Glasses giant Safilo Group confirmed that Dior glasses agent will expire

- Jul 03, 2019-

Italian eyewear manufacturer Safilo Group SpA (SFL.MI) confirmed that the French luxury brand Dior Dior's glasses agency will expire after the end of December 2020. The management of the group stated that it is committed to signing a new brand agency right before the end of the year to minimize the impact of losing Dior on financial performance.


First and foremost is the share price of Safilo Group SpA (SFL.MI), which has fallen 7.7% in the first two days of the week. In recent years, the strategy of strengthening the vertical integration of large luxury goods groups has caused Safilo Group SpA to lose a lot of big-name customers. In 2014, the group's share price of 10 euros has recorded a decline of more than 90%.


In the global high-end eyewear manufacturing integration storm of 2017, Dior Dior's world's largest luxury goods group LVMH Moët Hennessy Louis Vuitton SE (LVMH.PA) Lu Wei Xuan and Italian professional manufacturer Marcolin SpA formed a joint venture company Thélios, The two sides accounted for 51% and 49% respectively.


Thélios has absorbed Celine Catherine, who is the first to date with Safilo Group SpA, LVMH SE, and Dior Dior, who has worked with Safilo Group SpA for 23 years, and the contract will be in 2021 and 2022. Givenchy and Fendi Fendi, which expire at the end of the year, are also expected to join the Thélios formation.


Thélios announced the construction of a second eyewear factory in Italy earlier this year. The new plant, which is scheduled to go into production in the fourth quarter of 2020, will create 600-700 jobs with an initial capacity of 1.5 million units and a maximum annual production of 4.5 million units, ready to meet the Dior business.


Safilo Group SpA revealed that Dior Dior contributed 13% of the Group's revenue in FY18, and Dior and menswear brand Dior Homme had a total annual sales of more than 30 million pairs and a business volume of approximately 125 million Euros.


Since 2013, Giorgio Armani SpA Armani and Gucci Gucci have left the Safilo Group SpA, the former one of the world's largest eyewear manufacturers Luxottica Group SpA Luzon Tika Group, whose agent was selected The single-handed Kering SA (KER.PA) Kaiyun Group recycles. Kering Eyewear achieved sales of 391 million euros in FY 2018. The company also obtained the rights to Cartier Cartier and Montblanc through its strategic cooperation with Compagnie Financière Richemont SA (CFR.S) Richemont Group.


As the luxury brand business shrinks, Safilo Group SpA has turned its attention to contemporary fashion brands, CEO Angelo Trocchia believes that the contemporary high-end brand with a scale of 10 billion euros and an annual growth rate of 3%-4% The market has huge opportunities for development. Recently, the group has renewed its contract with fashion brands such as Kate Spade New York, Tommy Hilfiger and Fossil, and has won the rights to Levi’s Levi's and David Beckham's personal brand.


Missoni Mithoni will also rejoin Safilo Group SpA in 2020 with a portfolio of luxury brands including Max Mara, Moschino, Elie Saab and Jimmy Choo.


The group also announced that the sale of the US retailer Solstice has been completed. Angelo Trocchia pointed out that physical retail is not a strategic priority for the group at this stage, and the sale transaction is not only an important step for the group to resume sustainable growth, but also has a positive impact on earnings of 14 million euros.


Angelo Trocchia also revealed that the current sales growth of the group is within the target range of 2%-4%.


In the first quarter, Safilo Group SpA's net sales of its continuing operations increased by 3.4% year-on-year to €247.3 million, excluding the impact of the exchange rate, which was only 0.6%. In 2018, the annual revenue was 962.9 million euros, a year-on-year decrease of 7%, and the exchange rate was also reduced by 4%. The adjusted net loss narrowed from 47.1 million euros in 2017 to 26.7 million euros. The two new businesses, Moschino Mosicino, Love Moschino and rag & bone, just offset the loss of Celine.


Management expects the group to return to profitability by 2020 at the beginning of this year. Angelo Trocchia announced that it will release a new three-year plan during October and November.


Safilo Group SpA (SFL.MI) closed at 0.851 euros on Tuesday and the stock has lost 68.7% in the past 12 months. Italian brokers Equita Sim and Mediobanca Securities both believe that Dior's related bearishness will put the stock under pressure in the short term. The former also believes that the recent capital increase and refinancing of the group will help them make a smooth transition.