MILAN — Strong growth in North America’s wholesale market and in Mainland China helped Safilo Group rebound in the third quarter.
In the three months ended Sept. 30, an uptick in the top line and cost savings allowed the Italian eyewear company to report adjusted earnings before interest, taxes, depreciation and amortization of 14.3 million euros, up 9.3 percent compared to the same quarter of 2019. Thanks to the progress recorded in the third quarter, Safilo managed to reduce the group’s negative adjusted EBITDA in the first nine months of 2020 to 13.9 million euros, compared to a loss of 28.3 million euros in the first half of 2020. Safilo’s adjusted EBITDA was a profit of 54.3 million euros in the first nine months of 2019.
In the third quarter, sales rose 3 percent to 219.1 million euros, compared with 212.8 million euros in the year-ago period. At constant exchange, they rose 6 percent.
In a call with analysts on Tuesday at the end of trading in Milan, where Safilo is publicly listed, chief executive officer Angelo Trocchia noted that the recent acquisitions of Blenders Eyewear and Privé Revaux, which added 26.5 million euros to the group’s North America business, also contributed to the full-quarter results and boosted the group’s online business, together with the progress of the Smith brand’s direct-to-consumer channel. Safilo’s online channel now accounts for around 16 percent of revenues, up from about 3 percent in the same period of 2019.
The third quarter could not entirely offset the nine-month performance, which was hurt by the coronavirus pandemic and the global lockdowns, as Safilo reported a 21.7 percent decrease in sales to 554.7 million euros, compared with 708.7 million euros in the same period last year.
In addition to its own brands Carrera, Polaroid, Smith and Safilo, the group produces and distributes eyewear for labels ranging from DB Eyewear by David Beckham, Missoni, Marc Jacobs and Moschino to Tommy Hilfiger, Under Armour and Levi’s. Safilo expects the exit of the Dior brand to begin Jan. 1, and the Fendi label to begin July 1.
Trocchia touted improvements in all of Safilo’s core markets and channels in the third quarter, trumpeting the performance of North America, and “an outstanding growth in China” as well as more positive results in parts of Europe, such as Italy, Germany and France.
He underscored Safilo’s digital transformation and its direct-to-consumer strategy, which gained steam and relevance in the quarter. In August, Safilo launched its new business-to-business platform in Europe and, in November, it rolled out a new Customer Relationship Management system. “These are the first two execution waves of a significant midterm project which goes in the direction of reshaping and enhancing the relationship, the engagement and the way we do business with our many European opticians, improving after-sales-service and client satisfaction, to ultimately increase the share of our b-to-b business,” said Trocchia.
Two important goals were achieved in the period, he continued, as Safilo secured additional liquidity with a new term loan facility of 108 million euros guaranteed by SACE, and, as reported, the company sold its Italian plant in Martignacco as part of its industrial plan to optimize the production footprint. This allowed 181 workers, out of the 212 there at the date of the sale, to join iVision Tech, another local eyewear maker, which is being relaunched.
The month of October showed further progress, but uncertainties continue to loom due to the pandemic, and Trocchia, who spoke before the Italian government’s new restrictions to curb the infections were expected to be released, said Safilo continues “to maintain a very prudent stance for the remainder of the year, and we remain committed to providing timely updates to all our stakeholders on the evolution that the business will have in the coming months. We cannot foresee [the performance in] November and the holiday season.”
In the third quarter, prescription frames performed better than sunglasses and all of Safilo’s core licensed brands, from Kate Spade and Tommy Hilfiger to Jimmy Choo, contributed to the gains.
Smith products recorded double-digit growth in the sports-store channel and more than doubled its turnover in online channels.
In North America, sales climbed 41.5 percent to 113.1 million euros.
Europe showed a patchy performance, with revenues falling 17 percent to 79.3 million euros.
Sales in Asia-Pacific were down 9.4 percent to 15.9 million euros. The ongoing challenges in the travel-retail business, which was down in the region by 63 percent, were significantly offset by a surge in business in Mainland China. In this region, local demand and the contribution of Safilo’s new licensed brands, in particular Levi’s and Ports, pushed sales up 83 percent at constant exchange rates.
Responding to an analyst, chief financial officer Gerd Graehsler said travel retail was “never dominant” for Safilo, and “skewed toward luxury,” accounting for 4 percent of sales last year. Now it has fallen to represent 1 percent of revenues. The channel “has suffered a dramatic reduction and it will be a while before it comes back,” he said.
The Rest of the World continued to be weak, registering a 45.2 percent fall in sales to 10.9 million euros, hurt by the pandemic and economic downturns in Latin America, in Brazil in particular, India and the Middle East.
At the end of September, the group’s net debt (post-IFRS 16) stood at 201.7 million euros, compared to 188.5 million euros at the end of June.