MILAN — Safilo Group SpA on Thursday said adjusted net profit in the first half of the year jumped 23 percent, at current exchange rates, to 31.5 million euros, or $43.2 million, on the back of strong sales, especially in the second quarter, and a big drop in net financial expenses.
“This first semester of 2014 offers important early confirmation that we are on the right track towards midterm sustainable profitable growth, centered on quality of product, sales and distribution, and operations,” Luisa Delgado, Safilo Group chief executive officer said in the company’s results statement, released after the close of the Milan Bourse.
In the first half of the year, Safilo recorded an increase of 1.3 percent (4.7 percent at constant exchange rates) in net sales, to 606.3 million euros, or $830.6 million, boosted by consumer demand in the company’s leading European market, where turnover increased by 5.8 percent, or 6.3 percent at constant exchange rates. Europe represented almost 43 percent of group net sales in the January to June period. Safilo in particular singled out France and Germany as “the best-performing markets” for the group’s overall portfolio, while the recovery in Spain and Portugal “again led the way amongst the main sunglass markets, with performance resulting above all from growth in the Polaroid brand.”
In the group’s second-largest geographic market, the Americas, sales in the first half were down 1.6 percent, but up 4.0 percent at constant exchange rates. Safilo singled out department store sales and sunglasses as strong performers in the U.S., with brands including Polaroid, Fossil, Boss, Fendi, Bobbi Brown and Jack Spade “making the most important contributions.”
In emerging markets, including Brazil, China and Turkey, revenues in the six months jumped by nearly 18 percent, the company said.
Safilo recorded a slight downturn in adjusted earnings before interest, taxes, depreciation and amortization in the first half, to 71.7 million euros, or $98.2 million, compared to 72.4 million euros, or $94.8 million in the year-earlier period, as marketing expenses related to commitments on licensed brands and investments in the start-up activities of new licensed brands increased. Operating margins therefore decreased slightly to 11.8 percent in the period compared to 12.1 percent in the first six months of 2013.
Group net financial debt dropped in the first half by 17.3 percent, to just over 166 million euros, or $227.4 million. In the January to June period, net financial expenses were slashed by 64.3 percent, to 5.4 million euros, or $7.4 million, as the year-earlier period still included the payment of interest on the high yield bonds, which were completely redeemed in May 2013, as well as the negative impact of exchange rate differences, the company said.
Further commenting on the group’s first-half performance, Delgado said: “Increasing operational quality combined with quality of sales have enabled us to achieve a gross profit close to 200 million euro [or $274 million at current exchange] and a gross margin exceeding 63 percent, showing that we are going in the right direction, working for higher efficiency in our planning, product development and supply process.”
Delgado also said the company — which produces own brands including Carrera, Polaroid and Safilo, as well as licensed brands including Bottega Veneta, Marc Jacobs and Tommy Hilfiger — was focused on “quality distribution” and on entering “new channels with differentiated offerings,” a strategy she said contributed to an acceleration of sales growth in the second quarter and in a “continued improved mix for the semester.”
In the second quarter, sales increased 3.9 percent, or 7.4 percent at constant exchange rates, to 313.1 million euros, or $428.9 million. Turnover accelerated on the back of “continuing positive sales momentum in Europe…and a recovery in the North American market after the downturn linked to bad weather in the first quarter,” Safilo said.
Adjusted net profit in the period jumped 23.3 percent, to 15.0 million euros, or $20.6 million.