Before publishing its latest results, the Safilo Group announced that its big, longstanding license agreement for Dior and Dior Homme eyewear will end at its scheduled expiry date of Dec. 31, 2020. The eyewear group had sought to renew the contract, but LVMH, the French fashion house which owns the Christian Dior brand, was expected to terminate the partnership following the establishment of Thélios, its joint venture with the Marcolin Group.
In contrast with the transfer to Thélios of the Dior license, Bulgari, another important brand of the LVMH group, has agreed to an early renewal of its exclusive license with Luxottica for at least three years, from January 2021 to December 2023. Luxottica has been the licensee of Bulgari for more than 20 years. While confirming the renewal, Bulgari said it expects qualitative growth in the category in its main markets, especially in Asia and the U.S.
Safilo has been producing and selling Dior eyewear for more than 20 years. Over the period, it has sold more than 30 million pairs of Dior eyeglasses and sunglasses. Last year, the brand represented about 13 percent of its sales.
The loss of the Dior license comes as a big blow for the group, after its loss of the Gucci license to Kering Eyewear. In an interview with the news agency Reuters, Safilo's chief executive, Angelo Trocchia, pointed out that the group is working on renewing other existing licenses and expanding its portfolio with new licenses before the end of the year.
In a press release, Trocchia also said that the company is “on track with our goals and will further accelerate our journey towards restoring an adequate and sustainable level of profitability by 2020, which will enable us to effectively manage this license exit.” He added that the group will release a new business plan by the end of the year.
Under Safilo's current business plan through 2020, sales were supposed to rise on average by 2 percent in 2019 and 2020 at constant currency rates to reach €1,000-1,020 million next year. Excluding its production agreement for Gucci eyewear, the top line was forecast to grow at an annual average rate of 4 percent, at constant currency rates, over the two-year period. The Ebitda margin was set to reach 8-10 percent in 2020.
In the Reuters interview, Trocchia said that the new business plan will cover three additional years, starting in 2021, and that it will probably be presented between October and November.
An investment broker, Kepler Cheuvreux, estimates that the loss of Dior could knock €45-50 million off Safilo's Ebitda in 2021, which could be partially offset by €15 million of Ebitda generated by cost savings and new licenses.
Another brokerage firm, Equita SIM, is forecasting Ebitda of €50 million for Safilo in 2021, down from a predicted €70 million in 2020. However, it warned that visibility is currently limited for Safilo's future earnings. It expects the new business plan to shed light on the actions envisaged to bolster operating margins. It noted that the group has the financial means to manage the transition thanks to a recent €150 million capital increase and €150 million in debt refinancing.
At the same time as its announcement regarding Dior, Safilo reported the closing of the transaction for the sale of its loss-making American retail chain, Solstice, to Fairway (see Eyewear Intelligence Vol. 20 n° 8).