MILAN – Shares of Safilo Group SpA plunged over 6 percent on Thursday morning, underperforming the Milan Stock Exchange, and remained down almost 4 percent after noon on news that the eyewear maker’s first quarter 2017 sales will be impacted by delivery complications out of its Padova, Italy, distribution center.
Sales of its Going Forward Brand portfolio, which no longer includes Gucci, are likely to drop 15 percent to 20 percent in the first quarter compared with the same period last year, Safilo chief executive officer Luisa Delgado said in a conference call on Thursday morning.
Safilo revamped its delivery operations and is now operating an automated system to cater to its clients worldwide. Delgado noted that there were “bottlenecks” and that the company is committed to recovering warehouse deliveries and remedying complications in the second quarter.
In its full-year results statement, Safilo said its 2016 net profit, adjusted for nonrecurring items, more than doubled to 15.4 million euros, or $17 million, from $6.9 million euros, or $7.58 million, in 2015.
However, on a non-adjusted basis, Safilo reported a net loss of 142.1 million euros in 2016, or $157.3 million, compared to a loss of 52.7 million euros, or $58.5 million, in 2015. Dollar amounts have been converted at average exchange for the periods to which they refer.
Non-recurring items included an impairment loss on goodwill of 150 million euros, or $166.12 million, which reflected the writedown of the goodwill allocated to its Far East cash-generating unit, as well as 9.8 million euros, or $10.8 million, in restructuring costs related to its Polaroid brand.
Until the last quarter of 2016, Safilo continued to suffer from Gucci’s exit as a top licensed brand. The Gucci license, which represented some 18 percent of the group’s revenues in 2016, ended in December, two years earlier than planned.
Safilo will still benefit from compensation payments into 2017 as a result of early termination from Kering.
Safilo said the second of the three compensation payments of 30 million euros, or $33.2 million, from Kering was received in December 2016 and the third tranche will be settled in September 2018.
Safilo’s profits suffered significantly in the fourth quarter due to a lackluster sales performance worldwide. The Asian market declined 30.8 percent in the last quarter of 2016, North American sales fell 5.1 percent and Europe rose 8.4 percent.
Gross profit fell 15.5 percent to 151.7 million euros, or $167.9 million. Sales fell 1.7 percent to 313.9 million, or $347.5 million, while EBITDA or earnings before interest, taxes, depreciation and amortisation plunged 54.4 percent to 11.4 million euros, or $12.6 million, as the eyewear maker continued to focus on cost-efficiencies, as well as machinery and logistic upgrades across the board.
Looking ahead, Safilo said it is focused on projects like developing the Safilo brand’s identity, as well as the Havaianas launch in Brazil and propelling Polaroid as a streetwear brand.
Delgado said that Dior, which Safilo produces under license, is performing well and that they are “committed to the partnership with the brand.”
When asked if Safilo had any intention to merge with LVMH Moët Hennessy Louis Vuitton, Delgado said that the Italian-based eyewear company is committed to staying independent. As reported in February, starting in 2018, competitor Marcolin will design and manufacture eyewear for the Céline and Louis Vuitton brands, with the goal of “becoming, in the future, the preferred partner” of the LVMH group in the eyewear business. LVMH and Marcolin are to set up a joint venture with the first controlling 51 percent and the latter holding the remaining 49 percent.
“I cannot speak for LVMH but we have been very clear. Safilo’s plan and strategy is focused on wholesale and staying independent,” Delgado said.
Safilo produces and distributes eyewear under license for LVMH brands including Fendi, Dior and Marc Jacobs. This year it will focus on launching Givenchy. However, Céline will exit by the end of 2017.