BUSINESS Safilo Group Sees High Growth Momentum in Europe, Significant Increase in Profitability in First Half of 2022 By Staff Thursday, August 4, 2022 12:27 AM PADUA, Italy—Safilo Group S.p.A. reported that it achieved double-digit growth in the first half of 2022, ending June 30, 2022. In the first half of the year, Safilo’s net sales totaled €570.9 million, up 11.8 percent at current exchange rates, up 6.2 percent at constant exchange rates, compared to €510.7 million in the first half of 2021. A strong, organic growth of 14.3 percent in Q1 and a top line increase of 9.8 percent in Q2 allowed the Group to close the first half of 2022 with a double-digit organic growth of 12.0 percent at constant exchange rates.Safilo attributed the growth to the continued strength of its owned brands Polaroid, Smith and Carrera as well as the Group’s main licensed brands. In addition, the Group launched new collections from Carolina Herrera, DSquared2 and Chiara Ferragni that countered the sales recorded in 2021 by now discontinued brands. Angelo Trocchia, Safilo’s CEO, said, “We are pleased with the development of our business in the second quarter. Our strategic objective to build a Safilo with a strong and balanced portfolio of brands, geographies, products and channels is progressing well. This year Europe, our second largest region, has bounced back strongly becoming the Group’s key revenue growth driver in the first semester. "Despite the numerous macro headwinds in which we operate, including the persistence of strong inflationary pressures and their related impacts on consumption, COVID-related restrictions and the conflict in Ukraine, our results and the trends recorded so far in the eyewear industry give us confidence to reach already in 2022 the economic targets set out in our 2024 business plan,” Trocchia said. The first half of 2022 also saw an expected pick-up of sunglasses sales, with an organic growth of 13.9 percent at constant exchange rates. The Group reported buoyant customer demand in Europe, the Middle East and Latin America in particular. Sales of prescription frames represented 38.9 percent of the Group’s total business at the end of the semester, and recorded an organic growth of 5.0 percent at constant exchange rates. This is despite the demanding comparison with the first half of 2021, when the product category grew 19.8 percent compared to the first half of 2019. Finally, helmets and goggles for winter and summer sports grew as well, taking the share of Safilo’s “Other” product category to 9.6 percent of its total business. This represents an increase of 33.6 percent and constant exchange rates. The turnover of sports products has more than doubled compared to the first half of 2019, the company said. Safilo’s online sales, consisting of its direct to consumer business (D2C) and the Group’s sales via internet pure players (IPP), increased by 7 percent at constant exchange rates in the first half of 2022, confirming their share of Safilo’s total revenue at a solid 14.4 percent, compared to 13.6 percent in the first half of 2021. Safilo continued to develop its B2B e-commerce platforms as well; in Europe, You&Safilo’s revenues grew around 12 percent compared to the first half of 2021. Sales growth by geography in the first half of 2022 was driven by a strong bounce back in Europe. Sales performance in North America faced the double challenge of a tough comparison with the first half of 2021 and this year’s slower consumption pace in the U.S., but still remained positive at the organic level. The emerging markets of Latin America, India and the Middle East, which represent the “Rest of the World” category, confirmed sustained growth rates over the entire half year. Sales in Asia and Pacific, overall penalized by the COVID-related restrictions and lockdowns imposed by China until the beginning of June, grew at the organic level thanks to continued positive trends in South East Asia and Japan. Safilo Group’s gross profit in the first half of 2022 reached €318.3 million, recording an increase of 21.4 percent compared to the first half of 2021, while the gross margin grew to 55.8 percent, improving 450 basis points compared to the gross margin of 51.3 percent recorded last year (respectively +17.6 percent and +280 basis points compared to the first half of 2021 adjusted gross profit and margin). Selling, general and administrative costs in the first half of 2022 increased by 13.9 percent compared to the the first half of 2021 behind an increase in marketing and advertising investments recorded both in Q1 and Q2 due to the peak season for the sunglass business, and the impact of €3.7 million of software-as-a-service investment projects under the new IFRIC agenda, the equivalent of which in the first half of 2021 was still capitalized. Adjusted EBITDA in the first half of 2022 amounted to €62.6 million, up 26.1 percent compared to the adjusted EBITDA of €49.7 million recorded in the first half of 2021. The adjusted EBITDA margin stood at 11.0 percent (11.6 percent ex IFRIC SaaS impact), marking an improvement of 130 basis points compared to the 9.7 percent posted in the first half of 2021. Adjusted EBIT in the first half of 2022 amounted to €39.2 million, up 59.1 percent compared to the adjusted EBIT of €24.7 million recorded in the first half of 2021, while the adjusted EBIT margin grew to 6.9 percent from 4.8 percent posted in the first half of 2021. In the second quarter of 2022, Safilo Group’s net sales reached €288.3 million, up 11.2 percent at current exchange rates and 4.0 percent at constant exchange rates compared to €259.4 million recorded in Q2 of 2021. The organic sales performance equaled a growth of 9.8 percent at constant exchange rates and was driven by Smith’s continued strong momentum and the double digit sales growth rates of both Carrera and Polaroid. Within Safilo’s licensed portfolio, Tommy Hilfiger, BOSS, David Beckham, Under Armour and Isabel Marant showed significant progress. The rollout of the new Carolina Herrera, Dsquared2 and Chiara Ferragni eyewear collections contributed to offset the discontinued business still recorded in Q2 2021. Net sales in North America totaled €129.6 million in Q2 2022, up 7.1 percent at current exchange rates due to the positive foreign exchange impact resulting from the significant revaluation of the U.S .dollar against the euro. At constant exchange rates, the performance of the market instead declined by a total 5.1 percent due to the challenging comparison with Q2 2021 and a slower consumption pace in the U.S. In Europe, net sales reached €120.0 million, up 12.4 percent at current exchange rates and +12.1 percent at constant exchange rates compared to Q2 2021. In Asia and Pacific, net sales stood at €12.7 million, down 1.4 percent at current exchange rates and 8.5 percent at constant exchange rates. This is in part due to COVID-related lockdowns in China; sales momentum in South East Asia, including Australia and Japan, was dynamic. In the Rest of the World, net sales increased to €26.0 million, up 38.6 percent at current exchange rates and 24.9 percent at constant exchange rates compared to Q2 2021. Gross profit in Q2 2022 amounted to €162.8 million, marking an increase of 20.0 percent compared to Q2 2021, while the gross margin rose by 420 basis points, from 52.3 percent to 56.5 percent of sales (respectively +16.8 percent and +280 basis points compared to Q2 2021 adjusted gross profit and margin). Based on the first half of 2022 and current visibility into the third quarter, Safilo Group management said it is confident about reaching targets set out in the 2024 business plan, which forecasts net sales at around €1 billion and the adjusted EBITDA margin between 9 percent and 11 percent. Safilo Group now expects full year 2022 net sales to grow mid-single digits at constant exchange rates compared to 2021 and the adjusted EBITDA margin to stand at around 10 percent from 8.4 percent in 2021. These forecasts assume a reasonably stable economic and business environment for the rest of 2022. Safilo Group aims to provide an update of its medium-term economic and financial targets in the fourth quarter of the year.