Q3 and First 9 Months of 2024 Trading Update

(PRESS RELEASE) PADUA — The Board of Directors of Safilo Group S.p.A. has reviewed and approved the key performance indicators for the third quarter and first 9 months of 2024.

Angelo Trocchia, Safilo Chief Executive Officer, commented:
“In July and August, sales performance continued to be affected by a soft summer season characterized by uncertainties in various key markets. In September, the business showed a recovery, particularly in Europe, where the launch of our new collections had a promising start to order collection. In the period, North America remained challenging, with the sports segment still subdued, awaiting the beginning of the winter season, and an eyewear market in which the gradual recovery of the wholesale business coincided with a slowdown in sales through online channels.

In such a complex market environment, it has been crucial to continue focusing on our long-term priorities, consolidating our path of economic and financial improvement. We are particularly pleased to have confirmed also in this quarter the growth of our gross margin, and to have improved our operating performance. We also achieved another period of financial efficiency, thanks to a good cash generation.”

KEY PERFORMANCE INDICATORS
NET SALES PERFORMANCE

In Q3 2024, Safilo’s net sales amounted to Euro 225.4 million, down 3.4% at constant exchange rates and 4.1% at current exchange rates compared to Euro 235.0 million recorded in Q3 2023. After a soft performance in May and June, third-quarter sales were marked by a modest sun season in July and August, followed by a more promising start to the Fall/Winter order collection in September. Such business context did not allow the Group to counterbalance the exit of the Jimmy Choo brand. The quarterly performance showed lingering soft trends in North America and Asia, while trends proved more resilient in Europe, despite the slowdown of the sunglasses business. Among brands, Carrera, David Beckham, Tommy Hilfiger, and Marc Jacobs experienced the most significant growth, while Polaroid and other brands were influenced by their higher exposure to sun products. In the sport segment, Smith’s performance remained affected by a still cautious market environment.

Safilo closed the first 9 months of 2024 with net sales of Euro 757.4 million, down 2.7% at constant exchange rates and 3.5% at current exchange rates compared to Euro 785.1 million recorded in the first 9 months of 2023. Like in the third quarter, the decline in the first 9 months was entirely due to the exit of Jimmy Choo, net of which the sales performance was substantially stable compared to the same period of 2023.

In Q3 2024, sales in North America amounted to Euro 103.7 million, down 4.3% at constant exchange rates and 5.3% at current exchange rates compared to Q3 2023. The performance of the area remained soft and volatile, with varying trends across product categories and distribution channels. In eyewear, wholesale revenues of prescription frames and sunglasses posted a good recovery, thanks to the growth achieved by Carrera, BOSS, David Beckham, Tommy Hilfiger and Marc Jacobs. The market was instead subdued for sunglasses sales through online channels, and for the sports business, where clients and consumers maintained a cautious approach to purchases, awaiting the start of the winter season. In the first 9 months of 2024, sales in North America totalled Euro 321.4 million, down 5.4% at constant exchange rates and 5.8% at current exchange rates compared to Euro 341.1 million recorded in the first 9 months of 2023.

In Q3 2024, sales in Europe amounted to Euro 85.1 million, down 1.4% at constant exchange rates and 0.3%, at current exchange rates compared to Q3 2023. Excluding the residual negative effect of the Jimmy Choo exit, the underlying performance of the area was slightly positive, marked, on one side, by the ongoing solidity of the prescription frames business, on the other by soft sunglasses sales.

In the current context of uncertainty, Europe remained the Group’s most resilient market, particularly France, where the business with independent opticians and chains maintained good growth rates. The quarter was also positive in Germany, and in Eastern European markets.

In the first 9 months of 2024, sales in Europe totalled Euro 324.2 million, up 2.2% at constant exchange rates and 1.0% at current exchange rates compared to Euro 321.1 million recorded in first 9 months of 2023.

In Q3 2024, sales in Asia Pacific amounted to Euro 13.5 million, down 12.0% at constant exchange rates and 11.0% at current exchange rates compared to Q3 2023. The performance of the period was primarily influenced by the slowdown in China, where, however, the feedback on the new collections, gathered at the optical fair held in Beijing in the second week of September, proved to be promising.

In the 9 months of 2024, sales in Asia Pacific totalled Euro 40.0 million, down 7.8% at constant exchange rates and 8.7% at current exchange rates compared to Euro 43.8 million recorded in the 9 months of 2023.

In Q3 2024, sales in the Rest of the World amounted to Euro 23.0 million, down 1.0% at constant exchange rates and 7.1% at current exchange rates compared to Q3 2023. In July and August, business trends in the different markets of the area remained soft, while September registered a good recovery, especially in India, the Middle Eastern and African markets. In the first 9 months of 2024, sales in the Rest of the World totalled Euro 71.8 million, down 8.1% at constant exchange rates and 9.3% at current exchange rates compared to Euro 79.2 million recorded in the first 9 months of 2023.

ECONOMIC HIGHLIGHTS:

In Q3 2024, Safilo improved its economic performance through the ongoing growth of the gross margin, driven by the structural efficiency of the new industrial set-up, and a favourable impact of the price/mix of sales. At the operating level, this recovery was partially offset by the effects of the unfavourable operating leverage stemming from a lower level of revenues. Although marketing expenses saw a slight decrease compared to the same period in 2023, they remained significant to ensure the successful launch of the new collections.

In Q3 2024:

• gross profit amounted to Euro 133.3 million, showing a slight decrease of 1.6% compared to the adjusted1 gross profit recorded in Q3 2023. The gross margin instead improved by 140 basis points, to 59.1% of sales from the adjusted1 level of 57.7% recorded in Q3 2023;
• Selling and marketing, general and administrative expenses recorded a decrease of 2.8%, primarily driven by the ongoing normalization of IT investments. In the period, the incidence of SG&A costs on sales increased due to the unfavourable operating leverage;
• adjusted EBITDA amounted to Euro 17.8 million, decreasing slightly by 1.7% compared to Q3 2023,  while the adjusted1 EBITDA margin improved by 20 basis points compared to the same quarter of 2023,  to 7.9% of sales. 

In the first 9 months of 2024, despite unfavourable revenue trends, Safilo successfully solidified its gross margin growth, also improving its adjusted operating performance through effective cost management.

In the first 9 months of 2024:

• the gross profit amounted to Euro 452.5 million, slightly declining by 1.4% compared to the adjusted1 gross profit recorded in the first 9 months of 2023. On the other hand, gross margin improved by 120 basis points, from 58.5% to 59.7%, confirming the progress achieved in the first half of the year;
• Selling and marketing, general and administrative expenses declined by 2.6% compared to the first 9 months of 2023, while their incidence on sales increased by 50 basis points due to the unfavourable operating leverage;
• the adjusted1 EBITDA amounted to Euro 75.4 million, stable compared to Euro 75.4 million in the first 9 months of 2023, while the adjusted1 EBITDA margin improved by 40 basis points, from 9.6% to 10.0% of sales.

FINANCIAL HIGHLIGHTS:

In Q3 2024, Safilo delivered a very solid financial performance, represented by a positive Free Cash Flow of Euro 16.9 million, mainly driven by effective inventory management.

Safilo closed the first 9 months of 2024 with a negative Free Cash Flow of Euro 2.1 million, composed of a cash flow from operating activities, positive for approximately Euro 50 million, counterbalanced by a cash absorption for investments mainly related to the cash consideration to acquire the perpetual license for Eyewear by David Beckham.

Based on the Share Purchase Program launched on July 1, 2024, at the end of September, the Group had bought around 7.9 million Safilo Group ordinary shares, equal to approximately 1.9% of the outstanding capital, for a total transaction amount of Euro 8.7 million.

As at September 30, 2024, after accounting for the Program, the Group’s net debt amounted to Euro 96.1 million (Euro 56.6 million pre-IFRS 16, corresponding to a financial leverage, also pre-IFRIC SaaS, of 0.7x), down from Euro 100.4 million (Euro 62.6 million pre-IFRS 16) recorded as of June 30, 2024, and up from €82.7 million at 31 December 2023 (€43.7 million pre-IFRS 16).

2024 TOP BUSINESS NEWS

• On July 1, 2024 Safilo launches Safilo Group S.p.A. share purchase programme.
• On May 2, 2024 Safilo acquires the perpetual license for Eyewear by David Beckham.
• On April 10, 2024 Safilo and Marc Jacobs announce the renewal of their global eyewear licensing agreement until December 2031.
• On March 11, 2024 Safilo and Missoni announce the renewal of their global licensing agreement until 2029.
• On February 8, 2024 Safilo continues its sustainability journey: the near-term science-based targets have been validated by the Science Based Targets initiative (SBTi).
• On February 2, 2024 Safilo continues to invest in its digital journey and creates a partnership with Spaarkly.
• On January 18, 2024 Safilo and Levi Strauss CO. announce the renewal of their global licensing agreement until 2029
• On January 16, 2024 Safilo and Aeffe announce the early renewal of the global licensing agreement for Moschino and Love Moschino eyewear collections until 2033.
• On January 11, 2024 Safilo and HUGO BOSS announce the early renewal of their global licensing agreement until 2030.