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Safilo Announces Q3 and 9 Months 2020 Trading Update

Q3 growth in net sales and profitability led by the rebound of North America and a surging online business.

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(PRESS RELEASE) PADUA – The Board of Directors of Safilo Group S.p.A. has reviewed and approved Q3 and the first nine months 2020 economic and financial key performance indicators.

As anticipated by the group in the press release dated October 1st, in the third quarter of 2020 Safilo’s sales and economic results recorded a significant recovery compared to the severe downturn experienced in the first half of the year following the coronavirus pandemic and the subsequent, extensive lockdown measures.

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Q3 2020 net sales reached Euro 219.1 million, growing by 3.0% at current exchange rates and 6.0% at constant exchange rates compared to the same quarter of last year, with the key positive drivers represented by the significant rebound experienced by the wholesale market in North America, and the full-quarter contribution deriving from the recent acquisitions of Blenders Eyewear and Privé Revaux. The latter, together with the continuing progress recorded by Smith’s D2C sales and by the Group’s business generated through internet pure players, propelled Safilo’s total online sales to around 16% of Group total turnover.

In the third quarter, the positive sales development and the ongoing implementation of the Group’s cost saving actions and contingency measures allowed Safilo to return to a positive adjusted1 EBITDA of Euro 14.3 million, up 9.3% compared to the same quarter of 2019.

Angelo Trocchia, Safilo CEO, commented:

“After we were heavily impacted by the Covid-19 outbreak and the consequent global lockdowns between the first and the second quarters of the year, in the third quarter our business had a positive reaction reflecting, on one side, the sales rebound recorded in July as an expected catch-up effect after the strong H1 pandemic impacts, and, on the other side, a dynamic US market continuing into August and September, making North America the main driver of our recovery. It is also important to note that in the third quarter, all our core markets and channels recorded an improvement compared to the first half of the year, from an outstanding growth in China to more positive results in some of the main European markets such as Italy, Germany and France, while the IMEA countries, Latin America and the travel retail channel remained key hurdles to a full recovery.

As we continue to progress on the strategies set out in our Group Business Plan, seizing the additional opportunities provided by the current market environment, in the third quarter our direct-to-consumer strategy gained additional speed and relevance. This was thanks to the ongoing success of our Smith e-com business, and to the strength of our recent acquisitions, Blenders Eyewear through its advanced e-com platform, and Privé Revaux leveraging on its social marketing skills to expand its reach offline and online.

The work on our digital transformation strategy progressed also with the launch in August of our new B2B platform in Europe and of a new Customer Relationship Management system in November.

These are the first two execution waves of a significant mid-term project which goes in the direction of reshaping and enhancing the relationship, the engagement and the way we do business with our many European opticians, improving after-sales-service and client satisfaction, to ultimately increase the share of our B2B business.

We had two other important objectives to achieve in this still very complex period and we are thus very pleased with their positive outcome. On one side, we secured additional liquidity for the Group with a new term loan facility of Euro 108 million guaranteed by SACE, and, on the other, in line with our industrial plan to optimize the production footprint we sold the Italian plant in Martignacco to a local entrepreneur, an important step not just for us to recover a sustainable economic profile, but also for the workers and the local communities.

The third quarter delivered promising sales growth and the recovery of a satisfactory level of adjusted EBITDA, and while September results were relatively slower than the trends during the summer, business development in October was positive, again mainly driven by the solid performance of the US market and the online business.

There are again significant uncertainties in front of us due to the Covid-19 pandemic and the business environment, as we enter November and the very important holiday season with a new wave of infections emerging in several countries.
Once again, therefore, a very complex business context in which our most important priority remains that of preserving the health of all the people who work at our offices and sites, guaranteeing, at the same time, the widest possible use of
smart-working.

We therefore continue to maintain a very prudent stance for the remainder of the year, and we remain committed to providing timely updates to all our stakeholders on the evolution that the business will have in the coming months.”

In the third quarter of 2020, Safilo posted total net sales of Euro 219.1 million, up 3.0% at current exchange rates and 6.0% at constant exchange rates, compared to Euro 212.8 million posted in the third quarter of 2019. The positive sales performance reflected the full-quarter contribution of the recent acquisitions, Blenders Eyewear and Privé Revaux, which added a total of Euro 26.5 million to the Group’s North America business.

Safilo 2020 net sales

In the third quarter of 2020, Safilo’s organic business, which excludes the acquisitions, achieved a significant recovery compared to the previous quarters of the year, down 6.7% at constant exchange (-5.5% for the wholesale business2) compared to the decline of 32.7% recorded in the first half of 2020 (-33.2% for the wholesale business2).

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The recovery of Safilo’s organic business in the third quarter of 2020 was driven by:

  • Strong performance in North America, where the Group’s organic revenues were up 12.1% at constant exchange rates, mainly thanks to the solid sales recovery experienced by independent optical stores, Safilo’s most important distribution channel in the US. All of Safilo’s core licensed brands, from Kate Spade to Tommy Hilfiger to Jimmy Choo, enjoyed a solid momentum driven by the growth of the prescription frames business. The quarter in the market was a strong confirmation for Smith products, which recorded double-digit growth in the sports store channel and more than doubled their turnover in online channels.
    In North America, the Group’s total sales, including the new brands acquired, stood at Euro 113.1 million, up 41.5% at current exchange rates and 45.9% at constant exchange rates compared to the same quarter of 2019;
  • Mixed trends in Europe, with net sales equaling Euro 79.3 million, down 17.0% at current exchange rates and 16.4% at constant exchange rates (-15.2% for the wholesale business2). In Italy and in all the main countries of the region, sales to independent optician stores posted positive performances, growing in the different markets from mid-single digit to double digits compared to the same quarter of 2019. In Europe, also the sales generated through the internet pure players confirmed their strength.
    On the other hand, the recovery in order taking remained subdued, although improving compared to the second quarter of the year, in specialty channels such as boutiques, in travel retail and in big chains;
  • The significant business improvement in Asia Pacific, reducing the gap compared to the same quarter of the previous year, with net sales of Euro 15.9 million down 9.4% at current exchange rates and 6.4% at constant exchange rates. The continued hardship of the travel retail business, down in the region by 63%, was more significantly offset by the surge recorded by Safilo in Mainland China, where supportive domestic demand and the contribution of the Group’s new brands, namely Levi’s and Ports, pushed sales up 83% at constant exchange rates;
  • Continued sales weakness in the Rest of the World, where Latin America and the IMEA countries remained strongly impacted by the pandemic and the economic downturns still affecting Brazil, India and Middle East markets. Net sales in the area were Euro 10.9 million, down 45.2% at current exchange rates and 35.6% at constant exchange rates.

In the third quarter of 2020, the organic online sales grew around 94% at constant exchange rates, thanks to the aforementioned growth of Smith’s D2C business and the Group’s sales through its internet pure players. In the third quarter of 2020, Safilo’s total online sales, including the acquisitions, represented around 16% of the Group’s net sales, up from around 3% in the same period of 2019.

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