Safilo second-quarter sales plunge on poor sales in Europe, U.S. department stores

Italian eyewear-maker Safilo said on Thursday it expected a 3 percent decline in full-year 2018 sales at constant currencies after poor sunglasses sales in Europe and ongoing weakness in North American department stores hit its second-quarter.

It also issued a lower sales target for 2020, replacing a target issued in 2015. Since then luxury groups have begun to withdraw their lucrative licence models from glasses makers and bring production in-house.

Safilo's second quarter net sales fell 22.8 percent at current currencies to 241.3 million euros (214.83 million pounds) and 19.1 pct at constant currencies.

The fall in second-quarter sales led to a drop in earnings before interest, tax, amortisation and depreciation (EBITDA) to 10.3 million euros, about a third of last year's figure of 33.7 million euros.

"Sales performance was mainly affected by the negative underlying business trends recorded in the South European countries, where a subdued start to the sun season in March continued also into the second quarter," the company said in a statement.

Safilo updated its 2020 guidance as part of a five-year business plan under new CEO Angelo Trocchia and now expects sales to grow 2 percent per year in 2019 and 2020 and to amount to between 1 and 1.2 billion euros in 2020.

The updated 2020 target for sales represents an average cut of about 34 pct compared to those issued in 2015.

In the course of three years luxury groups have moved away from the traditional licensing model with eyewear producers.

French luxury goods group Kering set up its own eyewear business to better control distribution and pocket rich profit margins, turning a 350 million euro Gucci licence with Safilo into a four-year production deal with the company.

Following the footsteps of its rival, Dior-owner LVMH bought a 10 percent stake in Marcolin last year as part of a partnership, ending its Celine accord with Safilo and putting Safilo's other LVMH brand licenses at risk, including Dior.