PADUA—The board of directors of Safilo Group S.p.A. yesterday reviewed and approved Q1 2024 economic and financial key performance indicators, according to an announcement from the company. Angelo Trocchia, Safilo’s chief executive officer, said, “In a business environment which is still complex and uncertain, it was again a positive start to the year for our European business, supported by the brilliant growth of Carrera, which has made its debut in our main markets with a  brand new women's collection that is gathering excellent feedback, and David Beckham, which continued to register strong progress in the global premium segment. In North America, sales were affected by a subdued winter season for the sports business and a wholesale eyewear market that remained weak in the contemporary segment, while the direct-to-consumer channel of both Blenders and Smith continued to grow nicely.

“In the first quarter, it was particularly significant for us to deliver margin growth both at the industrial and operating level, and to maintain a good grip on cash generation. We remain focused on the objectives of our medium-term strategy, enhancing the quality, uniqueness and innovation of our products and services, while solidifying the core assets of our business model,” Trocchia said.

In Q1 2024, Safilo's net sales amounted to €277.2 million, down 1.8 percent at constant exchange rates and 3.5 percent at current exchange rates compared with €287.2 million recorded in Q1 2023. This performance was influenced by the reduction in sales of Jimmy Choo, a license not renewed at the end of December 2023 and now in  phase-out until June 30, 2024. 

Other main drivers of the period were the weak performance of North America and the temporary slowdown of some emerging markets. These dynamics were largely offset by the continued progress of the direct-to-consumer (DTC) business and the growth of the European market, the company said. 

In North America, sales amounted to €114.5 million, down 7.2 percent at constant exchange rates and 8.2 percent at current exchange rates compared with €124.7 million recorded in Q1 2023. The weakness in revenues concerned both Smith’s business in the physical sport shops, which was impacted by a subdued winter season, which started slowly in Q4 2023 and continued with a low level of reorders in Q1 2024, and the eyewear business in the contemporary sunglass segment, related to principal wholesale clients. In the quarter, the group was also affected by the contraction of Jimmy Choo, a license not renewed at the end of 2023. In the United States, Blenders and Smith’s direct-to-consumer business recorded good growth. 

In Europe, Safilo delivered a solid performance despite a tough comparison base.  In Q1 2024, sales in Europe amounted to €125.3 million, up 5.8 percent at constant exchange rates and 3.0 percent at current exchange rates compared with €121.6 million recorded in Q1 2023.  The start to the year was particularly positive in France, where Safilo strengthened and expanded its commercial network, and in the Central and Eastern European markets, driven by the good performance of the internet pure player (IPP) channel in Germany and the progress of the business in Poland and Turkey. The growth in Europe of Carrera and David Beckham stood out, while the license portfolio also saw the debut of the new Etro eyewear collections, the company stated. 

In Asia and Pacific, sales grew by 2.3 percent at constant exchange rates and declined by 1.1 percent at current exchange rates compared with Q1 2023, a performance that reflected both a positive Chinese market, also supported by the good results achieved during the Shanghai Fair in March, and some weakness in other Asian markets most impacted by the decline in sales of Jimmy Choo eyewear. 

In the Rest of the World, sales fell by 12.7 percent at constant exchange rates and by 11.3 percent at current exchange rates, mainly due to a soft travel retail business in Latin America and the different timing of some deliveries to Middle Eastern markets.

In Q1 2024, Safilo confirmed a solid economic and financial profile, which translated into an improvement in both industrial and operating margins, and a positive cash generation thanks to a careful management of its net working capital. The main factors that positively influenced the results of the period were the higher production efficiency and the lower depreciation resulting from the industrial restructuring that took place in Italy in 2023, and a positive price/mix effect on sales.

The pricing lever, coupled with the favorable channel mix resulting from the continued development of the direct-to-consumer business, more than countered the dilutive effect of phase-out sales. Below the industrial margin, the expected normalization of IT investments and marketing expenses allowed the group to limit the still negative operating leverage. 

In Q1 2024, gross profit amounted to €166.2 million, down 1.0 percent compared with Q1 2023, while gross margin improved by 160 basis points from 58.4 percent to 60.0 percent. In the period, adjusted EBITDA amounted to €32.0 million, down 1.3 percent compared with Q1 2023, while the adjusted EBITDA margin improved to 11.5 percent from 11.3 percent recorded in Q1 2023.

Due to a positive cash generation in the first quarter, equal to a Free Cash Flow of €1.7 million, the group's net debt as at March 31, 2024 stood at €81.3 million (approximately €41.8 million pre-IFRS 16), from €82.7 million (€43.7 million pre-IFRS 16), recorded as of December 31, 2023.