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Safilo Net Sales Double In 2021 Q2 Compared To Same Period 2020

SAFILO Q2 2021 TRADING UPDATE brings strong year on year rebound and results well above 2019.

NET SALES PERFORMANCE IN Q2 2021:
In the second quarter of 2021, Safilo’s net sales of Euro 259.4 million more than doubled, at +137.1% at constant exchange rates, compared to Euro 114.5 million posted in the second quarter of 2020, the one most heavily weighed down by the Covid-19 pandemic. The significant year-on-year rebound translated into a sequential top line acceleration of +9.4% at constant exchange rates, compared to Q2 2019

Sales performance continued to reflect the successful rebalancing of the Group’s brand portfolio, with the contribution provided by the new proprietary and licensed brand additions – from Blenders and Privé Revaux, to Levi’s, David Beckham, Missoni, Ports, Isabel Marant and Under Armour – effectively compensating the licenses terminated at the end of 2020.

The organic sales performance delivered by the Group’s comparable brands was very positive, up high-single digits at constant exchange rates versus Q2 2019, driven by each brand’s specific exposure to key markets, channels and product categories. Net sales in the period continued to be driven by strong momentum in prescription frames and sport products, reflecting on one hand the sustained business activity of optical stores in the different marketplaces, on the other the surge of outdoor activities boosting Smith’s business in its traditional distribution and more significantly through its renewed direct to consumer (DTC) channel. Sales of sunglasses, which more than doubled year-on-year, resulted on the other hand slightly below 2019, due to the impacts of restrictions on retail and travel, penalizing in particular Polaroid in some of its core markets like Spain, and to a difficult comparison base given the terminated licenses’ high weight of these products. In Q2 2021, the Group’s online business reported another strong growth, up 64% year on year versus Q2 2020 and reaching 14.4% of the Group’s total net sales, thanks to the new, sizeable contribution of Blenders’ e-commerce sales and to the performance of the revenues generated through the internet pure players and of Smith’s DTC channel.

Q2 2021 net sales in Europe reached Euro 106.7 million, recording a significant year on year rebound of +87.5% at constant exchange rates. This positive performance was on the other hand still not sufficient to allow the region to return to pre-pandemic levels and to fully compensate the sizeable terminated business in the base period.

Compared to Q2 2019, Safilo’s net sales in Europe were down -11.4% at constant exchange rates, although improving compared to the first quarter (-17.8% in Q1 2021 vs Q1 2019). After a weak start to the sun season, still affected by the impact of retail restrictions until May and the lack of tourists in key cities and summer locations, sales trends improved in the UK, Italy and some Nordic countries, while remaining more subdued in markets like Germany, France and Spain and in those channels more exposed to the terminated business, in particular licensor-owned boutiques, department stores and travel retail. On the other hand, also in Q2 2021, sales of prescription frames in Europe were up double-digits compared to Q2 2019.

KEY ECONOMIC HIGHLIGHTS OF Q2 2021
From an economic standpoint, the significant sales rebound recorded by Safilo in Q2 2021 translated into a sharp rise in operating profitability compared to last year’s exceptionally low basis and gave the opportunity to exceed 2019 margins at the EBITDA level. Positive economic results were fuelled by a structural recovery in operating leverage as sales volumes increased and by cost efficiency drivers in terms of lower obsolescence contributing to offset inflationary pressures particularly on transportation costs. As planned, marketing and advertising expenses reaccelerated compared to Q1 2021, driven by the online business peak season and the expectation of a less restricted retail environment.

On July 22, 2021, the French Competition Authority, following its investigation initiated in 2009 regarding a number of alleged practices in the eyewear sector in France, dismissed all charges raised against Safilo and which Safilo had been vigorously challenging.

Following this outcome, no sanctions were applied to Safilo, which was thus able to release the provision for risks and charges of Euro 17.0 million, booked in 2015 in order to cover the potential estimated liability. Such release had a positive impact on the Group’s reported Q2 and H1 2021 results, while it was not included in the adjusted key performance indicators.

Q2 2021 economic results included restructuring costs of Euro 3.2 million (Euro 3.8 million at the gross profit level) and the above mentioned income of Euro 17 million due to the release of a provision for risks and charges.

Q2 2021 gross profit rose to Euro 135.6 million, recording an exponential increase compared with Euro 39.2 million recorded in Q2 2020 and resulting substantially in line with the gross profit of Euro 135.9 million recorded in Q2 2019.

On an adjusted basis, Q2 2021 gross profit equalled Euro 139.4 million and a margin of 53.7%.

Q2 2021 EBITDA soared to Euro 37.7 million compared to the EBITDA loss of Euro -42.0 million recorded in Q2 2020, and posting an increase of +116.6% compared to the profit of Euro 17.4 million reported in Q2 2019.

H1 2021 ECONOMIC AND FINANCIAL RESULTS

NET SALES PERFORMANCE IN H1 2021
In the first half of 2021, Safilo’s net sales totalled Euro 510.7 million, posting a year on year rebound of +59.9% at constant exchange rates,

Compared to the first half of 2019, H1 2021 total net sales recorded an increase of +7.7% at constant exchange rates, with strong sales momentum throughout the first two quarters consistently driven by the rebound in growth experienced in the US and in China, and by some of the Group’s key strategic drivers.

On a two-year basis, H1 2021 key sales dynamics were:

• The full offset of the business terminated at the end of 2020 with the acquisitions of Blenders and Privé Revaux and the introduction of the new licenses of Levi’s, David Beckham, Missoni, Ports, Isabel Marant and Under Armour;
• The broad based organic growth delivered by the Group’s comparable brands portfolio, up high-single digits at constant exchange rates, led by Smith’s strong outperformance in its core product categories, by Carrera and the main licenses of Hugo Boss, Tommy Hilfiger, Kate Spade and Jimmy Choo, all firmly exceeding 2019 levels;
• The strong progress of the online business, thanks to the new, significant contribution of Blenders’ e-commerce, up 31.3% on a pro-forma2 performance basis, the growth of Smith’s DTC channel, and of the Group’s sales generated through internet pure players. In H1 2021, Safilo’s total online sales reached 13.6% of the Group’s total business, from 11% in H1 2020 and 3.8% in H1 2019, growing 2x and almost 4x compared to the respective periods;
• The double-digit growth of prescription frames across brands and markets, advancing the Group’s strategy for a re-balanced business between product categories, and the still soft performance of sunglasses.

ECONOMIC PERFORMANCE IN H1 2021
Safilos H1 2021 economic results reflected the benefits of the recovery of operating leverage led by the strong top-line growth, the now leaner overheads structure which the Group continued to manage with disciplined cost control, and cost of goods sold efficiencies.

In H1 2021, Safilo’s structural costs savings amounted to around Euro 13 million, while the contingency measures still in place in relation to the Covid-19 emergency resulted in an estimated cost avoidance of Euro 4 million. The Group’s results have been, on the other hand, affected by the inflationary pressures coming in particular from rising transportation costs

H1 2021 economic results included restructuring costs of Euro 19.3 million (Euro 8.4 million at the gross profit level, and Euro 15.6 million at the EBITDA level) and the above mentioned income of Euro 17 million due to the release of a provision for risks and charges.

H1 2021 gross profit stood at Euro 262.2 million, recording a significant increase of +76.5% compared to H1 2020, and a slight decline of -1.5% compared to the gross profit in H1 2019.

H1 2021 EBITDA soared to Euro 51.0 million from the loss of Euro -38.6 million recorded in H1 2020 and posting an increase of +40.8% compared to the EBITDA of Euro 36.3 million recorded in H1 2019. H1 2021 EBITDA margin increased to 10.0% compared to -11.5% in H1 2020 and 7.3% in H1 2019.

H1 2021 operating result was back to a profit of Euro 22.3 million, compared to the operating losses of Euro -68.4 million and Euro -218.8 million recorded in H1 2020 and H1 2019 respectively. H1 2021 operating margin stood at 4.4% of sales.

H1 2021 Group net result equalled a profit of Euro 2.0 million, compared to the Group net losses of Euro -74.8 million and Euro -246.9 million recorded in H1 2020 and H1 2019 respectively.

H1 2021 adjusted1 Group net result equalled a profit of Euro 4.4 million, compared to the adjusted1 net loss of Euro -63.7 million recorded in H1 2020 and registering a decline of 48.5% compared to the adjusted1 net profit of Euro 8.5 million posted in H1 2019.

2021 OUTLOOK
Based on the better than expected H1 2021 performance and the continuation of positive trends into the beginning of the third quarter, Safilo now expects the Group’s full year 2021 net sales above 2019 levels, up mid-single digits at constant exchange rates. Adjusted EBITDA for the year is also forecasted to surpass 2019 levels. Such expectations are also based on the assumption of a stable business environment, in the second half of 2021, in relation to the Covid-19 pandemic.