Sun shines on Safilo in some markets but times are still tough as profits take a soaking

Italian luxury eyewear producer Safilo had it tough in Q1 as costs linked to product and commercial restructuring bit hard. On the sales front too, there was a mixed picture with sales in The Americas impressing, but offset by an almost double-digit dip in Asia-Pacific and more modest returns in Europe.

So what went right and wrong in Q1? In the three months ended March 31, net profit plummeted over 90% to just €1.4m while adjusted net profit dipped 86% to €2.3m. Ouch. Any better news? Well, adjusted ebitda, fell ‘only’ 8.2% year-on-year to €32.6m

Revenues were a bright spot though, rising to 10.6% to €324.3m on the back of the strength of the US dollar. Currency-neutral sales grew a more modest 0.8%.

So it’s clear that North America is a great market for the company. It continued to grow, jumping 27% at current exchange rates and by 5.3% currency-neutral, to €132.9m, while Latin America sales rose and even better 30.1% to €12.5m. Operations in sun-drenched Mexico and Brazil were “especially strong”.

Sales in Europe rose only 2.6% to €132.9m with Iberia, Germany and the Nordic markets performing well, while Italy also saw a positive start to the year. But Russia remained weak, reflecting domestic economic conditions.

Asia-Pacific, revenues fell 9.8% to €39.2m, affected by a requalification of regional distributors, hurt by softness in China and Hong Kong. However, Australia saw “excellent” growth, and Japan has begun to show early gains from a more brand-driven commercial approach.

“This has been another quarter of investment, on track with our plans for the year,” said CEO Luisa Delgado.

“As we progress further with the commercial reinvention to enable worldwide quality sales growth, and the supply network reinvention to enhance gross margins and reducing the level of cash tied up in inventory, we plan to see increasing benefit as we move through 2015.”

The results also included the first of three compensation payments of €30m received in January from Kering, who in September said it would terminate the current license with Safilo for the Gucci brand at the end of 2016, two years earlier than planned, in exchange for compensation of €90m.

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