Safilo reports full year sales down 2%
Safilo’s full year total net sales reached Euro 1,252.9 million, slightly contracting compared to the Euro 1,279.0 million recorded in 2015 (-2.0% at current exchange rates and -1.2% at constant exchange rates) mainly as a result of the double-digit decline of Gucci in its last year as Safilo’s licensed brand.
Sales of the Group’s Going Forward Brands increased 3.6% at constant exchange rates, or 5.2% excluding the declining US retail business, achieving solid results in the core European and North American wholesale markets while Asia remained subdued.
At the operating level, 2016 adjusted2 EBITDA reached Euro 88.8 million, declining 13.3% compared to Euro 102.4 million in 2015. 2016 adjusted2 EBITDA margin stood at 7.1% of sales compared to 8.0% the year before, reflecting the dilutive effects of the Gucci business.
Safilo closed 2016 with an adjusted2 Group net result of Euro 15.4 million compared to the adjusted2 net result of Euro 6.9 million recorded in 2015.
2016 adjusted net result does not include a non-cash impairment loss of Euro 150.0 million on goodwill allocated to the Far East cash generating unit and non-recurring restructuring costs of Euro 7.5 million (Euro 7.9 million on EBITDA)
In 2016, the Group generated Free Cash Flow of Euro 44.7 million, further reducing the Group Net Debt to Euro 48.4 million from Euro 89.9 million in 2015. This result includes the second of the three compensation payments of Euro 30 million from Kering received in December 2016, and a cash consideration of Euro 10.7 million for the sale of the Group’s former North American distribution center in New Jersey.
Luisa Delgado, Safilo CEO, commented:
“2016 was for Safilo a year in which we grew the sales and profitability of the Going Forward Brands Portfolio, managed the Gucci decline as well as possible in its final license period, and implemented further savings and business transformation initiatives.
In total, the Group delivered almost stable net sales at constant exchange rates and lower operating results. Going Forward margins grew, while the Gucci decline affected sales and profit. Cash flow was positive even with accelerated Capex investments.
We continued to build our License Brand portfolio, launching Givenchy, the collaboration with Swatch, and the ‘havaianas’ brand first in Brazil. We renewed early Jimmy Choo, Max Mara and Dior, while Celine will exit end 2017. We signed new licenses in the fashion luxury segment with Moschino, and Love Moschino, and in the upper contemporary segment with the American brand ‘rag & bone’.
Safilo’s full year 2016 net sales totaled Euro 1,252.9 million, down 2.0% compared to Euro 1,279.0 million in the full year 2015. At constant exchange rates, the Group’s net sales decreased by 1.2%. The key drivers of the year’s performance were the growth of the Going Forward Brand Portfolio, up 3.6% at constant exchange rates (+5.2% excl. Retail) and the double-digit decline of Gucci, as the license drew to a close and the market was waiting for the new collection.
The margin movement at the gross and operating level reflected the Gucci impacts, the decline of Solstice and a negative FX, which more than offset the positive margin impact from the Going Forward wholesale business.
2016 gross profit was equal to Euro 715.6 million, down 5.5% compared to Euro 757.0 million in 2015, with the gross margin moving to 57.1% of sales from 59.2%.
2016 adjusted2 EBITDA was Euro 88.8 million, down 13.3%, while 2016 adjusted2 EBIT was Euro 43.5 million.
2016 total net financial charges decreased to Euro 6.4 million from Euro 27.4 million in 2015 mainly due to the positive impact of exchange rates differences and the higher positive fair value measurement of the option component embedded in the equity-linked bonds. In 2016, net interest charges decreased.
In North America, the Wholesale business and in particular the Going Forward Brand Portfolio, proved resilient, while the overall business performance in the region was influenced by the continuing weakness of the retail channel in the US, a soft winter sports market, in particular during the last quarter of the year, and by the significant decline in Gucci sales.
In 2016, Safilo’s business in Asia was strongly impacted by the high double digit decline of the Gucci business, while the performance of the Going Forward Brand Portfolio showed some signs of improvement during the second half of the year, recording a mid-single digit decline compared to the double digit decline in the first half of 2016.
Rest of the World grew in 2016, with both IMEA and Latin America contributing to the positive performance and gaining momentum in the development of the Going Forward Brand Portfolio.
In 2017, the Group business will reflect the complete exit of the Gucci licensing business and the start of the strategic product partnership agreement (SPPA) with Kering for the product development, manufacturing and supply of Gucci eyewear.
In line with its Simplification strategy, the Group will continue to focus on the streamlining of its cost structure, focusing on production, sourcing and distribution efficiency actions as well as the planned overhead cost savings initiatives.
In 2017, Safilo will continue to invest in its core assets, in particular in its production plants, to further progress with its Supply Chain reinvention strategy as well as in its core Eyeway project to modernize, simplify and standardize the Company’s work processes