Safilo Group SpA reported sales of Sports Products, which includes its Smith Optics brand, reached €16.1 million in the first quarter, up 0.9 percent, or 4.3 percent in currency-neutral (c-n) terms.
alian parent company of the U.S.-based Solstice chain of sunglasses boutiques as well as the Polaroid sunglasses brand, reported margins grew significantly faster than sales during the quarter.
Total sales amounted to €293.2 million, down 1.3 percent from €297.0 million in the same period of 2013, but up 1.9 percent in currency-neutral (c-n) terms. Wholesale sales reached € 276.7 million compared with € 279.6 million of the first quarter of 2013, down 1.0 percent, or up 2.1 percent c-n. Sales at the company's 132 Solstice stores in the United States, meanwhile, declined 1.6 percent c-n to €16.5 million, due in part to unfavorable weather.
U.S. sales hurt by weather In the U.S., sales reached €112.9 million, down 4.8 percent, or up 0.3 percent in c-n terms from €118.6 million in the first quarter of 2013 . The US market was partially affected by soft demand at Solstice and more generally in the prescription frame business at independent opticians' stores.
In the European market, the Group's sales grew 2.4 percent, or 3.1 percent c-n, to € 131.3 million, compared to €128.2 million in the first quarter. Germany and the U.K. were the main drivers of growth in Europe, while business in the Italian market and in countries such as Spain and Portugal continued to recover. European key accounts once again proved to be the Group's best distribution channel both for the top end brands and the fashion and value-for-money segment.
Safilo said a Latin American unit established during the quarter delivered the best performance, highlighting the as of yet untapped potential for Safilo in this area of the world.
In Asia, sales increased by 1.9 percent c-n thanks to the positive performance of China and Korea, especially in the sunglasses segment. Sales amounted to €45.0 million compared to € 46.0 million in the same quarter of 2013 , a decline of 2.2 percent in currency adjusted terms.
Margins and earning up
The first quarter of 2014 was characterized by a strong growth of the gross margin, which increased by 230 basis points to 62.8 percent of revenues from 60.5 percent in the same period of 2013. Gross profit improved by 2.4 percent to €184.0 million compared to €179.7 million in the first quarter of 2013. Improvements in product, brand and channel mix were the main contributors to this result, combined with the increase in the "Made in Safilo" volumes and with the progress in efficiency in the production processes.
EBITDA increased of 2.3 percent to €35.4 million compared to € 34.7 million in the first quarter of 2013. EBITDA margin improved to 12.1 percent of sales from 11.7 percent in the same period of 2013. In the first quarter of 2014, EBIT reached €26.8 million, up 4.3 percent from €25.7 million in the same period of 2013.
Beyond the operating results, the quarter benefited from lower financial expenses, which declined 58 percent to € 2.3 million from € 5.5 million due to the reduction of debt and the better mix of financing sources following the High Yield Bond repayment in May 2013. The tax rate stood at 32.4 percent of the Group profit before taxation (32.6 percent in the first quarter of 2013).
Net profit increased 22.9 percent, reaching € 16.5 million from € 13.4 million recorded in the first quarter of 2013.
