MILAN — Safilo Group reported net sales for new and continuing brands grew 4.7 percent in the first nine months of the year, nearly compensating for expiring business as the Italian eyewear company’s license for Gucci comes to a close in December.
Total net sales for the first nine months were 939.1 million euros, or $1.03 billion at current exchange rates, down 2.2 percent over the same period last year.
The third-quarter cast an even rosier outlook for the global leader in luxury eyewear, with licenses such as Givenchy, Dior, Fendi, Kate Spade and Marc Jacobs, and house brands that include Carrera, Smith, Polaroid and Safilo. Safilo Group’s earnings before interest, taxes, depreciation and amortization grew 30 percent at constant exchange rates compared to the July to September period last year, from 14.7 million euros to 19.1 million euros, or from $16.1 million to $20.9 million. Net sales for the third quarter were 288.0 million euros, or $315 million, marking a rise of 1.7 percent in constant exchange rates over the third quarter of 2015.
Safilo Group chief executive officer Luisa Delgado told analysts on a conference call that it was successfully building house brands Polaroid, Carrera and Smith. Meanwhile, the group recently inked licenses with Rag & Bone and Moschino, and renewed its license for Max Mara. Delgado noted that Max Mara had suffered “corporate neglect and decline” prior to her tenure, which began three years ago, but thanks to new attention and “mutual trust” with the fashion house Max Mara now represented “one of our future core brands.”
“Over the last two years [Max Mara] has enjoyed one of the fastest growths in our portfolio,” Delgado said.
She also highlighted reinforcement of the group’s stronghold in innovative lens production. In September, the group purchased the remaining 24.4 percent stake in the Italian lens manufacturer Lenti, a specialist in state-of-the-art decorated lenses, after previously holding 75.6 percent. Sales of Smith Chromapop lenses are expanding across product and price categories, as Smith has succeeded in bringing down its price from $209 for a pair to $169. Chromapop uses advanced technology to filter light waves to avoid color confusion and provide greater clarity, according to the company. Safilo Group also owns Polaroid Eyewear, the originators of polarizing lenses.
Europe became Safilo Group’s largest market in the first nine months, outpacing sales in North America, which were nearly flat due. Europe garnered net sales of 399.1 million euros, or $436.5 million, from January to September, marking 6.6 percent growth in total net sales over the same period last year. Net sales for new and continuing brands in Europe rose 11.4 percent at constant exchange rates, while the continent’s share of the group’s net sales rose from 39.4 to 42.5 percent for the first nine months.
Delgado told analysts that a “positive sun season” in Europe had boosted sales especially for Polaroid, while sales in France had grown by double digits. The company is reinforcing its presence in Northern Europe, particularly for the strength of Polaroid in those markets. Last month, Safilo revealed the formation of a new business region, Northern Europe, that includes the U.K. and Ireland along with Nordic countries such as Sweden, Denmark, Finland, Norway, Iceland and the Baltics. A new showroom opened in Stockholm.
Net sales in Asia-Pacific sank 20.2 percent in the first nine months to 90.1 million euros, or $98.54 million. The region represented 9.6 percent of the group’s net sales compared to 11.8 percent for the first nine months of 2015. Despite these figures, Delgado said, “We see tangible progress with resetting business in Asia,” and vowed that Safilo was working to create “strong, sustainable” business in the region.
Net sales for the wholesale business grew 6.1 percent at constant exchange rates, while retail, which is concentrated in North America, suffered lackluster performance. Delgado said the group was giving itself 12 months to review, closely monitor and restructure its retail business in North America, closing unpromising stores and selecting others for relaunch.
Delgado noted that the board of directors on Wednesday approved the reorganization of its corporate structure to create more consistency between legal and business units. A new entity, Safilo Industrial Srl, will become the group’s wholly controlled manufacturing arm, while Safilo Group SpA will remain the holding company, and Safilo SpA will continue to lead global business. The change is expected to reduce the number of legal entities within the group from 52 to 49, and offer new synergies and cost savings going forward.
Safilo’s license for Gucci, which represented 15 to 17 percent of turnover since January 1, comes to a close in December. This is two years earlier than originally planned, as the brand’s parent company Kering prepares to internalize control over its eyewear. The loss of Kering’s business will be partially compensated by cash compensation and a production agreement with Kering Eyewear.