Shares of Safilo plunge following announced end to Gucci license

By

Dominique Muret

Published
Sep 4, 2014

Safilo probably now regrets having parted ways with Roberto Vedovotto… especially without having made him sign a non-compete clause!

Hired by François-Henri Pinault in November 2013, the former managing director of the Italian eyewear company, which is owned by the Dutch investment firm Hal, has not wasted any time in establishing a Kering eyewear unit as part of a gradual effort to bring the company’s eyewear licenses in-house.

The first license to be affected will be that for Gucci, which Safilo has held for twenty years. The eyewear manufacturer and Kering reached an agreement to bring and end to the license two years ahead of schedule (it was set to end on December 31, 2016) in return for 90 million euros in compensation for Safilo to be paid by Kering between 2014 and 2018.

Despite the Italian company’s attempt to reassure the markets by emphasizing the "strategic product partnership" signed with Kering until 2020 for the development and production of Gucci eyewear collections that should bring in 75 to 100 million euros per year, the company’s stock immediately plunged following the announcement.

Gucci is in fact one of the main sources of income for Safilo, accounting for over 20% of its total revenue, or nearly 250 million euros, according to financial analysts. Over the course of Wednesday, Sept. 3, the company’s stock tumbled on the stock exchange in Milan, falling by as much as 30% during the session, after having been suspended limit up for a part of the morning.

The market appeared even more worried considering that Safilo holds licenses for several other Kering-owned brands including Saint Laurent, Bottega Veneta, Alexander McQueen and McQ. Many analysts have now revised their estimates downward.

"Safilo has lost its most important license. Moreover, as it lost its license for Giorgio Armani two years ago, it is becoming less interesting in terms of distribution for potential customers," concludes a analyst.