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Amid Falling Q1 Sales, Safilo Says Portfolio Is Solid

The Italian eyewear maker’s sales in the first quarter were dragged down by the loss of its Jimmy Choo license and a drop in U.S. revenue, but said strong portfolio agreements like the David Beckham license have rendered the firm “safe for quite a long time.”

Amid Falling Q1 Sales, Safilo Says Portfolio Is Solid

Angelo Trocchia

MILAN Safilo Group‘s said it will seek more secure, perpetual licenses and continue with plans to expand its portfolio, despite reporting a drop in its first-quarter sales.

The quarter was hit in part by the loss of its Jimmy Choo license, which ended at the end of December. Jimmy Choo inked a deal with the world’s largest eyewear manufacturer EssilorLuxottica for a 10-year license agreement last June.

In a statement released Tuesday, Safilo said its sales dropped to 277.2 million euros, down 3.5 percent compared with 287.2 million euros in the same period last year. At constant exchange rates, sales edged down 1.8 percent.

In a conference call with analysts, chief executive officer Angelo Trocchia said the results were in line with expectations. The second quarter, Trocchia said, is already looking up. “Overall, April was a positive month driven by a continuation of a very solid trend in Europe, where in North America performance was better than the first quarter, but still negative,” he said, adding that the contemporary segment remains “volatile” in the region.

Safilo’s chief financial officer Michele Melotti echoed this. “We are very glad to be able to confirm a positive free cash-flow generation also in this quarter, notwithstanding the seasonality of the business and fourth quarter of last year, which was better than expected in terms of cash generation.”

In the first quarter, adjusted earnings before interest, taxes, depreciation and amortization, excluding non-recurring costs of 3.9 million euros related to the potential costs of the terminated licensing agreement, amounted to 32 million euros, or a margin of 11.5 percent, in line with 32.4 million euros, or a margin of 11.3 percent, in the first quarter of last year.

In the three months ended March 31, sales in North America decreased 7.2 percent to 114.5 million euros from 124.7 million euros in the same period a year earlier. Sales performance in the region was dragged down in part by a subdued winter season that hit Smith’s business in physical sport shops; however, Blenders and Smith’s direct-to-consumer business recorded “good growth,” Safilo said.

Amid Falling Q1 Sales, Safilo Says Portfolio Is Solid

An image from the spring campaign for Eyewear by David Beckham.

In Europe, revenues in the period outpaced other regions, rising 5.8 percent to 125.3 million euros, as the group debuted the Etro eyewear collections and were helped by a positive performance of Carrera and David Beckham, which were both up by double digits. Business was helped by the “excellent progress of the business” in Poland and Turkey and France, the company said.

In the Rest of the World area, revenues plummeted 12.7 percent to 25.6 million euros, impacted by a slowdown in travel-retail business in Latin America, as well as timing issues that affected deliveries to the Middle Eastern markets. In Asia and Pacific, sales increased by 2.3 percent to 11.9 million euros, lifted by the Chinese market in particular.

Gross profit fell 1 percent to 166.2 million euros.

Looking ahead, the company expressed confidence in its David Beckham eyewear license. Last week, the Padua, Italy-based group revealed it had signed a perpetual license agreement with Authentic Brands Group for Eyewear by David Beckham. The first Eyewear by David Beckham collection was unveiled in 2020, an eyewear brand designed by the athlete in collaboration with Safilo and comprising sunglasses and optical frames. Trocchia said it is now a top male brand in the global premium segment and a force in Safilo’s digital universe, also helped by Beckham’s involvement, his global reach and his social media efforts. This replaces the previous contract that was due to expire at the end of 2030 and signals a trend in companies seeking more secure agreements.

“The instability of the market pushed this industry to have more stability of its licenses. We cannot afford any more licenses that keep changing…personally I think we will try to discuss with other fashion houses which have an open mind to understand if we can have other perpetual agreements along the lines of David Beckham,” Trocchia said.

Trocchia also commented on the renewal of Safilo’s global eyewear licensing agreement with Marc Jacobs until December 2031, which he said has the potential for growth especially in its core market, the U.S. “We have over six years of solid license portfolio [positioning] in front of us with all of our core licenses fully secured and a remaining part of our portfolio made by a number of smaller brands.…This has positioned us very safely for quite a long time,” Trocchia commented, adding that about 75 percent of its licensed brand portfolio is secure to the end of 2030.

Looking ahead, the firm still has its eye on expanding its brand portfolio. In addition to proprietary brands including Smith, Carrera and Polaroid, Safilo produces eyewear collections under licensing agreements with Carolina Herrera, Isabel Marant, Tommy Hilfiger, Marc Jacobs, Missoni and Moschino, among others. “We will keep looking to M&A…sport, optical are the two main areas where we keep looking for potential brands, which have a role in our portfolio.”