Safilo Sales Hit by Delivery Disruption

MILAN, Italy — Italy's Safilo, which makes glasses for Boss, Fendi and other fashion brands, reported a steep drop in first quarter net sales after a new IT system at its Padua distribution centre disrupted deliveries.

Sales for the January-March quarter fell 21.3 percent, a drop the company said was also because its Gucci licence had ended in 2016.

Net sales of what it calls its Going Forward Brand portfolio, which excludes Gucci, were particularly affected by the delivery disruption and fell 14.9 percent year-on-year.

Safilo, which owns the Carrera brand, warned in March that it expected disruption of deliveries to affect the Going Forward Brand portfolio, saying sales were expected to fall 15 to 20 percent.

Safilo said Going Forward Brand net sales would have grown in the low single digits without the disruption caused by the new IT system.

Earnings before interest, tax, depreciation and amortisation swung to a loss of €9.5 million ($10.34 million) from a positive EBITDA of €19.8 million a year ago, as a weaker top line hurt profits.

Safilo said it had addressed the IT system issues and expected to establish normal working conditions and service levels in the Padua distribution centre by the end of June.

CFO Gerd Graehsler said in a conference call that April was a "relatively low month" due to a low number of shipment days due to public holidays, adding that May and June will be key months to recover the delay in deliveries suffered in the first quarter.

Graehsler said the company did not so far see a meaningful amount of order cancellations following the announcement of the distribution disruption.

By Silvia Recchimuzzi; editor: Edmund Blair.