(PRESS RELEASE) PADUA — The Board of Directors of Safilo Group SpA has reviewed and approved Q1 2022 economic and financial key performance indicators.
Angelo Trocchia, Safilo chief executive officer, commented: “We closed a positive first quarter, with a solid start to 2022 for our net sales, which grew by 8.4% at constant exchange rates compared to 2021, and, more meaningfully for the improvement of Our profitability, with the gross margin reaching 55.0% of sales and the adjusted2 EBITDA margin increasing to 11.3%.
The period confirmed once more the strength of our own and licensed brands which continued to show their ability to grow at a healthy pace in their core product categories and markets.
We saw an encouraging pick-up in demand in Europe and continued progress in some of our key emerging markets in Latin America and the Middle East, while North America remained a stronghold despite a tough comparison basis, both in our traditional wholesale channels and in the online business.
Despite the strategy challenges deriving from the developments of the Covid-19 pandemic, inflationary pressures and the conflict in Ukraine, we remain confident that the resilience of the eyewear sector and the effectiveness of our will continue to support the Group’s sales and margin growth also in 2022.”
Q1 2022 Net Sales Performance
Safilo’s net sales in Q1 2022 reached Euro 282.6 million, up 8.4% at constant exchange rates (+12.4% at current exchange rates) compared to Euro 251.4 million recorded in Q1 2021.
Organic sales performance was up double-digits, at + 14.3% at constant exchange rates, backed by the continued strength of owning brands Smith and Carrera, and by an encouraging start to the year for Polaroid. In the licensed portfolio, Tommy Hilfiger, Kate Spade and Hugo Boss kept a strong pace of growth, and the newer licenses of David Beckham, Missoni, Isabel Marant and Under Armor increased their portfolio relevance, gaining further momentum in their reference markets.
Q1 2022 also saw the promising launch of Carolina Herrera, Dsquared and Chiara Ferragni’s new eyewear collections, three debuts that met with considerable market excitement, supporting the offset of the non-recurring sales recorded in the corresponding period of last year.
Q1 2022 net sales performance by product and channel was broad-based, with the prescription frames business which remained a resilient stronghold, growing by 7.9% at constant exchange rates, +5.2% organic1, and continuing to drive positive momentum worldwide in the core independent Optical channel. The quarter was also a promising start to the year for sunglass sales, up 5.1% at constant exchange rates, +19.8% organic1, compared to the same period of 2021, reflecting, in particular, the products’ significant rebound in Europe. Finally, sales of Smith’s sports products confirmed the double-digit growth pace recorded in 2021, continuing to progress both in specialized sports shops and online through its direct to consumer (D2C) channel. The latter contributed, together with the Group’s sales via internet pure players, to push Safilo’s total online business up 9.4% at constant exchange rates in Q1 2022.
Q1 2022 net sales performance by geography was driven by a strong business rebound in Europe and the continued positive momentum in Latin America markets and the Middle East, while sales in the United States remained solid. Conversely, total business performance in the Asia region was impacted by new Covid-19 related restrictions.
- Q1 2022 net sales in North America reached Euro 129.0 million, up 0.9% at constant exchange rates (+8.3% at current exchange rates) against a challenging comparison base. Organic1 growth was solid at +5.5%, once again supported by Smith’s strength in snow and bike helmets and goggles, but also by its growing eyewear business, one the brand’s key priorities for the current year, alongside its international expansion. Among the other leading brands of the region, Kate Spade, Carrera and Under Armor were key growth drivers in the different wholesale distribution, while in the online channel, Blenders’ e-com sales closed the quarter substantially in line with the extraordinary level of business recorded in Q1 2021 when the brand surged by 79%.
- Q1 2022 net sales in Europe reached Euro 117.2 million, up 16.2% at constant exchange rates (+15.5% at current exchange rates) compared to Q1 2021. The rebound in Europe was driven by a +24.9% organic1 growth, to which all the Group’s own brands and key licenses provided a strong contribution, in particular thanks to the significant uplift of their sunglass sales.
- Safilo’s sales growth in Europe was broad-based across markets, with UK, France, and Germany outperforming, while Spain and Portugal posted a strong year on year rebound as the countries were last year among the most exposed to the slow-recovering sunglass market.
- Q1 2022 net sales in Asia and Pacific remained under pressure mainly due to rising Covid-19 cases and related lockdowns in a growing number of Chinese provinces. Net sales in the region stood at Euro 12.4 million in the quarter, down 9.3% at constant exchange rates (-4.4% at current exchange rates) compared to Q1 2021, as business activities were also constrained by the cancellation of the Shanghai optical fair, the most important eyewear sector exhibition in Asia. The organic1 performance was however positive, at +2.3% at constant exchange rates, backed by a business recovery in Japan and South East Asia.
- Q1 2022 net sales in the Rest of the World equaled Euro 23.9 million, up 27.3% at constant exchange rates (+34.6% at current exchange rates) compared to Q1 2021. The business performance, which fully reflected organic1 growth of 29.8%, was driven by the continued positive sales in Brazil and Mexico, but also by a constantly improving business environment in the Middle East and in India, with the latter returning to growth after many quarters of softness.
Q1 2022 Economic and Financial Performance
In Q1 2022, Safilo recorded a significant improvement in its gross margin, driven by a positive price/mix effect and further progress on the Group’s structural COGS savings project envisaged in the 2024 business plan. These levers continued to effectively counter the inflationary pressures deriving from increasing transport costs and the more marked incidence of energy expenses.
Safilo continued to focus on the efficiency of its supply chain, also completing in the quarter the industrial restructuring plan launched at the end of 2019.
In the period, marketing and advertising expenses increased as a result of the more dynamic business and market environment compared to Q1 2021, while EDP expenses grew due to the recent inclusion of costs, no longer capitalized due to the IFRIC on SaaS (software as a service), related to investments in software that the Group continued to implement in line with its digitalization strategy.
At the adjusted2 EBITDA level, Safilo closed Q1 2022 with a strong profit growth and another meaningful improvement (Euro million) Q1 2022 % on of the margin
Gross profit in Q1 2022 amounted to Euro 155.5 million, up 22.8% compared to Q1 2021, while the gross margin at 55.0% of sales, marked an improvement of 460 basis points compared to the margin of 50.4% reported in Q1 2021. This year’s progress remained very meaningful, at +18.5% in absolute terms and with a margin improvement of +280 basis points, even in comparison with last year’s adjusted2 gross profit of Euro 131.2 million and margin of 52.2%.
In the period, selling, general and administrative costs increased by around 15% compared to Q1 2021, mainly due to higher investments in marketing and advertising, and to IFRIC SaaS costs, not yet recognized in the comparative period, which equaled Euro 1.9 million in Q1 2022.
Adjusted2 EBITDA in Q1 2022 margin stood at Euro 32.0 million, up 23.8% compared to Q1 2021, while the adjusted1 EBITDA increased to 11.3% of sales (12.0% ex IFRIC SaaS), improving 100 basis points compared to the 10.3% margin impact recorded in Q1 2021.
From a financial standpoint, at March 31, 2022, the Group’s net debt amounted to Euro 109.1 million (Euro 68.9 million pre-IFRS 16), a small increase compared to Euro 94.0 million (Euro 52.8 million pre-IFRS 16) at the end of 2021, mainly reflecting the normal seasonality of the business in terms of working capital dynamics.