Eyewear group Safilo can get past LVMH loss, says CEO
today Jan 30, 2017
Italian eyewear group Safilo can make up for the potential loss of design-to-distribution deals with French luxury group LVMH with new licences and by expanding its own brands, its chief executive said on Friday.
Shares in Safilo were hit last week by a report that LVMH could buy a stake in spectacles maker Marcolin and grant it licences currently held by Safilo and worth 340 million euros (289 million pounds) of its sales.
Safilo recently renewed the key Dior licence with LVMH until 2020 but said it would lose Celine, another brand of the French group, after this year. Licences for Givenchy, Fendi and Marc Jacobs will expire between 2021 and 2024.
"Safilo can get reorganised to not just survive but flourish even without LVMH," CEO Luisa Delgado told Reuters in an interview.
"Our heart is in our core brands and in being good licensing partners, nimble and easy going. We receive two or three proposals a week," she said, speaking at the group's Milanese showroom.
The eyewear industry is going through a major shake-up with top spectacles maker Luxottica set to merge with the world's biggest lens producer Essilor in a 46 billion euro deal announced this month.
The long-mooted tie-up follows Kering's radical move in 2014 to bring its eyewear business in-house to boost profit margins.
The French group set up Kering Eyewear in Padua, Safilo's hometown, and turned a 350 million euro Gucci licence with Safilo into a four-year production deal starting from Jan. 1, 2017.
But Delgado shrugged off any pressure to merge.
"We're an attractive target ... but we want to remain independent, Italian and listed in Milan," she said.
Delgado said bringing together lenses and frames made sense but it could be achieved through partnerships. "You don't need a merger," she said.
"We've lost licences in the past and we've filled the hole in our sales."
LVMH CEO Bernard Arnault said on Thursday the group would unveil its new eyewear strategy later this year. He declined to comment on the speculation about Marcolin.
Founded in 1934, Safilo is the world's second biggest eyewear manufacturer with 1.3 billion euros ($1.4 billion) annual sales in 2015 compared with Luxottica's 9 billion euros.
Delgado, who arrived at Safilo in 2013 when former CEO Roberto Vedovotto moved to Kering Eyewear, aims to boost the share of sales from proprietary brands to 40 percent under a plan to 2020 unveiled in March 2015.
She said whipping into shape the group's five brands Safilo, Polaroid, Carrera, Smith and Oxydo had taken longer than initially envisaged.
"Growth at our own brands is not yet visible ... but the foundations are now in place, results will follow. The stars are coming together," she said.
Delgado said Safilo could expand its brand portfolio with an acquisition. "We're always on the lookout, we're buyers not sellers," she said.
Analysts say U.S. eyewear brand Maui Jim, Denmark's Lindberg and Austria's Silhouette could be attractive targets.
Safilo had 72 million euros in liquidity and net debt of 103 million euros at end-June. Next year, the group is set to receive a third and final 30 million euro instalment in compensation agreed with Kering for ending its Gucci licence with Safilo.
Safilo last acquired a brand in 2012 buying Polaroid for $88 million thanks to a 44 million euro capital injection by its top shareholder, Dutch investment fund HAL Holding.
HAL, which took control of Safilo from Italy's Tabacchi family back in 2009, remains a long-term investor in the group, Delgado said.
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