Safilo Group has announced that its licensing agreement with Max Mara, which was due to expire at the end of 2006, has been extended to 2013, as it has already done with the Gucci and Yves Saint Laurent licenses. Safilo and Max Mara, two companies which are similar in size, have also decided that Safilo will launch a new and younger brand of eyewear, called Max&Co, starting in 2007.
Meanwhile, Safilo's preliminary results for the 1st quarter show revenues up by 7.5 percent ? or 3.3 percent at constant exchange rates ? to €302.1 million, with good performance in America - particularly in the USA ? and in Asia, and on the domestic market. Sales were down in Spain and France. The group's most prestigious brands ? Armani, Dior and Gucci ? led the trend, but its own brands also did well, especially in Europe.
These figures confirm a relatively positive trend registered in 2005, which saw revenues up by 8.5 percent. Sales of sunglasses continued to grow by 13.4 percent to represent 58.8 percent of the total turnover. Prescription frames were off by 0.7 percent, in spite of an increase in Asia, and sports eyewear was up by 7.3 percent, thanks to a good performance of the Smith brand in the USA.
Geographically, the Americas led the way with a sales increase of 19.4 percent, although the growth rate on the continent would have been only 7 percent without the favorable exchange rate and the expansion of Safilo's Solstice chain in the USA, which now counts 55 stores. The Americas have thus become Safilo's n 1 market, taking up 39.5 percent of its turnover and replacing the European continent to the exclusion of Italy, which fell into second place at 31.2 percent of global revenues.
European sales outside Italy in fact fell by 8.4 percent during the quarter, in spite of good progress in Germany, the UK and the Nordic countries. The Italian market grew by an encouraging 10.2 percent, with similar performances in frames and sunglasses, also under the Valentino and Safilo brands. Sales in Asia and Australia went up by 17 percent in terms of euros and by 10.9 percent in local currencies, representing 11.9 percent of total revenues. The rest of the world grew by 13.3 percent.
The management points out that Safilo raised its overall turnover in spite of no new brand additions and the loss of the Burberry license. While the longer term is clouded by the loss of the Ralph Lauren licenses, which will be only partly compensated by the introduction of the Hugo Boss line, the immediate outlook continues to be positive as total orders are 15 percent higher than a year ago, leading the company to boost manufacturing to respond to the demand.
Contradictory signals came from the financial markets, as the group's share price on the Milan Bourse struggled to climb up to €4.4 after it had fallen to €4.09 on April 20. Both Fitch and Standard & Poor's gave improved ratings of BB- to the company. Goldman Sachs, however, confirmed the group's underperformance, citing the lack of any interesting aspects during the quarter combined with various risk factors. These included the group's negative performance in the prescription eyewear sector, in which competitors like Luxottica performed well, and doubts as to Safilo's capacity to honor orders after delays in deliveries from certain Asian suppliers and the closure of some of its own production facilities.
Separately, Safilo has extended its contract with the Special Olympics and its global Special Olympics/Lions Club International Opening Eyes vision program. Through the program Safilo provides sunglasses and frames free of charge to mentally challenged people.