Safilo Group, the parent of Smith, reached €1.047 billion in net sales in 2017 compared to €1.25 billion in 2016, a decline of 16.4 percent. Sales were down 15.5 percent on a currency-neutral basis.
The reduction of sales was mainly driven by the change of the Gucci license into a supply agreement, representing a net decline of €155 million (12 percent), and by the implementation of the new Order-to-Cash IT system in the Padua DC early in the year. That event negatively affected deliveries and, while operationally recovered from mid-year, impacted order taking and thus reduced sales and profit up to and including the fourth quarter.
In the year, the sales of the Going Forward Brand Portfolio decreased by 3.9 percent at constant exchange rates, with Southern European countries being more affected by the above described Padua DC issues and by the decline experienced by the Dior collections after several years of extraordinarily strong growth. On the other hand, Own Core Brands and the total of all other licensed brands grew single digits, thanks in particular to the significant progress recorded by the Group in the emerging markets.
At the operating level, 2017 adjusted EBITDA stood at €41.1 million, with the margin at 3.9 percent of sales (€88.8 million and 7.1 percent of sales in 2016). This result mainly reflected the contraction recorded by the Group at the gross profit level, following the dilutive effect of the change of the Gucci license into a supply agreement and the sales decline of the Going Forward Brand Portfolio. The latter event affected capacity absorption of the Group’s Italian plants and the operational leverage of the year. In 2017, in line with the announced overheads productivity program, the Group achieved cost savings of €13 million, partially counterbalanced by approximately €4 million of exceptional costs incurred in relation to the above-mentioned Padua DC issues.
Safilo closed 2017 with an adjusted Group net loss of €47.1 million compared to the adjusted net profit of €15.4 million recorded in 2016. 2017 adjusted net result does not include a non-cash impairment charge of €192.0 million on goodwill allocated to its cash generating units (as already communicated on February 27, 2018), and non-recurring costs of €12.5 million (€15.2 million on EBITDA).
Eugenio Razelli, Safilo Group executive chairman, commented: “2017 was a complex year for Safilo, in which we faced the transformation of the Gucci license into a supply agreement and a difficult implementation of a new Order-to-Cash IT system in the Padua distribution center, thus impacting our service levels and order intaking opportunities. These events significantly affected the Group economic and financial results. On the positive side, emerging markets showed positive trends and our own core brands performed better. We look towards 2018 as a brand new start for Safilo, with the announced appointment of Mr. Angelo Trocchia as new CEO to take the company through a new phase of successful business execution and brand portfolio development. Mr. Trocchia will join Safilo effective April 1, 2018.”
Safilo’s eyewear portfolio encompasses Carrera, Polaroid, Smith, Safilo, Oxydo, Dior, Dior Homme, Fendi, Banana Republic, Bobbi Brown, BOSS, BOSS Orange, Elie Saab, Fossil, Givenchy, havaianas, Jack Spade, Jimmy Choo, Juicy Couture, kate spade new york, Liz Claiborne, Love Moschino, Marc Jacobs, Max Mara, Max&Co., Moschino, Pierre Cardin, rag&bone, Saks Fifth Avenue, Swatch and Tommy Hilfiger.
The full press release is here.
