Safilo shares plunged 6% in Q1 sales may plunge 20% March 16, 2017 -- Italian eyewear manufacturer Safilo Group SpA (SFL
Safilo shares plunged 6% in Q1 sales may plunge 20% March 16, 2017 -- Italian eyewear manufacturer Safilo Group SpA (SFL.MI) warned that sales from continuing operations in the current quarter could plummet by 15%-20% due to warehouse problems, while Italian eyewear manufacturer Safilo Group SpA (SFL.MI) reported a 1.7-fold increase in net loss for the 2016 fiscal year The Group's share price plunged as much as 6.3% to a new 52-week low of 6.20 euros today.
Safilo Group SpA said the problem was with the automated system at its warehouse in Padua, northern Italy, and that it would try to fully compensate for the delay in deliveries in the second quarter. In the 2016 fiscal year, the group's net loss doubled to 142.1 million euros from 52.7 million euros in the 2015 financial year. Excluding a non-cash goodwill loss of EUR 150 million in the Far East business and a one-off restructuring charge of EUR 9.8 million for the Polaroid brand, the Group achieved a net profit of EUR 15.4 million, an increase of 123.2 percent compared to EUR 6.9 million in the previous year.
Adjusted core EBITDA declined by 13.3 percent year-on-year to 88.8 million euros, while the adjusted EBITDA margin decreased from 8.0 percent to 7.1 percent. Last year's earnings performance was weighed down by weak sales in the U.S. and Asia in the fourth quarter, with sales in Asia slumping by 30.8%, North America by 5.1% and Europe growing by 8.4%.
Most of the decline in Asia and North America was due to the exit of Gucci, the largest brand that accounted for 18% of the Group's sales last year. Gucci parent company Kering SA (KER. In September 2014, Kering announced that it would take back Gucci's eyewear franchise and terminate its agency contract two years ahead of schedule, resulting in Safilo Group SpA receiving 鈧?0 million from Kering SA in three instalments The partnership was terminated on December 31, 2016.
Safilo Group SpA could also lose LVMH Mo?t Hennessy Louis Vuitton SE (LVMH. PA) LVMH Group's current business of approximately EUR 350 million. Although it had just renewed its contract with LVMH SE's Christian Dior brand in December 2016 until the end of 2020, in January this year it was announced that LVMH SE would buy a 10% stake in Marcolin SpA in order to gain greater autonomy in the high-end eyewear market, which has become more competitive in recent years.
In February, rumors became that LVMH SE and Marcolin SpA would form a joint venture, with both parties owning 51% and 49% respectively. LVMH SE, which currently has a contract with Safilo Group SpA, also includes Fenci, Givenchy, C茅line and Marc Jacobs. According to statistics, only C茅line's contract will end at the end of 2017, and LVMH SE has decided not to renew the contracts of the other four Maisons between the end of 2020 and the end of 2024.
It is reported that the representation of C茅line and Louis Vuitton will be handed over to Marcolin SpA from 2018. At the results conference on the 16th, Luisa Delgado, CEO of Safilo Group SpA, was asked if she had any intention of merging with LVMH SE, and she answered about the business strategy. In an interview with Reuters at the time, Luisa Delgado said that Safilo Group SpA Safilo could make up for the loss of LVMH SE business by representing new brands and expanding its own brand business.
She revealed that the group has two or three brands knocking on the door every week to seek cooperation, and their focus is on their core business and being a good agency partner. Luisa Delgado acknowledges that Safilo Group SpA Safilo is an "attractive (acquisition) target", but she stresses the principle of the group's independence, in addition to maintaining the identity of an Italian company and its listing in Milan, which is also important to them.
For Italy's Luxottica Group SpA (MTA:LUX; NYSE:LUX) and France's Essilor International SA (ESSI. PA) Essilor Group's 鈧?6 billion merger deal, Luisa Delgado said that the alliance between the frame manufacturer and the lens manufacturer does not need to be combined. Safilo Group SpA reported its sales figures for the 2016 fiscal year at the end of January, with net sales down 2.0% year-on-year to 1,252.9 million euros, or 1.2% at constant exchange rates.
The continuing operations portfolio grew by 3.6 percent in constant currency terms, with growth of 9.2 percent in Europe and 9.7 percent in the rest of the world, offsetting declines of 0.2 percent in North America and 10.2 percent in Asia. Gucci posted double-digit declines. In its strategic plan, released in March 2015, Luisa Delgado set a target of increasing the sales share of its five private brands, Safilo, Polaroid, Carrera, Smith Smith and Oxyd, to 40% by 2020.
Now that Luisa Delgado acknowledges that progress is lagging behind and that growth has not yet been achieved, she stresses that the groundwork has been laid and that it is only waiting for the results to emerge. Luisa Delgado also said it plans to expand its private label business through acquisitions, with analysts citing target brands such as Maui Jim in the United States, Lindberg in Denmark and Silhouette in Austria.
Polaroid is the most recently acquired brand by Safilo Group SpA, but it dates back to 2012, when the group paid 88 million euros. Currently, Safilo Group SpA's largest shareholder is the Dutch investment fund HAL Holding NV (41.6%). The group's share price narrowed its decline to 3.70% at 鈧?.38 today, and the stock has fallen 20.23% so far in 2017.