MILAN — Continued weakness in the U.S. and in Europe weighed on Safilo Group S.p.A.’s performance in the first six months of the year, although there were positive signs coming from growth in emerging markets and in the prescription eyewear business. On Thursday, the Italian eyewear manufacturer reported that adjusted net loss totaled 10.4 million euros, compared with a net loss of 6.6 million euros in the first half of 2017.
In the six months ended June 30, sales decreased 10 percent to 492.2 million euros, compared with 547.2 million euros in the same period last year. At constant exchange rates, sales decreased 4.3 percent.
Adjusted earnings before interest, taxes, depreciation and amortization dropped 9.5 percent to 25.1 million euros. Adjusted operating profit plunged 54.9 percent to 3.1 million euros.
Safilo also issued a five-year business plan that includes an update of the previous 2020 plan, and sees moderate sales growth compared to 2018, since business trends are expected to improve in the second half, and a strong recovery of profitability, mainly through adjusting the group cost structure. The 2020 update expects sales to grow by approximately 2 percent in 2019 and 2020, while earnings before interest, taxes, depreciation and amortization margin should increase significantly, reaching 8 to 10 percent of sales in 2020. Free cash flow is expected to turn positive from 2019.
“Our objective is to improve the performance of our company, focusing on few, very clear, priorities,” said Angelo Trocchia, who joined Safilo as ceo in April, succeeding Luisa Delgado. “First and foremost, we need to return to grow our top line, exploiting more and better the core strengths of the Group: our product creation and development capabilities, our 140 years of eyewear manufacturing experience, and our deep worldwide distribution network. We need to focus on our go-to-market execution, combining commercial capabilities, brand execution and customer service and leveraging our strong portfolio of brands, with regards to which I am glad to announce the renewal of the Fossil license (until 2023) and the extension of the Kate Spade license (until 2020).”
Trocchia said the company has revised overall expectations for 2018 and in the second half of the year it “will work on making the required adjustments and changes to reignite the engines of growth, while executing our cost-saving initiatives.” Trocchia pointed to the arrival of Stephen Wright as chief commercial officer of Safilo North America, effective June 19, succeeding Henri Blomqvist, and expected to further develop business in the region. “We are in the process of creating a leaner organization and therefore an agile, performance-based and customer-centric culture, able to respond more effectively to key opportunities and risks, and as a consequence significantly align our cost structure to the scale of the Group, to restore an adequate and sustainable level of profitability,” said Trocchia.
As of June 30, net debt stood at 171.1 million euros, compared with 112.7 million euros at the end of June last year.
As a 2018 outlook, Safilo has revised its expectations, with sales forecast to decline 6 percent, or 3 percent at constant exchange rates.
The updated 2020 plan is to be presented to analysts on Friday morning.