Safilo Group’s Earnings Slide In Q3

Safilo Group S.p.A. said that in the third quarter of 2017, Safilo’s total net sales equaled €245.1 million compared to €288.0 million in the third quarter of 2016, down 14.9 percent  at current exchange rates and 12.3 percent  at constant exchange rates.

In the quarter, the net sales of the Going Forward Brand Portfolio increased by 1.3 percent  at constant exchange rates 
(+1.6 percent  excl. retail), driven in particular by the positive growth trends experienced by the Group’s Own Core Brands and good sales momentum in Emerging Markets.

In the first nine months of 2017, total net sales equaled €797.7 million compared to €939.1 million in the first nine months of 2016, down 15.1 percent  at current exchange rates and 15.0 percent  at constant exchange rates.

In the period, the net sales performance of the Going Forward Brand Portfolio was negative by 4.0 percent  at constant exchange rates (-3.5 percent  excl. retail), due to the difficult start to the year following the implementation of the new Order-to-Cash IT system in the Padua DC.

As previously announced, the Group’s sales and economic results reflect the exit of the Gucci license at the end of 2016 and its replacement with the Strategic Product Partnership Agreement with Kering for the product development, manufacturing and supply of Gucci eyewear.

Economic and financial highlights

 Q3 2017 Gross Profit equaled €120.4 million, down 28.9 percent  compared to €169.4 million in the third quarter of 2016. Gross margin declined to 49.1 percent  of net sales compared to 58.8 percent  in the third quarter of 2016.
9M 2017, Gross Profit was €407.6 million, down 27.7 percent  compared to €564.0 million in the same period of 2016. Gross margin declined to 51.1 percent  of net sales compared to 60.1 percent  in the first nine months of 2016.

Q3 2017 adjusted1 EBITDA was equal to €15.4 million, down 19.6 percent  compared to the adjusted1 EBITDA of €19.1 million in the third quarter of 2016. Q3 2017 adjusted1 EBITDA margin stood at 6.3 percent  of net sales compared to 6.6 percent  in the same quarter of 2016.

9M 2017 adjusted1 EBITDA was equal to €43.2 million, down 44.2 percent  compared to the adjusted1 EBITDA of €77.4 million in the first nine months of 2016. 9M 2017 adjusted1 EBITDA margin equaled 5.4 percent  of net sales compared to 8.2 percent  in the same period of 2016.

At the end of September 2017, Safilo’s Net Debt increased to €135.9 million compared to €111.5 million at the end of September 2016, and €112.7 million at the end of June 2017.

Markets

Europe

Q3 2017 net sales in Europe equaled €100.5 million compared to €107.6 million in the third quarter of 2016, down 6.6 percent  at current exchange rates and 5.9 percent  at constant exchange rates.

In the quarter, the sales of the Going Forward Brand Portfolio, down 4.2 percent  at constant exchange rates, on one hand was particularly positive in Central & Eastern Europe and on the Own Core Brands and most of the licensed brands, while the relative performance of the Dior brand remained influenced by the challenging comparison base with the same quarter of the previous year.

9M 2017 net sales in Europe equaled €367.7 million compared to €399.1 million in the first nine months of 2016, down 7.9 percent  at current exchange rates and 7.3 percent  at constant exchange rates.

In the period, the sales of the Going Forward Brand Portfolio declined in Europe by 6.1 percent  at constant exchange rates, heavily driven by order intake not yet materializing between the second and third quarter at the usual speed following the difficult implementation of the new Order-To-Cash IT system in the Padua DC and the resulting late deliveries of spring/summer collections in June.

North America

Q3 2017 net sales in North America were €103.5 million compared to €126.5 million in the third quarter of 2016, down 18.2 percent  at current exchange rates and 13.7 percent  at constant exchange rates.

Despite a difficult business environment in department stores and the impact of severe weather conditions that hit several southern states in September, in the quarter, the wholesale revenues of the Going Forward Brand Portfolio slightly increased compared to the same period of last year (+0.4 percent  at constant exchange rates), driven by the improved performance of the business in the independent retail optical channel.

9M 2017 net sales in North America totaled €325.3 million compared to €386.3 million in the first nine months of 2016, down 15.8 percent  at current exchange rates and 16.0 percent  at constant exchange rates.
In the first nine months, the wholesale revenues of the Going Forward Brand Portfolio decreased by 1.4 percent  at constant exchange rates, reflecting in particular the weakness of the market environment in department stores.

Sales of the 103 Solstice stores in the United States (116 stores at the end of September 2016) equaled €16.4 million in Q3 and €49.9 million in 9M 2017, declining respectively 9.3 percent  and 13.7 percent  at constant exchange rates compared to the same periods of 2016. Same store sales performance was negative by 4.4 percent  in Q3 and by 8.8 percent  in 9M 2017.

Asia Pacific

Q3 2017 net sales in Asia equaled €16.7 million compared to €31.3 million in the third quarter of 2016, down 46.7 percent  at current exchange rates and 43.7 percent  at constant exchange rates.

In the quarter, the sales performance of the Going Forward Brand Portfolio in the region turned positive, up 9.3 percent  at constant exchange rates, driven by the positive trends recorded in almost all the markets of the area led by China, both through the development of the own core brands and the growth of the portfolio of licensed brands.

9M 2017 net sales in Asia were €45.6 million compared to €90.1 million in the first nine months of 2016, down 49.4 percent  at current exchange rates and 48.7 percent  at constant exchange rates.

In the period, the sales performance of the Going Forward Brand Portfolio was negative by 8.7 percent  at constant exchange rates.

Rest of the World

Q3 2017 net sales in the Rest of the World were €24.4 million compared to €22.6 million in the third quarter of 2016, up 8.4 percent  at current exchange rates and 8.0 percent  at constant exchange rates.

In the quarter, the sales of the Going Forward Brand Portfolio increased by 28.2 percent  at constant exchange rates, thanks to the strong development of the entire brand portfolio led by Own Core Brands.

9M 2017 net sales in the Rest of the World were €59.1 million compared to €63.5 million in the first nine months of 2016, down 7.0 percent  at current exchange rates and 10.0 percent  at constant exchange rates.

In the period, the sales of the Going Forward Brand Portfolio increased by 6.6 percent  at constant exchange rates.

Safilo’s portfolio encompasses Carrera, Polaroid, Smith, Safilo, Oxydo, Dior, Dior Homme, Fendi, Banana Republic, Bobbi Brown, BOSS, BOSS Orange, Céline, Elie Saab, Fossil, Givenchy, havaianas, Jack Spade, Jimmy Choo, Juicy Couture, kate spade new york, Liz Claiborne, Marc Jacobs, Max Mara, Max&Co., Pierre Cardin, Saks Fifth Avenue, Swatch, and Tommy Hilfiger.