March 11, 2020 / 7:20 PM / 25 days ago

Safilo sees negligible impact from coronavirus outbreak for now

MILAN (Reuters) - Italian eyewear maker Safilo (SFLG.MI) said on Wednesday that 2020 had started well and, at this stage, the impact on the business of the coronavirus outbreak was negligible.

FILE PHOTO: Gucci's sunglasses are seen at the Mido exhibition for glasses and eyewear products in Milan, Italy, February 29, 2016. REUTERS/Stefano Rellandini/File Photo

For the first quarter and beyond, much will depend on what happens in the coming weeks, particularly in Europe and the United States, Chief Executive Angelo Trocchia told reporters in a conference call on 2019 results.

The fashion and luxury goods industry worldwide is facing a major sales hit due to the epidemic which first emerged in China and has now spread to multiple countries, with key manufacturing hub Italy the worst affected country in Europe.

China accounts for just around 1% of the group’s total revenue and Italy for 5%, the CEO said. Safilo’s factory in China reopened on Feb. 10 and it is now running at 85% of its capacity, and no big problems occurred at plants in Italy.

“Our supply chain has held up well, but in this situation we live day by day,” he said.

“January and February were very good, we are seeing an impact of the epidemic only from the beginning of March. So far, the impact on the business is negligible”, Trocchia said adding that, at the moment, he was sticking to the plan presented in December and there were no other job cuts planned.

The world’s second largest eyewear maker has been struggling to lift sales and profit in recent years, at a time when large luxury groups, including Kering (PRTP.PA) and LVMH (LVMH.PA), are ending licensing deals for brands such as Gucci and Dior, often to take production in-house.

Safilo’s key licence for LVMH’s Dior brand will expire at the end of 2020 while the production agreement with Kering will last until the end of 2023.

In late 2019 the company announced an industrial reorganization under a restructuring plan and said it would cut 700 jobs in Italy this year, or more than 10% of its global workforce.

Safilo posted a 9.5% drop in adjusted core profit to 51.8 million euros ($58.39 million) in 2019, or a 5.5% margin on revenue, in line with company’s latest guidance of an around 6% margin.

Reporting by Claudia Cristoferi; editing by David Evans

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