Angelo Trocchia.
PADUA, Italy—The board of directors of Safilo Group S.p.A. (SFL.IM) reviewed and approved Q1 2022 economic and financial key performance indicators. Angelo Trocchia, Safilo Group's CEO, said, “We closed a positive first quarter, with a solid start to 2022 for our net sales, which grew by 8.4 percent at constant exchange rates compared to 2021, and, more meaningfully for the improvement of our profitability, with the gross margin reaching 55.0 percent of sales and the adjusted EBITDA margin increasing to 11.3 percent.

"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 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 strategy will continue to support the Group’s sales and margin growth also in 2022,” Trocchia said.
 
Safilo’s net sales in Q1 2022 reached €282.6 million, up 8.4 percent at constant exchange rates (+12.4 percent at current exchange rates) compared to €251.4 million recorded in Q1 2021. Organic sales performance was up double-digits, at + 14.3 percent at constant exchange rates, backed by the continued strength of Safilo's own 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 Armour increased their portfolio relevance, gaining further momentum in their reference markets, the company said.
 
It added that Q1 2022 also saw the promising launch of Carolina Herrera, Dsquared2 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 percent at constant exchange rates, +5.2 percent organic, and continuing to drive positive momentum worldwide in the core independent optician channel. The quarter was also a promising start to the year for sunglass sales, up 5.1 percent at constant exchange rates, +19.8 percent organic, 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 percent  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 U.S. remained solid. Conversely, total business performance in the Asia region was impacted by new COVID-19 related restrictions, Safilo noted.
 
Q1 2022 net sales in North America reached €129.0 million, up 0.9 percent at constant exchange rates (+8.3 percent at current exchange rates) against a challenging comparison base. Organic growth was solid at +5.5 percent, 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 Armour were key growth drivers in the different wholesale distribution, while in the online channel, Blenders’ e-commerce sales closed the quarter substantially in line with the extraordinary level of business recorded in Q1 2021 when the brand surged by 79 percent.

Safilo Group's Q1 2022 net sales in Europe reached €117.2 million, up 16.2 percent at constant exchange rates (+15.5 percent at current exchange rates) compared to Q1 2021. The rebound in Europe was driven by a +24.9 percent organic 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 the U.K., 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.
 
Safilo noted that 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 €12.4 million in the quarter, down 9.3 percent at constant exchange rates (-4.4 percent 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 organic performance was however positive, at +2.3 percent 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 €23.9 million, up 27.3 percent at constant exchange rates (+34.6 percent at current exchange rates) compared to Q1 2021. The business performance, which fully reflected organic growth of 29.8 percent, 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.
 
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 adjusted EBITDA level, Safilo closed Q1 2022 with a strong profit growth and another meaningful improvement of the margin.
 
From a financial standpoint, at March 31, 2022, the group's net debt amounted to €109.1 million (€ 68.9 million pre-IFRS 16), a small increase compared to €94.0 million (€ 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, the company said.