Safilo lowers 2020 targets, to cut 700 jobs in Italy

Safilo Group S.p.A. expects to close the 2019 fiscal year with the net sales of the continuing operations substantially stable compared to 2018, while the wholesale business is estimated to grow by approximately 3 percent at constant exchange rates, reflecting the positive performance achieved by the group’s own core brands, Carrera, Polaroid and Smith, in their key markets. For 2020, the group now forecasts net revenues of 960 to 1,000 million euros versus the 1,000 to 1,020 million euros target provided on August 2, 2018, and an adjusted EBITDA margin at around 6 percent of sales compared to the previous objective of an 8 percent to 10 percent. The company also plans to cut 700 jobs in Italy next year to boost profitability amid sluggish sales.

Commenting on the business plan, Angelo Trocchia, the company’s Chief Executive Officer, said in a statement: “We are today updating and extending our Group Business Plan, confirming the strategic objective to deliver business growth, leveraging the significant progress achieved in the last 18 months thanks to a tight action plan to recover top line growth and operating margins. With our economic and financial targets, we aim for Safilo to become a modern leader of the eyewear industry, a more balanced and profitable player across its markets, brands and product segments.”

Safilo lowers 2020 business targets

The company said lower expectations is due to the confirmed exit of the Dior license after 2020, as communicated by the company on July 1, 2019, and the new plan thus reflects the expected decline of the Dior business in its last year of license in Safilo, a period of phase-out which will negatively impact the brand’s overall profitability.

Adjusted EBITDA margin of the continuing operations is expected to be around 5.5 percent of sales in 2019 due to the improvements recorded at the gross margin level and the strong recovery of overhead costs.

Safilo reveals expectations for 2024

The company said, net sales are expected to be around 1 billion euros in 2024, with a 5-year CAGR of around 1-2 percent. More specifically, Safilo expects wholesale revenues CAGR, including all the new licenses signed during 2019, of around 4 percent, able to offset a significant part of the business decline, mainly expected in 2021 for around 200 million euros, due to the exit of the LVMH luxury licenses. The group expects to achieve this goal through a mid-single digit growth in North America and low-single-digit upside in its main European markets. A higher contribution is then expected from the main emerging markets, in which some of the new brands in the license portfolio will play a significant role.

Safilo foresees its core own brands, Carrera, Polaroid and Smith, to grow faster than group average, further building on the positive achievements of the most recent execution plans in terms of product, distribution and communication strategies. The development of optical frames is confirmed as a strategic lever to support the growth plans of the group’s main brands, including all its core licenses. An additional top line growth is expected to be achieved through the acquisition of the brand Blenders Eyewear, for which Safilo targets a double-digit sales CAGR over the Plan period. This acquisition, together with the foreseen development of Smith, Carrera and Polaroid’s D2C platforms, is expected to boost the share of the group’s business made through the direct-to-consumer e-commerce channel, to represent around 15 percent of total net sales by 2024, and the share of own brands to reach approximately 50 percent of the group’s wholesale business.

Adjusted EBITDA margin is expected to reach 9 percent to 11 percent of net sales in 2024. Safilo expects significant progress to be made by its wholesale business, leveraging positive top line growth dynamics coupled with the implementation of a further cost productivity plan to allow additional savings for around 45 million euros and an additional positive contribution to be achieved through the acquisition of the brand Blenders Eyewear.

Picture:Facebook/Carrera