Safilo announced 700 job cuts at its Italian operations, to be completed next year as part of its efforts to downsize its manufacturing base with the forthcoming loss of three important LVMH-owned licenses: Dior, Fendi and Givenchy. The group claims that their eyewear is entirely made in-house.

The three brands represent about €200 million in annual sales, delivering a “solid” double-digit margin, says the company. The bulk of the revenues are generated by Dior, whose license expires on Dec 31, 2020. Safilo noted that the impact of the termination of the Dior license will be felt already in the second half of next year, prompting it to issue a profit-warning on its 2020 results.

The Fendi license is now scheduled to expire on June 30, 2021 and Givenchy at the end of 2021. The Fendi license was originally due to end on Dec. 31, 2022, and Safilo neither gave a reason for its early termination and nor mentioned any compensation from LVMH.

On the other hand, Safilo unexpectedly announced the early renewal of the eyewear license for Marc Jacobs, also owned by LVMH. That license was scheduled to expire in 2024. With the new agreement, the partnership now runs until Dec. 31, 2026. Here again, no explanation was given for the two-year extension but it can be imagined that it was some form of trade-off for the shortening of the Fendi license.

Marc Jacobs represents about 4 percent of Safilo's annual revenues. The collection is positioned in a second-tier category that Safilo refers to as its contemporary segment. But, with the launch of its new Runway eyewear collection in January 2021, the brand will enter the company's luxury segment.

LVMH has been bringing the production of eyewear in-house after creating a manufacturing joint-venture with Marcolin, called Thélios, in which it has a 51 percent stake. It is starting with Céline and other brands.

Safilo's planned layoffs represent nearly 11 percent of its worldwide workforce of about 6,500 and about 27 percent of its Italian headcount of around 2,600 employees. The group intends to cut 400 jobs at its manufacturing facility in Longarone, where Dior is being produced, 250 at Martignacco and 50 at the head office in Padua.

The Martignacco site, located in the region of Friuli Venezia Giulia (FVG), will be closed in January. Safilo sought to sell the plant but failed to find a buyer. Kering Eyewear indicated that it was not interested in acquiring the site, confirming its strategy of not wanting a proprietary manufacturing base in Italy.

According to trade union sources, Martignacco is Safilo's most productive and efficient site. Ten years ago, when Safilo had to go through an even deeper restructuring program, it closed another factory in Precenicco, also situated in the FVG region. The group claims that its domestic plants already handle all the activities that are economically viable in a high-cost environment.