Safilo announced on Friday, Feb. 16 that its chief executive, Luisa Delgado, is retiring on Feb. 28 for “personal reasons.” The announcement was unexpected and furtively made after the close of the Milan stock exchange on Friday evening. But the transition was obviously well prepared because the 51-year-old manager will be replaced as of April 1 by Angelo Trocchia, president and general manager of Unilever's Italian subsidiary since 2013. Previously, he spent three years as chairman of Unilever Israel.  

The change was cheered by the stock market, with Safilo's share price rising about 5 percent in the following Monday's opening trade. The broker Equita noted that a management change was “opportune” in the light of the group's results. But, during the week the share reduced its gains and largely stagnated as investors continued to be concerned by the weakening of the company's brand portfolio and its overall competitiveness.  

In the interim, the company will be run by the group's non-executive chairman, Eugenio Razelli. He will have to handle the conference call with financial analysts and investors now scheduled for March 13 to present the company's 2017 results, while Trocchia's first main public appearance is expected to be at the shareholders' meeting on April 24.  

The unfolding of Delgado's hasty departure is still unclear but the reasons seem to rest with the relatively poor results achieved last year. Up to the end of January, she was still officially due to preside at a high-profile encounter in Milan with the financial community on March 14 to unveil an update of the firm's long-term business plan.  

Delgato will be leaving with over €1 million in benefits, including an “exit incentive relating to the mutual termination of her employment” of €500,000 and €200,000 for a non-competition clause and a pledge not to solicit any of Safilo's staff for six months. The €200,000 will be paid in four installments up to December.

Delgado will also obtain a €300,000 settlement and keep 70,000 stock options. She will be entitled to a company car for one month, an apartment for ten months and insurance coverage until Dec. 31. Safilo will contribute, for the overall amount of €40,000 plus value-added tax and social security, to the legal fees borne by Delgado in relation to the agreement.

Delgado also owned 38,008 Safilo shares and 290,000 stock options as of Feb. 16, when the announcement of her retirement was made.

Delgado became Safilo's CEO in October 2013, after serving as a non-executive board member for over a year. She replaced Roberto Vedovotto, who rescued the company from financial distress and brought in the Curaçao-based investment group Hal Holding as Safilo's new reference shareholder.  

Hal, which currently holds a 42.2 percent stake in Safilo, according to stock exchange filings, recently denied speculation that it wanted to take over its control. Vedovotto, who apparently left Safilo without a non-competition clause, moved on to become the CEO of Kering Eyewear, disrupting the eyewear industry and ironically becoming one of the main causes of the problems currently affecting his former company by taking back from Safilo the juicy Gucci license and others.  

In March 2015, Delgado presented a business plan to lift sales from €1,179 million in 2014 to €1,600-1,700 million in 2020. Sales were forecast to rise by an average of 6 percent a year, with a dip expected in 2017 due to the loss of the Gucci license. Excluding Gucci, sales were anticipated to rise by 10 percent over the period.

The plan was also intended to boost Safilo's profitability, lifting the Ebitda margin to about 14 percent in 2020, or some 4.0 percentage points more than in 2014, while turning the group into a significant cash-generative business, with a predicted cumulative free cash flow of €350-400 million between 2015 and 2020.

At the annual general meeting held in April 2016, the Tabacchi family, which founded and previously controlled Safilo and still has a 9.2 percent stake, decided not to approve the results presented for the 2015 financial year. The Tabacchis then claimed that the results, which showed a 8.5 percent rise in sales to €1,279 million but a loss of €57.2 million due to impairments and provisions, were very negative and not in line with the business plan, which “promised results already in 2015.” Vittorio Tabacchi, Safilo's former chairman, continued to have reservations about Delgado, who maintained Hal's backing.  

Delgado deployed a wide range of initiatives on many fronts. Over the years, Delgado addressed Safilo's industrial shortcomings, modernizing its manufacturing base, which she claimed had been neglected for 15 years, transforming its patchy information technology platform, upgrading and streamlining the distribution network, and expanding the company's international presence with partnership agreements.

She also successfully added licenses for Moschino, Givenchy, Elie Saab, Havaianas, Rag & Bone, Swatch and Rebecca Minkoff to Safilo's portfolio and renewed the licenses of Dior, Jimmy Choo, Tommy Hilfiger, Max Mara, Kate Spade, Juicy Couture and Saks. She also attempted to cultivate house brands like Polaroid Eyewear, Smith, Carrera and Oxydo, while repositioning the Safilo brand for its relaunch in the market.

A hyper-active manager, Delgado relentlessly applied herself to executing a rational business plan. But her efforts to relaunch the company coincided with one of the major shifts within the industry as Kering and LVMH decided to move directly into the manufacture of eyewear, while Luxottica and Essilor moved to create a vertically-integrated behemoth.

We could mention the fact that the top management of Luxottica has been even more unstable than Safilo's in recent years. In the meantime, the fashion industry has continued its consolidation, resulting in changes of ownership for some of Safilo's licensors, which have created further uncertainty about future renewals.

In an interview with Reuters released in January 2017, Delgado claimed that the company could weather the possible loss of the brands owned by LVMH, which at the time were estimated to represent €340 million in annual sales for Safilo.

Safilo is currently in the midst of downsizing its production to tackle excess capacity of 15 percent due to a slowdown in sales of the key Dior license after a period of strong growth. Last year, the company's overall sales fell by 16.4 percent to €1,047 million. At constant currency rates, they dropped by 15.5 percent. Safilo quantified the decline in annual revenues at €194 million at constant exchange rates, of which €155 million were attributed due to the termination of the Gucci license and its transformation into a supply agreement. The firm also expects to post adjusted full-year Ebitda of €38-40 million, more than half the level of €88.8 million posted in 2016.

Last year's top line was also affected by delivery issues at the company's European distribution center in Padua, which was undergoing an automation upgrade. The snag impacted order taking and thus trimmed sales and profits throughout the year. The shortcomings at the center also caused Safilo to incur exceptional costs of €4 million.

The mishap led to the sacking of Leonardo Innocenzi, global head of product supply, and the hiring in July of Fabio Roppoli as industrial and logistics director. Roppoli was previously in charge of global ophthalmic operations at Luxottica, where he worked for about 13 years. But the sheer size of the sales decline is believed to have also led to the Delgado's departure.

Trocchia, who is 54 years old, has a similar profile to Delgado. Both of them spent most of their careers with leading consumer goods multinational corporations, Delgado having worked 21 years at Procter & Gamble (P&G).

After an MBA at the STOA'/MIT in Naples and a PhD in aeronautical engineering at La Sapienza, a university in Rome, Trocchia began his career at Unilever in 1991, the same year as Delgado started at P&G. He has held various roles of increasing responsibility in supply chain and sales in the Anglo-Dutch group.

With the newest change at the helm, the update of Safilo's business plan has been postponed to the second half of the year. The focus will be on whether Trocchia confirms or significantly alters the plan.

There has been speculation of a change of ownership or the delisting of Safilo but Hal recently denied planning to modify its stake. Since Hal took over Safilo through a capital increase completed in March 2010, the share price has fallen, after fluctuating notably, from around 8 euros to Friday's closing price of €4.5, which is near record lows. When Delgado was appointed in October 2013, the stock was trading above €14 a share.

In introducing Trocchia, Safilo said that it was “pleased to appoint an executive with a solid and international track record and a comprehensive 360° background in business management, able to lead the company through a successful development, supported by the current leadership team.”

Undoubtedly, his first task will be to immediately establish a good working relationship with a top management built around former P&G executives who worked with Delgado when she was general manager for Nordic countries at the U.S.-based consumer goods group. Gerd Graehsler, Safilo's chief financial officer, Henri Blomqvist, the chief commercial officer, and Thorsten Brandt, the chief marketing officer, are all former P&G managers.