The #2 player in the global eyewear frame industry saw growth in every market last year, led by the Far East, and its sunglasses segment began to account for the largest portion of its sales with a 51.5 percent share in the total turnover, followed by prescription frames with 41.2 percent and sports eyewear with 6.0 percent. Sunglasses were 47.2 percent of Safilo's sales in 2004.
The group's total revenues increased by 8.5 percent for the year in terms of euros and of local currencies, with a 9.2 percent increase in the 4th quarter, reaching €1,025.3 million. Sales of prescription frames dropped by 0.7 percent during the year, but sunglasses were up by 18.5 percent and sports eyewear by 6.4 percent. Sales of licensed products grew by 12.2 percent.
Sales in the Far East rose by 20.0 percent to €119.8 million and represented 11.7 percent of sales. In other regions, sales in Europe, excluding Italy, grew by 3 percent to €339.4 million with the strongest contributors being Spain and Germany, while turnover in Italy increased by 12.2 percent to €138.6 million. Aided by a 19.1 percent increase in the Outlook division and a 56.2 percent jump in the growing 55-store Solstice retail chain, sales in the Americas were up by 9.9 percent to €383.3 million in local currencies. In the rest of the world, turnover climbed by 9.1 percent to €44.2 million.
In the 4th quarter the company got its largest boost from the Americas, where sales increased by 20.8 percent to €93.1 million, representing 37.4 percent of Safilo's total net sales. The company's turnover grew by 4.0 percent in Italy, but in the rest of Europe it slid by 3.2 percent to €74.5 million and made up 30.0 percent of sales. Sales in the Far East rose by 13.8 percent in the quarter.
Turnover from sunglasses climbed by 17.3 percent to €126.3 million, while sales of prescription frames were up by just 3.3 percent to €96.2 million. These two categories respectively comprised 50.8 percent and 38.7 percent of total sales in the quarter, as compared to 47.3 percent and 40.9 percent in the year-ago period. The sport products segment grew by 14.5 percent to €22.9 million.
In terms of brands, Armani, Dior, Gucci and Valentino drove the growth in Italy and the rest of Europe during the past year. Two company-owned brands, Safilo and Oxydo, scored well in Italy, too. Armani, Dior, Gucci and several American collections performed well in the Americas. In the Far East, sales nearly doubled in China and the Philippines, and they grew at double-digit rates also in Japan and Korea.
Meanwhile, Safilo's license for Yves Saint Laurent eyewear has been extended from 2007 to 2010, with plans to develop the brand in the Far East and North American markets. YSL, which belongs to the PPR Group like Gucci, does not bring in as much revenues as the Ralph Lauren license, which runs until next year. As reported, Armani, Dior, Gucci and Ralph Lauren represented 55 percent of Safilo's revenues in 2005, and all of these brands except for Lauren have extended their licenses with the company.
Last Jan. 11, Safilo exercised one-third of the greenshoe option related to last December's initial public offering (IPO) on the Milan Stock Exchange, selling 7,667,515 shares to the San Paolo IMI bank at €4.70 a share. The transaction raised the company's total equity by a further 4 percent. Safilo has not yet disclosed its profits, but on the Italian stock exchange Safilo shares are still being exchanged below their issue price, at around €4.70.
The group has begun to reduce its debt, using the proceeds from the equity increase related to the IPO. It has already reimbursed 35 percent of the high-yield bonds that were going to mature in 2013, for a value of €105 million plus interest and charges for early redemption. Negotiations are taking place for the refinancing of the senior debt, and they should be finalized during the first half of the year, leading to a major drop in interest charges.