MILAN — Safilo Group is kicking off the year on a positive note, with solid growth in sales and profitability.
On Tuesday, the Italian eyewear manufacturer reported a 12.4 percent increase in revenues that reached 282.6 million euros for the three months ended March 31. This compares with 251.4 million euros in the same quarter last year.
“The period confirmed once more the strength of our own and licensed brands, which continued to show their ability to grow at a healthy pace in their core product categories and markets,” said chief executive officer Angelo Trocchia. The executive said Safilo saw “an encouraging pick-up in demand in Europe” and continued progress in Latin America and the Middle East. North America “remained a stronghold despite a tough comparison basis, both in our traditional wholesale channels and in the online business.”
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Despite the challenges deriving from the COVID-19 pandemic, inflationary pressures and the war in Ukraine, Trocchia said he was “confident that the resilience of the eyewear sector and the effectiveness of our strategy will continue to support the group’s sales and margin growth also in 2022.”
The organic sales performance, including only proprietary brands and not terminated licenses such as Fendi and Dior, was up 14.3 percent at constant exchange rates, lifted by the continued strength of the owned Smith and Carrera labels and an encouraging start of the year for Polaroid.
Among the established licenses, Tommy Hilfiger, Kate Spade and Hugo Boss showed a strong growth pace, and, among the most recent licenses, David Beckham, Missoni, Isabel Marant and Under Armour increased their relevance, gaining further momentum in their reference markets.
The quarter also saw the promising launch of Carolina Herrera, Dsquared2 and Chiara Ferragni’s new eyewear collections, which “met with considerable market excitement,” Trocchia said during a conference call with analysts at the end of trading.
In the quarter, gross profit rose 22.8 percent to 155.5 million euros, driven by a positive price-mix effect and further progress on the group’s structural cost of goods sold savings project part of the 2024 business plan, said chief financial officer Gerd Graehsler.
“These continued to effectively counter the inflationary pressures deriving from increasing transport costs and the more marked incidence of energy expenses,” Graehsler said. “Safilo continued to focus on the efficiency of its supply chain, also completing in the quarter the industrial restructuring plan launched at the end of 2019.”
In the period, adjusted earnings before interest, taxes, depreciation and amortization, excluding non-recurring costs related to restructuring expenses and special projects, rose 23.8 percent to 32 million euros, a margin of 11.3 percent on sales improving by 100 basis points compared to the same quarter last year.
The prescription frames business grew 7.9 percent at constant exchange rates, but the quarter also showed a promising start to the year for sunglass sales, up 5.1 percent at constant exchange rates reflecting a significant rebound of the category in Europe. “Sunglasses suffered in the past two years without travels and with the lockdowns, but now they have to grow, and we see the first signs of rebound,” Trocchia said. “May and June will tell us, but we see all the positive signs.”
Graehsler concurred, saying that the category is also growing significantly online and in the direct-to-consumer channel.
Sales of Smith’s sports products confirmed the double-digit growth pace recorded in 2021, continuing to progress both in specialized sports shops and online through its direct-to-consumer channel.
Safilo’s total online business was up 9.4 percent at constant exchange rates in the first quarter.
Sales in North America rose 8.3 percent to 129 million euros, representing 45.7 percent of the total against a challenging comparison base. The executives cited Smith’s strength in snow and bike helmets and goggles, but also its growing eyewear business, one of the brand’s key priorities for 2021.
Among the other leading brands in the region, Kate Spade, Carrera and Under Armour were key growth drivers at wholesale while online Blenders’ sales closed the quarter “substantially in line with the extraordinary level of business recorded in the first quarter last year when the brand surged by 79 percent,” Trocchia said.
Graehsler said he was “pleased with the resilience of the market and the omnichannel strategy is paying off.”
Sales in Europe totaled 117.2 million euros, up 15.5 percent compared with the same period last year. The U.K., France and Germany outperformed, while Spain and Portugal posted a strong year-over-year rebound as the countries were in 2021 among the most exposed to the slow-recovering sunglass market.
Responding to an analyst, Trocchia said April in Europe continues to show a positive trend seen in the first quarter. “We don’t see any negative, the mood is quite positive, people are traveling again, and we closed [the international eyewear trade show] Mido with a positive feedback,” Trocchia said. “We are expecting a rebound of sun, and we are accepting a little bit higher stock to answer the market and be more reactive.”
In the quarter, sales in Asia and Pacific remained under pressure mainly due to rising COVID-19 cases and related lockdowns in a growing number of Chinese provinces. Revenues decreased 4.4 percent at 12.4 million euros. “We are carefully tracking China and ’til now, we have ensured continuity,” Trocchia said. “We assume a slowdown in China in the second quarter.” Graehsler cited a “demand and supply imbalance” in China and Trocchia also noted that business activities were impacted by the cancellation of the important Shanghai optical fair. Japan and South East Asia fared better in the period.
Sales in the rest of the world climbed 34.6 percent to 23.9 million euros, driven by ongoing positive sales in Brazil and Mexico, but also by a constantly improving business environment in the Middle East and in India, with the latter returning to growth after many quarters of softness.
“The numbers are the result of our actions,” Trocchia said. “I believe that if you are really focused, with the right communication and execution, it always pays off. Our own brands are growing in the second quarter and I have no doubt they will grow in the second half. We have a balanced portfolio and a strong marketing strategy and we see healthy sustainable growth.”
As of March 31, net debt amounted to 109.1 million euros, compared with 94 million euros at the end of 2021, mainly reflecting the normal seasonality of the business in terms of working capital dynamics, Graehsler said.