Safilo confirmed previously reported sales of €1,279 million for the full 2015 financial year. They were up by 8.5 percent on a reported basis but flat in terms of local currencies. The company pointed out that the turnover went up by 4.3 percent on a comparable, currency-neutral basis, with licensed brands up by 15.0 percent and house brands down by 2.5 percent, after excluding brands that have been stopped or will be discontinued.

Among the brands licensed by the group, Christian Dior grew by a high double-digit rate, led by its men's collection. The cluster of Safilo's “future core brands” - which includes Hugo Boss, Tommy Hilfiger, Max Mara, Marc Jacobs and Kate Spade - rose by a low single-digit rate, driven by Boss, Max Mara and Kate Spade.

Safilo Group Consolidated Income Statement

Million Euros. Year ended Dec. 31

 

2015

2014

%
Change

NET SALES

1,279.0

1,178.7

8.5

Cost of Sales

552.0

460.1

20.0

Selling and Marketing

526.5

479.4

9.8

General and Administrative

171.5

157.5

8.9

Other Expense

17.7

6.4

-

Financial Charges. net

26.4

10.4

-

Pre-Tax

25.6

64.9

-

Tax

26.9

25.4

5.9

Minority Interest

0.3

0.4

-25.0

NET PROFIT (LOSS)

(52.7)

39.1

-

Earnings (Losses) / Share - Diluted

(0.840)

0.622

-

The management noted that Max Mara grew by a strong double-digit rate. Kate Spade, which is Safilo's largest brand in the U.S. after Smith, enjoyed double-digit growth in 2015 and will be distributed worldwide. On the other hand, the Marc Jacobs portfolio was hit by the licensor's decision to terminate its secondary line, Marc by Marc Jacobs.

The group's so-called “rocket” – represented by Fendi, Celine and Jimmy Choo - enjoyed a sales increase of more than 30 percent.

A high single-digit sales drop for the Carrera brand led the group's house brands to register a 2.5 percent decline in full-year sales at constant currency rates. The label, whose sales are roughly equally divided between sunglasses and prescription frames, posted positive momentum in optical frames, with North American wholesale revenues up by a high single digit, and fall in sunglasses as the new collection fared poorly.

Polaroid Eyewear went up by a low single-digit rate, although its sales were disrupted by the termination of distribution agreements in China and Russia, where Safilo brought the distribution in-house. Adjusted for those changes, the line actually rose by a high single-digit percentage rate in 2015.

Safilo claims that Polaroid has remained the second-largest sunglass brand in the European Union's five largest markets. This year the brand will benefit from dedicated sales forces in each key market as it seeks to have a presence in more stores and bolster sales where it is already present, thanks to improved product availability and stock replenishment.

Smith also raised its sales by a low single-digit rate, despite a weak snow season in North America. The brand increased its leadership in the North American snow-sports market. Safilo expressed satisfaction about the development of the Smith brand in the European sports channel, but the label did not enjoy sufficient notoriety to significantly boost its European sales in other categories.

The brand has pursued its diversification into the cycling segment, which now represents 2 percent of its sales after starting from scratch two years ago. It continued to develop its e-commerce business, which came to represent more than 10 percent of sales in 2015, and introduced online sales in Europe. As part of its foray in Europe, Smith will focus on individual countries that can offer a rapid return on investments, concentrating this year on France and Spain.

Regarding the phasing out of the Kering brands, Safilo expects that the new Givenchy license alone will compensate for the termination on June 30, 2015 of the three minor Kering brands: Bottega Veneta, Saint Laurent and Alexander McQueen.

Regarding Gucci, which is Safilo's largest licensed brand, the Italian company will have the right to sell the January and April collections until the end of the year. It will skip the design of the August collection. Kering will start presenting and collecting orders for the January 2017 collection from August in the U.S. and from October in the rest of the world. Safilo will continue to manufacture and sell Gucci eyewear to Kering from the fourth quarter of this year. In 2015, Safilo's sales of its Gucci line declined by a low double-digit rate, and they now represent less than 20 percent of Safilo's overall sales. The sales trend is expected to continue this year.

Commenting on its newly acquired licenses for Havaianas and Swatch eyewear, Safilo says it expects them to help it become market leader in what the company regards as the large and fast-growing “mass cool” segment of the market, along with Polaroid. With Swatch, the company aims to “revolutionize” eyewear manufacturing by launching a model with 30 percent fewer components. The partnership with Swatch will enable the company to reduce the product development cycle from seven months to five. The clout of the Swiss brand has also permitted the group to introduce a selective distribution strategy in the mass cool segment.

Safilo's chief executive, Luisa Delgado, stressed that Swatch is not only about sales volumes “that will be substantial, but it is a catalyst for us to reinvent ourselves and transfer the know-how to Polaroid, very fast. That will be the real size of the prize.”

With Havaianas, the product development process has been cut to three months, creating a fast-fashion model. The brand will be launched in Brazil for the upcoming Summer Olympics in Rio de Janeiro, where the Brazilian brand is acting as a sponsor, and will go global from January 2017.

By region, Safilo's European revenues rose by 6.0 percent at constant currencies in 2015 and by 10.8 percent in the fourth quarter. In North America, annual sales grew by 0.8 percent, but quarterly sales fell by 3.8 percent. In Asia, the top line dropped by 20.5 percent in 2015 and by 28.7 percent in the final quarter. In Latin America, 12-month sales decreased by 1.1 percent, but the rate of decline increased to 5.3 percent in the final quarter. In the rest of the world, sales were up by 11.6 percent over the year but fell by 17.1 percent in the quarter.

The general sales slowdown in the fourth quarter was generated by a cocktail of factors, ranging from a mild winter in North America that hit the sports channel, the termination of distribution contracts for Polaroid and a shift in the timing of deliveries for shipments to some distributors in the “rest of the world” business area.

By channel, wholesale revenues rose by 0.7 percent at constant currency rates in the full year and fell by 1.8 percent in the quarter. Significant increases were scored in the group's business with key accounts, which rose by a double-digit rate with the top 100 clients, thanks to the development of joint business plans and the installation of Safilo's automatic replenishment service, called Smile. During 2015, the number of points of sale using Smile extended to more than 3,400 from 2,500.

 
 

Safilo Group - Sales Breakdown

Million Euros, Year ended Dec. 31

 

2015

% of
total

2014

%
Change

%
Change *

By georaphical area

Europe

508.6

39.8%

478.5

6.3%

6.0%

North America

531.3

41.5%

445.1

19.4%

0.8%

Latin America

51.3

4.0%

54.9

-6.6%

-1.1%

Asia Pacific

154.8

12.1%

170.8

-9.4%

-20.5%

Rest of the World

33.0

2.6%

29.3

12.6%

11.6%

By distribution channel

Wholesale

1 190.4

93.1%

1 096.7

8.5%

0.7%

Retail

88.6

6.9%

82.0

8.0%

-9.8%

TOTAL

1 279.0

100.0%

1 178.7

8.5%

0.0%

* At constant exchange rates

Retail sales dropped by 9.8 percent at comparable currency rates during 2015, with the rate of decline accelerating to 14.7 percent in the fourth quarter. Safilo has unveiled its readiness to sell its own retail chain in the U.S., Solstice. At the end of 2015, the chain had a total of 125 stores, down from 132 a year earlier, as the network was pruned to cut costs. When asked during a conference call if the chain was going to be sold, Delgado said that she was not excluding anything and that “everything is up for grabs.”