Details at Fendi RTW Spring 2019

MILAN — Safilo Group SpA’s first-quarter net sales increased 3.4 percent to 247.3 million euros compared with 239.1 million euros in the same period last year. At constant exchange rates, group sales rose 0.6 percent.

The encouraging sales performance was supported by the improvement of business trends in Europe and the stabilization of the U.S. market, company chief executive officer Angelo Trocchia explained during a conference call with analysts held Thursday after the close of trading in Milan, where the company is listed.

“These first few months marked a good start of the year,” said Trocchia, introducing the figures. “We’re not yet where we should be, but it has started in the right direction.”

Safilo produces and distributes eyewear under license for brands including Fendi, Dior, Givenchy, Moschino, Tommy Hilfiger and Max Mara, as well as house brands, such as Smith and Polaroid.

In the three months ended March 31, gross profit was up 7.4 percent to 130.2 million euros as the gross margin represented 52.7 percent of sales, compared to 50.7 percent in the first quarter of 2018. Trocchia said the growth was mainly driven by higher product supply efficiency and cost-saving operations.

In a statement, the Italian company specified the figures reported refer to continuing operations and exclude the Solstice retail business, which Safilo put on the market last month. “We aim to conclude the disposal within summer,” Trocchia specified.

Excluding 1.1 million euros of non-recurring costs, adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, in the first quarter totaled 16.5 million euros, up 2.4 percent compared with 16.1 million euros in the same period last year — a figure that also included 9.8 million euros of income for the early termination of the Gucci license.

Starting in 2019, the company also adopted the IFRS 16 international financial reporting standards, based on a modified retrospective approach. According to the new principle, adjusted EBITDA reached 20 million euros in the first quarter, with margin on sales standing at 8.1 percent.

In the first quarter, sales in Europe rose 0.8 percent to 124.6 million euros, representing 50.4 percent of total revenues. Safilo’s chief financial officer Gerd Graehsler said this was also due to “a good recovery of the Italian market” and was driven by the overall positive performance of the company’s own core brands — Smith and Polaroid, specifically — and of licensed labels, mentioning Dior, Tommy Hilfiger and Max Mara among them. In particular, Graehsler said the company has earmarked 1.5 million euros for the marketing of its own brands, which also include Carrera and Safilo.

Safilo’s revenues in the U.S. grew 7.1 percent to 88.9 million euros, accounting for 36 percent of total sales. At constant exchange, sales in the region edged down 0.6 percent. During the call, Graehsler emphasized that the performance had “stabilized after two consecutive years of losses” and that it had been boosted by the Kate Spade and Tommy Hilfiger brands. Graehsler added that there’s still work to do in the market, as the company needs to enhance the focus on the independent opticians channel.

In the Asia-Pacific region, sales climbed 23.8 percent to 17.7 million euros, representing 7.2 percent of total group revenues. The area’s business was boosted also by the performance of travel retail in South Korea and China.

“Asia-Pacific is clearly a strategic area for us, where we want to continue to grow,” underscored Graehsler, pointing to the recent joint venture inked with South Korean eyewear and sports goods player Parma International as a key asset to this end.

On the other hand, the zone including India, the Middle East, Africa and Latin America reported weak business, with sales decreasing 11.8 percent to 16.1 million euros, compared to 18.2 million euros registered in first-quarter 2018.

At the end of March, net debt on a pre-IFRS 16 basis stood at 26.4 million euros compared to 166 million in the same prior-year period, reduced through a capital increase in September 2018. The company registered net debt of 32.9 million euros at the close of last year.

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