Safilo improves in Q1, shrugs off bad weather in key markets
Recent updates from retailers have pointed towards a heatwave-driven recovery in sales for some markets with sunglasses leading the charge. So it was interesting this week to see just how eyewear giant Safilo fared in the first quarter, given that the weather was cold and snowy in many markets.
While sunglasses would have been the last thing on many consumers’ minds, the Italian giant actually said it saw a “significant recovery” year-on-year in Q1. It hailed “a return to normal operating conditions, recording strong growth rates in the European markets and in emerging countries, which had been hurt last year by the difficult start-up of the new information system in its Padua distribution centre.
But it wasn't all good news. Excluding the impact from the weaker US dollar, sales in North America “remained soft, in particular due to the still difficult business environment in department stores.”
So what did that translate to in terms of figures? Net sales rose 6.9% to reach €250.9 million. At constant exchange rates, that would have been a 15.4% increase. And the company said its Brand Portfolio was up 16.9% at constant exchange rates (excluding the Gucci business), “enriched by the launch of new licenses, Moschino, Love Moschino and Rag & Bone.”
Its gross profit reach €127.5 million, which was a 9.1% increase, with the gross margin rising to 50.8% of net sales compared to 49.8% a year ago.
Excluding €1.7 million on one-off costs, profit on an Ebitda basis was €13.1 million, which was so much better than the €6.2 million loss of a year ago. However, net debt reached €166 million, bigger than the €131.6 million of just three months earlier.
As mentioned, the company saw its performance varying widely around the world. European sales rose 25.5%, but in North America, they dropped 17.2%. Asia-Pacific was up 29.3% and the rest of the world soared 72.1%.
In Europe, its Brand Portfolio, excluding the Gucci business was up nearly 32% at constant exchange rates so the company is clearly powering ahead in the markets closest to home. Further afield, the Asia-Pacific performance continued the stronger trend that has been seen in the second-half. And in the rest of the world, Safilo did well in Brazil, Mexico, India and Saudi Arabia, together with the countries it had more recently entered through local distribution partnerships.
But clearly, North America remains a problem on more than one front. The exchange rate issue is one that's hard to overcome, but at least the company knows that this will change at some point. Less easy to predict is the situation in American department stores, which remain hugely challenged across multiple product categories. But at least the group's American Solstice business managed to turn in an improved performance with sales up 1.4% at constant exchange rates and same-store sales up 2.5%.
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