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Safilo Struggled in 2017 After Losing Gucci License

The world's second-largest eyewear group's adjusted core profit is set to halve from a year earlier.

PADUA, Italy — Italian eyewear group Safilo said its 2017 adjusted core profit was set to halve from a year earlier after fourth-quarter sales dropped more than expected as the loss of its Gucci license continued to bite.

French luxury goods group Kering, which owns Gucci, has turned a 350 million euro ($434 million) Gucci license with Safilo into a four-year production deal and set up its own eyewear business to better control distribution and pocket rich profit margins.

Safilo, owner of the Carrera and Polaroid brands, reported fourth-quarter net sales of 249 million euros, down 16.9 percent from a year earlier at constant currencies.

The company said that the Gucci license loss accounted for 44 million out of a 53 million euro annual decline in fourth-quarter sales.

Following that drop, Safilo said it expected full-year adjusted earnings before interest, tax, amortisation and depreciation (EBITDA) at 38 to 40 million euros, down from 88.8 million euros last year.

Safilo said it would present an update of its business plan when it publishes final 2017 earnings on March 14.

Full-year sales totalled 1.05 billion euros, down 15.5 percent from 2016, as the Gucci loss was compounded by an IT-related disruption in deliveries at Safilo's main distribution centre in Padua, Italy, and hurricanes in the United States.

When factoring in currency swings, full-year sales were down 16.4 percent. Analysts in a Thomson Reuters poll had forecast on average full-year revenues of 1.08 billion euros.

Safilo is the world's second-largest eyewear group after Luxottica, which on Monday reported a 2 percent rise in 2017 sales to 9.16 billion euros on a strong fourth quarter.

Further adding pressure on Safilo, Luxottica is expected to get a green light soon from U.S. and EU anti-trust authorities for its 50-billion-euro merger with top lens manufacturer Essilor.

Rejecting speculation in the Italian press that Safilo may soon become a takeover target amid intensifying competition, a spokeswoman for the group said on Monday that top investor HAL Holding had no plan at present to change its stake.

Safilo, which has also just lost its license for LVMH's Celine brand, reported a 3.7 percent fall in fourth-quarter sales of its "going forward" brands, meaning excluding brands that Safilo has stopped or will stop selling under license.

Following in Kering's footsteps, LVMH bought a 10 percent stake in Marcolin last year. The partnership between the world's largest luxury goods group and Marcolin could cost Safilo other LVMH licenses, including the prized Dior brand. The Dior license expires in 2020.

Safilo said sales of Dior-branded spectacles fell in 2017 after several years of strong growth.

By Silvia Recchimuzzi in Gdynia: Editors: Valentina Za and Adrian Croft.

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