Publishing its final results for its fourth quarter and complete 2020 financial year yesterday, Safilo announced that it remained focused on its transition and the implementation of its group business plan after a difficult and contrasting year in a Covid-19 market environment. The group managed to end 2020 with a small increase in constant-currency overall revenues and a slightly positive adjusted EBITDA thanks to a solid sales recovery in H2, however with important differences in regional and segments’ performances, and a tight control on expenses. The company also announced on the same day its intention to close its production facility in Slovenia as part of its restructuring program.

In the fourth quarter of 2020, Safilo reported a 2.1 percent year-on-year decrease in total revenues to €225.6 million. In constant currencies, however, sales progressed by 3.0 percent. The positive sales’ performance in the quarter was driven by North America, as well as by online sales. On an organic basis, i.e. excluding the €14.1 million contribution from the newly acquired Privé Revaux and Blenders Eyewear businesses, Safilo’s quarterly sales kept recovering in the quarter, after a 33.2 percent drop in H2 and a 5.5 percent decline in Q3, but were still down by 3.6 percent overall from Q4 2019 and by 1.6 percent at wholesale level.

Safilo - Net Sales by Geographic Area
(Million euros, Quarter ended on Dec. 31)
  2020 2019 % Change
Europe 86.1 106.9 -19.5
North America 100.9 84.7 19.1
Asia-Pacific 21.1 17.0 24.1
Rest of the World 17.5 21.8 -19.7
NET SALES 225.6 230.4 -2.1
Source: Safilo

In detail, North American quarterly revenues, which represented roughly 45 percent of Safilo’s overall sales, jumped from €84.7 million last year to €100.9 million in 2020, a 27.0 percent increase at constant exchange rates from a year ago. The strong regional performance was largely fueled by the new acquired businesses but organic sales also performed well, increasing by 8.9 percent. Asia-Pacific revenues also progressed rapidly in the quarter, going up by 28.1 percent on a currency-neutral basis to €21.1 million, but the region accounts for less than 10 percent of the group’s revenues. China and Australia drove the sales’ growth in the region.

These positive performances were counterbalanced by a severe drop in European Q4 sales, which plunged by 18.0 percent year-on-year and on a currency-neutral basis to €86.1 million. Although the company mentioned a progress in sales to internet pure players and a recovery in orders from large retail chains, these improvements could not offset the impact of the reintroduction of lockdowns and travel restrictions in the region, in particular on specialty channels like boutiques and travel retail.

Safilo also stressed its progress in online sales which went up to represent 12 percent of the group’s revenues in the quarter, from 4.5 percent in the same period of 2019. The growth in e-commerce revenues was fueled by Privé Revaux and Blenders Eyewear, but the company also reported a 60.9 percent increase in organic online revenues, driven by its sports’ brand Smith and by sales to internet pure players.

Safilo Highlights
(Million euros, Quarter ended on Dec. 31)
  2020 2019 % Change
Net Sales 225.6 230.4 -2.1
Gross profit 101.3 101.8 -0.5
Ebitda 5.7 (17.9)
Adjusted Ebitda 15.0 11.1 35.1
Source: Safilo

On an adjusted basis, the company reported a 34.5 percent year-on-year increase in EBITDA to €15 million and a 1.8 percentage point increase in EBITDA margin to 6.6. percent, mainly attributable to the improved operating leverage in the period.

For the last six months of the financial year, revenues went up by 4.5 percent year-on-year and in constant currencies to €444.7 million, indicating that the group’s recovery slowed down slightly in Q4 as compared to the previous quarter.

For the full financial year, Safilo´s total revenues went down from €939.0 million in 2019 to €780.3 million in 2020, or by 16.9 percent in reported terms and 15.2 percent in constant currencies, due to the sharp decline suffered in the first half of the year. In constant currencies, the company’s organic business declined by 21.9 percent overall and by 21.5 percent at the wholesale level. Privé Revaux and Blenders Eyewear, acquired in the course of last year, contributed a total of €61.8 million to the group’s topline, with aggregated sales growing by 66 percent on a pro-forma performance basis thanks to strong progress in e-commerce activities.

Safilo - Net Sales by Geographic Area
(Million euros, Financial year ended on Dec. 31)
  2020 2019 % Change 
Europe 330.4 448.8 -26.4
North America 342.5 334.0 2.5
Asia-Pacific 60.7 78.0 -22.2
Rest of the World 46.8 78.3 -40.2
NET SALES 780.4 939.1 -16.9
Source: Safilo

Reaching about €100 million in annual revenues, online sales came to represent 13 percent of Safilo’s business in 2020, from around 4 percent in the previous year. Commenting on the results, Angelo Trocchia, CEO of the company, commented that the push for more e-commerce had been a clear strategic choice even before the pandemic. He also highlighted that the group had made other significant digital investments this year in a new B2B platform and CRM system.

Annual sales in North America grew by 4.7 percent year-on-year and in constant currencies to €342.5 million, thanks to a strong rebound in H2 driven by the contribution of new businesses and a 10.6 percent hike in organic sales. Safilo mentioned its business with independent stores and the good performance of its Smith brand as the main drivers for the second half recovery in organic sales. The region represented 43.9 percent of the group’s total annual revenues last year.

Conversely, annual sales in Europe fell from €444.8 million in 2019 to €330.4 million in 2020, representing a 25.9 percent year-on-year drop in constant currencies. Overall, the region, which did not see a recovery in H2 sales because of a subdued summer season affecting the sunglass business and the second Covid-19 wave, accounted for about 75 percent of Safilo’s reduction in revenues last year. Consequently, the share of European revenues in the group’s topline declined by more than 5 percentage points to 42.3 percent. Sales in Asia-Pacific and the rest of the world respectively declined by 20.9 percent and 32.6 percent on a constant currency basis.

In terms of profitability, the group’s gross profit margin went down by 4.3 percentage points to 46.5 percent in 2020, suffering from the combined negative effects of a significant drop in production in H1, a negative sales mix effect and non-recurring costs and write-offs of fixed assets. On an adjusted basis after the exclusion of restructuring expenses and charges related to the termination of licenses, Safilo reported a very slightly positive EBITDA of €1.0 million in 2020, down from €65.4 million in 2019. Trocchia stressed that the company was able to save €15 million on overhead expenses last year, on a medium-term target of €20 million. However, the group net loss widened to €46.5 million in 2020 from €6 million from the previous year on an adjusted basis. 

Safilo Highlights
(Million euros, Financial Year ended on Dec. 31)
  2020 2019 % Change
Net Sales 780.3 939.0 -16.9
Gross profit 362.5 476.9 -24.0
Ebitda (20.1) 26.1
Adjusted Ebitda 1.0 65.4 -98.5
Operating Result (79.8) (271.7) -70.6
Adjusted Operating Result (54.3) 3.7
Group Net Result (69.4) (301.9) -77.0
Adjusted Group Net Result (46.5) (6.0) 675.0
Source: Safilo

The net debt of the Italian group jumped to €222.1 million in 2020 as compared to €74.8 million in 2019, with the acquisition of Privé Revaux and Blenders Eyewear representing €111.8 million of the total.

Commenting on the first months of activity in 2021, Trocchia said that, as expected, the company’s business in January and February had been on a more moderate level than the positive sales’ trend observed at the start of 2020 but that the first ten days of operation in March showed a significant acceleration from the same period a year before.

However, considering the challenges ahead as well as the group’s restructuring plan which calls for a more streamlined industrial organization, Safilo announced yesterday the beginning of a process for the closure of its Ormoz plant in Slovenia, starting June 2021 and involving 557 employees. According to the company’s announcement, the situation in the Slovenian factory, which was already difficult due to big reductions in volumes because of the termination of licensing agreements and a long-term trend towards more acetate products, only worsened after the outbreak of the Covid-19 pandemic. In Italy, the group had already closed its Martignacco factory and started reorganizing its Longarone site in the course of last year.