MILAN — A successful rebalancing of Safilo Group’s brand portfolio; strong momentum in the U.S., China and online, and an increase in prescription frame sales helped the Italian eyewear company return to profit and report an increase in sales in the first half.
In the six months ended June 30, Safilo reported an adjusted net profit of 4.4 million euros, compared with an adjusted net loss of 63.7 million euros in the same period last year. This compares with a net profit of 8.5 million euros posted in the first half of 2019.
In the first half of 2021, revenues totaled 510.7 million euros, up 52.2 percent compared with 335.6 million euros in the same period last year. Compared to the first half of 2019, sales increased 3 percent.
During a conference call with analysts at the end of trading, chief executive officer Angelo Trocchia touted a second quarter that “continued the solid sales and profitability momentum of the first three months of the year,” which allowed Safilo to close the first half with a rebound “well-above the first half of 2019. We believe in the work we are doing and we are moving in the right direction.”
Following the exit of licensed brands Dior, Max Mara and, from the end of June, Fendi, Safilo has been rebalancing its stable of brands with the arrival of new proprietary and licensed labels, from Blenders and Privé Revaux, to Levi’s, David Beckham, Missoni, Ports, Isabel Marant and Under Armour — effectively compensating for the licenses terminated at the end of 2020. Chief financial officer Gerd Graehsler said the new licenses and the acquisitions, such as those of the digitally native brand Blenders Eyewear and Privé Revaux, helped offset the exit of licenses of about 200 million euros in sales at the end of 2019.
The organic sales performance delivered by the group’s comparable brands was very positive, up high-single digits at constant exchange rates compared with the second quarter of 2019, led by Smith’s strong performance in its core product categories, by Carrera and the main licenses of Hugo Boss, Tommy Hilfiger, Kate Spade and Jimmy Choo.
In May, Safilo inked a license with Dsquared2 and, in July with Carolina Herrera. Trocchia underscored the importance of that agreement “in terms of size and positioning, and it completes our women’s offer. It will help strengthen our business in Iberia and Latin and North America, and helps us to balance the exit of some licenses.” The first collection will be launched in January for spring.
In the second quarter of 2021, the group’s online business was up 64 percent compared with the same period last year, reaching 14.4 percent of total sales, thanks to the contribution of Blenders’ e-commerce sales and to the revenues generated through the internet pure players and to Smith’s direct-to-consumer channel.
Safilo’s shareholders on July 30 approved a share capital increase up to a maximum of 135 million euros, which is expected to further support the group’s investments, including new opportunities that may become available in the sector.
Asked to elaborate, Trocchia said there was no concrete acquisition “option on the table, but we are strongly interested in opportunities and we want to be ready. The industry is very dynamic, in great evolution and we believe we have to be in the right condition.” He ticked off the emergence of Essilux, Thélios and Kering, and said, “We have asked ourselves does it make sense to stay as is?” Responding to another question on the issue, he said eventual targets would be “in b-to-c or in optical.”
Trocchia and Graehsler emphasized the increased focus on the optical division, citing the new successful Polaroid and Carrera prescription glasses, for example. Trocchia said that over the last two years, Safilo has enhanced its sales force “teaching to sell optical versus sun, which requires a very different set of capabilities,” and further pushing on “service, which becomes crucial with optical.”
Sports products also helped drive business. Smith sales almost doubled in the second quarter compared with 2019, said Graehsler, also boosted by the direct-to-consumer channel.
In the first half, sales in North America amounted to 240.1 million euros, representing 47 percent of the total, and were up 86.9 percent. Graehsler said the rebound in the U.S. was “better than expected.”
Revenues in Europe rose 26.2 percent to 208.2 million euros, accounting for 40.8 percent of the total.
Sales in Asia Pacific represented 5.1 percent of the total, amounting to 25.9 million euros, up 9.1 percent. Graehsler touted the performance of Safilo in China, but said continued lockdowns in the Asia Pacific region weighed on business there. Tocchia noted that the Ports license, which was very successful, reflected Safilo’s strong interest in China.
Sales in the rest of the world totaled 36.5 million euros, climbing 98.6 percent.
Adjusted earnings before interest, taxes, depreciation and amortization amounted to 49.7 million euros, compared with the adjusted loss of 28.3 million euros recorded in the first half last year. This compares with an adjusted EBITDA of 41.2 million euros in the first half of 2019.
Adjusted operating profit totaled 24.7 million euros, compared to an adjusted loss of 55.2 million euros in the first half last year. This compares with an adjusted operating profit of 13.3 million euros recorded in the first half of 2019.
As of June 30, net debt stood at 226.9 million euros, compared with 222.1 million euros at the end of December 2020.
Based on the better-than-expected first half and the continuation of positive trends into the beginning of the third quarter, Graehsler said he expects the group’s full year 2021 sales to be above 2019 levels, up mid-single digits at constant exchange rates. Adjusted EBITDA for the year is also forecast to surpass 2019 levels. Such expectations are also “based on the assumption of a stable business environment” in the second half of 2021, in relation to the COVID-19 pandemic, he underscored. This also allows Safilo to confirm its Group Business Plan 2020-24, announced at the end of 2019.