Safilo Group, the parent company of the Smith Optics brand and licensee for various lifestyle and sports brands, including Under Armour, Tommy Hilfiger and Havaianas, reported third-quarter net sales declined 9.8 percent in reporting currency to €235.0 million, a result which was said to be significantly affected by the strengthening of the euro against the U.S. dollar and a number of other currencies. At constant currency (cc) exchange rates, the decrease for the quarter was 3.9 percent, improving from the 6.6 percent decline recorded in the second quarter, which was said to be mainly due to the return to growth of the Smith Optics sports business in North America.
The company said in a release the negative performance of the period was largely explained by the sales decline in the former GrandVision chains, which accounted for the total decline recorded in Europe and for most of the Group’s total performance, and by the persistent weakness in the North American market, particularly in the Contemporary segment, while the contribution from emerging markets was again positive.
North America sales were down 12.2 percent in the third quarter to €109.6 million, compared to €124.7 million in the 2022 corresponding quarter, again heavily impacted by the strengthening of the euro against the U.S. dollar. In constant currency exchange rates, sales in the region declined 4.9 percent for the quarter, marking a significant improvement compared to the 11.3 percent decline posted in the first half of the year. The company reiterated that the improvement was due to the return to growth of the Smith Optics sports business in physical stores, which added to the already positive development of the brand in the DTC channel.
Still, the performance of the region remained soft in the eyewear market, especially in the sunglass product category, which was said to be affected by “a subdued demand, particularly in the Contemporary segment where the Group’s offer is more concentrated.”
In Europe, Q3 sales totaled €85.4 million, down 10.7 percent at reported exchange rates compared to €95.7 million in Q3 2022. At constant currency exchange rates, the decline was 6.1 percent and was said to be fully driven by the sales decline in the former GrandVision chains, net of which sales in the area recorded an increase of around 1 percent compared to the corresponding period last year. A positive performance that was reportedly more moderate than in the first half of the year following the normalization of trends in markets such as Italy, France and Spain, which, more than others, benefitted from a strong sun season last year. In all countries, the independent optician Business to Business channel continued to outperform the rest of the channels.
In the quarter, the German market reportedly remained negatively affected by the weakness of the Internet Pure Players channel, while the growth of the new markets in Eastern Europe, and Turkey in particular, continued in the quarter.
In Asia and Pacific, Q3 sales amounted to €15.2 million, down 5.9 percent at current exchange rates and up (+2.3 percent cc) compared to €16.2 million in Q3 2022. The performance was said to be driven by the positive progress of the business in China and some of the other key markets of the region, and by the sports business, which, with Smith Optics, is now reportedly one of Safilo’s main growth drivers in the area.
In the Rest of World, third-quarter sales reached €24.8 million, up 3.9 percent at current exchange rates (+5.9 percent cc) from €23.9 million recorded in Q3 2022. In the period, growth was mainly led to the further development of Carrera in India and the Middle East, while business trends in Latin America were positive in Mexico, but softer in Brazil.
Group gross margin reportedly made another significant improvement compared to the corresponding quarter in 2022, mainly due to lower transport costs, higher efficiencies in procurement and the positive contribution of the price/mix effect on sales. On the other hand, the operating performance of the quarter was said to be still negatively affected by the operating leverage, particularly influenced by the impact of wage inflation, together with higher IT and marketing investments to support the Group’s future development.
In the quarter, Safilo’s operating performance was also impacted by non-recurring costs, equal to €3.1 million at the gross profit level and Euro 4.7 million at the EBITDA level, mainly related to the transfer of the Longarone plant.
Photo courtesy Smith Optics
