have assured Dior and our clients we will continue to keep our focus on the development of the collections,” he said.
At the same time, on Monday Safilo announced the closing of the transaction to sell its U.S. retail chain Solstice to Fairway LLC, revealed in May. “This is an important step in the path of returning to a sustainable growth,” said Trocchia. “Our priority now is not the physical retail, it is not strategic for us,” he added, noting that the closing was “quite fast” and that it allowed to see a positive impact on profitability of 14 million euros.
Fairway is a U.S. limited liability company, formed by a group of investors active in the U.S. and in the European eyewear retail business.
At the request of Italy’s Stock Exchange watchdog CONSOB in May, Safilo revealed that the deal, for a consideration of $9 million on a cash and debt-free basis, also includes a multi-year supply agreement for Safilo products. In the fiscal year ended Dec. 31, the Solstice retail business reported sales of 52.1 million euros, down 16.5 percent at constant exchange rates compared to 2017, and an operating loss of 13.5 million euros. The transaction is expected to result in a disposal loss estimated at approximately 18 million euros.
The sale of Solstice comes “at the right moment to reduce cash consumption, it’s an important means to return Safilo to profitability, which is a goal within our 2020 business plan,” the executive said. By the end of the year, Safilo will present a new plan beyond 2020, on the back of increased long-term visibility, he noted.
“We remain fully committed to our 2020 group business plan, aiming to reignite sales growth focusing on key geographies, brands and channels, while recovering operating performance enabled by our cost-reduction program. We are on track with our goals,” said Trocchia, actually pointing to an acceleration toward profitability, which will help manage the end of the Dior license. Safilo was impacted in 2017 by the end of the Gucci license, internalized by Kering Eyewear.
As reported, Safilo saw encouraging first-quarter net sales, which increased 3.4 percent to 247.3 million euros compared with 239.1 million euros in the same period last year.
Safilo cut its loss in 2018, and the company’s management expects to return to profitability in 2020.
In the 12 months ended Dec. 31, adjusted net losses totaled 26.7 million euros, compared with an adjusted net loss of 47.1 million euros in 2017.
In 2018 revenues came to 962.9 million euros, down 7 percent, compared with 1.03 billion euros in 2017. At constant exchange, sales decreased 4 percent.