Safilo to cut 700 jobs in Italy as sluggish sales weigh

MILAN (Reuters) - Eyewear maker Safilo SFLG.MI will cut 700 jobs in Italy next year, or more than 10% of its global workforce, as it tries to boost profitability amid sluggish sales, it said on Tuesday.

The Italian company said it expected net sales to grow around 1-2% a year over the next five years and lowered its guidance for 2020, at the end of which it will lose a key license to make glasses for LVMH's LVMH.PA Dior brand.

Safilo’s shares earlier closed up 10.5% after it announced the renewal of a licensing deal with LVMH’s Mark Jacobs brand, allaying fears about the loss of a further contract.

Safilo has been struggling to lift sales and profits in recent years, at a time when large luxury groups including Kering PRTP.PA and LVMH are ending licensing deals for brands such as Gucci and Dior, often to take production in-house.

The world’s second largest eyewear maker said on Monday it had agreed to buy 70% of Blenders Eyewear, looking to boost digital sales through a deal it said valued the U.S. surf and ski sunglasses brand at $90 million.

“The exit of the LVMH luxury licenses makes it necessary for Safilo to initiate an industrial reorganization and restructuring plan, promptly responding to the new production scenario that the company will be facing, by realigning its manufacturing footprint”, Safilo said in a statement.

The company cut its net revenue forecast for next year to 960 million-1 billion euros ($1.1 billion) from an estimate of 1.0-1.2 billion euros in August.

It also reduced its 2020 forecast for adjusted earnings before interest, taxes, depreciation and amortization (EDITDA), to around 6% of sales from 8%-10% previously.

The figures reflect the expected decline of the Dior business in its last year at Safilo, the company said.

The end of the Dior agreement was announced in July and LVMH is expected to turn to a joint venture it has with Safilo’s domestic competitor Marcolin.

Safilo forecast one-off restructuring costs of around 50 million euros over its 2020-24 business plan.

It said it aimed to achieve an adjusted EBITDA margin of 9-11% in 2024 from the 5.5% expected this year and a positive net cash position by the end of the plan.

Reporting by Claudia Cristoferi, Editing by Giulia Segreti and Mark Potter