Good evening, welcome to the Safilo Group first quarter 2026 trading update conference call. This call may contain forward-looking statements relating to future events and operating economic and financial results for the Safilo Group. Such forecasts, due to their nature, imply a component of risk and uncertainty due to the fact that they depend on the occurrence of certain future events and developments. The actual results may therefore vary, even significantly, to those announced in relation to a multitude of factors. Today's participants are Angelo Trocchia, Chief Executive Officer, Michele Melotti, Chief Financial Officer, Barbara Ferrante, Director of Investor Relations. I will now pass the call over to Mr. Angelo Trocchia, Chief Executive Officer. Mr. Trocchia, you may begin.
Thanks. Thanks very much. Good evening. Good evening, everyone, and thank you for joining us for the Safilo's Q1 2026 trading update. The first quarter of 2026 marked a solid start of the year, once again highlighting the resilience of our business model, which rests on two pillars, a strong and relevant brand portfolio and a consistent commercial execution across markets and channels. Importantly, Q1 delivered another meaningful step forward on margins and cash generation. This is the outcome of the structural work we've been carrying out over the past few years across operations, sourcing and cost discipline. As we move through 2026, our priorities remain unchanged. Disciplined execution in a challenging business environment, profitability and cash generation, combined with selective investments that can support long-term value creation. Let me briefly highlight a few key messages from the quarter. First, on sales.
Net revenue were broadly in line with the Q4 exit rate, growing 0%+ or 0.4% at constant exchange rate. What matters here is the continuity in the business trends across geographies, in particular in two of our key regions. Second, from a brand perspective, Kate Spade, Smith, BOSS, David Beckham and Carrera deliver strong performances across channels and key markets, once again confirming the breadth and balance of our portfolio. Third, profitability and cash. We continue to make quite a significant progress with gross margin reaching 62% of revenue and Adjusted EBITDA margin at 13.6%. Operating improvement then translated into solid cash generation with free cash flow of EUR 17.5 million before the investment in Inspecs, and a positive net financial position pre IFRS 16.
Let me now hand over to Michele, who will talk you through the results in more detail.
Thank you, Angelo. Good evening, everyone. Let me start from total revenues. In the first quarter, group net sales amounted to EUR 272.9 million, up 0.4% at cost and exchange rate. Like in the fourth quarter, reported sales were impacted by a 5% currency headwind, so they were down 4.5% at current exchange rate, driven mainly by the weaker U.S. dollar. From a geographical perspective, the picture is clear. We saw positive momentum continuing in North America and across core European markets, while Asia and the Middle East represented the main headwind to overall growth. By product category, our performance was once again led by prescription frames, which remain the most resilient part of the portfolio and also sport products. Turning to Europe, sales in the region were up 1.4% at cost of exchange rates.
Performance was solid across key markets with France, Italy and Germany delivering positive trends, both with independent opticians and key accounts. We also continue to strengthen our footprint in Eastern Europe, where the expansion of key brand distribution continues to support growth. A positive highlight is the launch of the new Victoria Beckham eyewear collection, which is seeing a very promising reception from customers and consumers. In the quarter, this largely offset the impact of the Lenti consolidation, which will no longer be a headwind from the third quarter. In retail chains and e-tail pure players, BOSS, David Beckham, Carrera and Isabel Marant were our key outperformers during the quarter. Moving to North America, sales grew 2.3% at constant exchange rate. At current exchange rate, revenue declined by 7.7%, reflecting an approximately 11% depreciation of the average U.S. dollar versus the euro.
Beyond the facts, the underlying picture was positive. Sales momentum was driven by higher productivity at independent opticians and by new brand launches in retail chains. Several brands delivered strong performance, in particular Kate Spade, Carrera, Tommy Hilfiger, BOSS, Marc Jacobs and David Beckham. In sports shops, we deliver another solid quarter, driven in particular by goggles and promising start for summer helmet. While Blenders improved, supported by the expansion in the wholesale channel and some initial recovery recorded in the direct-to-consumer channel. Turning to Asia and rest of world, which together represent around 12% of our total business, sales at cost of exchange rate were down by 13.6% and 6.3% respectively. In Asia, the quarter was affected by a challenging comparison base as revenues were up by around 19% in the same period last year.
More broadly, we observe more prudent demand patterns across both distributor and trios. In China, trading in January and February was influenced by the timing of Chinese New Year, with some improved trading in March, supported by the Shanghai Optical Fair. In the rest of the world, performance was mainly impacted by the weak trend in the Middle East, following the escalation of geopolitical tension which weighed on commercial activities from March onwards. This impact was partially offset by continued growth in Mexico, where key licensed brands such as Carolina Herrera, Tommy Hilfiger, and BOSS sustained demand across our main distribution channels. Moving down the P&L, let me start as usual with gross margin, which grew to 62% of sales, up 150 basis points year-over-year. The improvement reflected several factors working together.
First, the continued mitigation of tariffs through the pricing action introduced last year and source rebalancing. Second, we benefited from a sustained positive price mix effect driven by a reduced share of gross margin diluted activities, namely Lenti and the product supply business. Finally, we continue to see a positive FX effect at the gross margin level linked to our dollar-denominated sourcing base. This accounted for around 50% of the total gross margin improvement. At the operating level, Adjusted EBITDA reached EUR 37.1 million, up 7.9%, with the margin expanding to 13.6%, which is an improvement of 160 basis points versus the first quarter of last year. This confirms our ability to consistently convert gross margin improvement into stronger operating profitability.
During the quarter, we maintain effective cost discipline with marketing investment and other operating costs kept broadly in line with last year. Foreign exchange had a more limited impact at the EBITDA level, meaning that the margin expansion was driven primarily by the underlying performance of the business. On our financial performance. Free cash flow stood at EUR 12.6 million compared to EUR 14.4 million last year. This reflected our solid operating performance in the quarter, a normal seasonal absorption from working capital, and the purchase of additional share in Inspecs for around EUR 5 million. As you know, this brought our stake in the group from 25% to 29.9%. Before this investment, our free cash flow amounted to EUR 17.5 million.
Our net debt at the end of March stood at EUR 30.1 million, down from EUR 46.1 million at year-end, with a positive net financial position of EUR 6.6 million pre IFRS 16, which compared to a net debt of EUR 6.6 million pre IFRS 16 at the end of last year. With that, I'll hand back to Angelo for his closing remarks.
Thanks, Michele. Before we open the call to the Q&A, let me briefly touch on one strategic development announced a couple of weeks ago. We signed an exclusivity agreement with Bollé Brands aimed at the acquisition of SPY+ and Serengeti. This is fully consistent with our approach of selectively strengthening our portfolio, focusing on brands with a strong complementary with our existing portfolio or filling an attractive gap. Both brands meet these criteria and can offer us top and bottom line synergies while remaining fully aligned with our disciplined approach to capital allocation. SPY+ reinforces our sport and outdoor ecosystem, sitting between Smith's premium technical leadership and Blenders' mass cool position. Serengeti represents a distinctive opportunity in the premium and high-end eyewear segment, supported by a strong reputation for the best-in-class high-performance lenses. Thanks for your attention. We are now happy to take your questions.
Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. We will pause for a moment as participants are joining the queue. First question is from Oriana Cardani, Intesa Sanpaolo.
Yes, good evening. Thank you for taking my questions. The first one is about the outlook for the U.S. sports segment. What is your feeling for the bike season? This second question is on current trade. If you can give us an update on April and start of May performance. The third question is on the acquisition of SPY+ and Serengeti. If you can provide some information on the impact of this acquisition on your gross margin and EBIT margin. Thank you.
Okay. I'm assuming I should answer to all three questions. Great pleasure for that. I mean, first question on sport and bike. Let's start from the snow. The season on snow this year has been a little bit strange and patchy. As you know, we had quite a huge amount of snow where normally there's no snow, where it was missing a bit in the center, in the central U.S. Let me say if I look to the snow, it's been a little bit patchy. Also in this situation, Smith has been able to remain positive. On the bike, we see a clear rebound. You know that we have gone through two years difficult in bike.
Definitely, from the last bit of the last year and in Q1, we see an important rebound of the bike business and we are waiving this rebound. Overall, I would say that the sport remains what we think a growing territory with different dynamic according to the different category. Definitely we judge like a part of the market which will keep being in a positive territory, and our aim is to catch that growth. On current trading, I will reconnect with what we've been saying when we talk early March.
January and February, let me say, was broadly in line, if I look overall, broadly in line with the Q4 exit pace, with both North America and Europe showing quite an important resilience. Obviously, as the end of March and, and April, both in U.S., maybe more notably in U.S., a little bit less in Europe, we see more a change at customer level more than at consumer level. What I mean by that, the customer are showing a little bit more cautious approach. Obviously, it's not helping their behavior or what they are hearing around. We personally think that for the moment it's more, as I said, the customer perspective more than a consumer.
I mean, there are a lot of research on the consumer confidence, but still, I think, for example, the D2C on Smith keeps going well. I think it's more a cautious from a customer perspective more than a consumer, otherwise we should have a negative effect on the D2C. D2C Smith, we see obviously that snow has been impacting negative for the reason I've been expressing before, but the other categories have been performing well. April, honestly, I will not comment on the month per se. I mean, now the game is going to be played in May, June, where obviously what is going to be crucial is, you know, if the situation, the macroeconomic or the political situation will stabilize.
I think we need really to wait what's going to happen in the next days. The good thing of, and this is more true for North America more than in Europe, is that in that case, both the customer and the consumer are a little bit nervous in overreacting, but thanks to God, are very fast in positive reacting. You know, if the change of the situation will happen shortly, I think that we can have, we can see some positive effect in May and June. You were asking on the M&A. I will not comment on the numbers. I think I leave to Michele. I will just stress the strategic fit.
We've been always declaring that our strategic direction were optical, were sport, were female. This acquisition is perfectly fitting with the strategic direction. SPY+ obviously is going to play together with Smith and Blenders and reinforce in the Safilo position in the sport outdoor arena with different position, different brand equity. By sure, we are going to play a portfolio strategy there where Serengeti is going to play in the top end and going to play around high quality lenses and high quality product.
Yeah. In terms of number, of course, we don't want to comment too in detail. It's still a bit premature. Overall, given also how the two brands play in the different channel and categories, SPY+, a bit more outdoor and sport than Serengeti. On the optical side, we expect the acquisition to be slightly dilutive at gross margin level, while fully compatible with our underlying EBITDA at EBITDA level. Of course, in the medium realm, thanks to the potential synergy of the two brand plug in our infrastructure, the acquisition will become of course accretive also at bottom line level.
Understood. Thank you very much. Next question is from Domenico Ghilotti, Equita.
Good afternoon. Can you hear me?
Yes. Yes.
Okay. Okay, good. I have a few questions. First, let's start from the D2C. You were mentioning some signs of improvement. You have been referring also to Smith. I wonder if you can comment also on what's going on on Blenders. Question on Inspecs in the sense that I'm trying to understand what is your strategy on the stake that you have. On Polaroid, you did not mention the brand as a contributor to growth. Some color on your view on the performance and the opportunity that you see. Lastly, at this stage, probably also if you can elaborate on the synergies that you see from the acquisition of SPY+ and Serengeti.
Both, you mentioned both top line and cost synergies, so if you can give some color on the opportunity.
I can give you something.
Okay. I will try to start, and then eventually I will ask Michele to comment or add some more info. Let's start from the D2C. I mean, as I said, net of the snow, the D2C of business keeps being positive and we, to be honest, we see on bike and on eyewear that the trend there keeps being positive. The arena, this is for Smith. Blenders, we are not yet there. We are improving compared to last year, compared to the previous year. The dynamic of Blenders and Smith are completely different, and I try to build on.
Smith plays performance, plays sport, plays high pricing, and, you know, thanks to the strength of the brand, we've been not moving there in terms of pricing or discounts. And I think the numbers are there telling that we are in the right direction. On Blenders, we took a tough decision. We took the decision more than a year ago to don't follow the price war there. We've been stick to what we think is the right position from Blenders. Means that in the short run, we've been suffering. We are still suffering, but there are clear signs that, you know, we see that our strategy is the right, we will not move out of the strategy of Blenders.
On Blenders, we have done quite an important change in decision last year, which is let's look to Blenders not anymore only like a D2C brand, but really a brand which fight or plays in different channels. Online will remain the core, the heart of the Blenders. One year and a half ago, we've been, thanks to the combination with Smith, launching Blenders in wholesale, and honestly, the rotation of the Blenders product in wholesale are really good, and the business in wholesale is growing. We have a small combination with few shops which are more have a role of brand building. Blenders is not yet out, but more we will move through 2026 and for the year to come.
Blenders has not to be seen anymore like a brand which plays only D2C. It's going to be a combination. We will stick to the decision that we took last year, which means suffering, keep suffering a little bit on the D2C, but we see a trend there between the combination of the three channel I was mentioning before. I was not mentioning Polaroid because Polaroid is a little bit too early. You know, Polaroid remains still a brand which is mainly sun. You know, the game on the sun has to start. You know, we are now in May, so I mean, to talk about sun in Q1 is a little bit too early.
Polaroid, you know that we have done this agreement with ATL, which I think is working very well. We had the Madrid tournament, which has been great success there in terms of activation, in terms of consumer reach, in terms of having a brand which is getting out from the crowd. Next week, we will have the tournament in Rome, which I think is going to be another great occasion. I think Polaroid is moving there. I think the tennis, we were right in choosing the tennis. I mean, especially now if Sinner is going to win also Rome, I think they are expecting a huge reach there. We are working with Cobolli, which has a different position.
I think Polaroid is getting there, but we need to wait the sun season because at the end, Polaroid remains still a mainly sun brand. On the M&A, I think it's, I will leave to Michele on the cost. I think for me, let's start from why, which is I think is more important than anything else. We are looking for brands that have a strategic role to be played in the Safilo portfolio. Serengeti will allow Safilo to play in the high end of the market, will play with high quality lenses, will allow us to catch a part of the market that we were not able to cover with the current brand portfolio.
Serengeti is really reinforcing, is a sun brand. We will not necessarily stay only as a sun brand, but is a brand which has a story of lenses and is really filling a strategic gap into the Safilo portfolio. SPY+ is a different story. SPY+ is perfectly fitting with Smith and Blenders, so is going to reinforce how we will go to the big American chain or how we can play different geography because now we have three brands with three different execution, three different position. We can really play a portfolio, even a stronger portfolio game into the sport channel. On the cost, I will-
You know, synergies overall, I believe two source of synergies. Top line synergies, cost synergy. Equally important, I believe top line synergies will come by two key factor. On one side, leveraging the Safilo distribution, both on the sport outdoor channel and on the optical market, so leveraging our current commercial infrastructure. While at least secondly on B2C, leveraging our capabilities on especially in the States and our also investment capacity when it comes to the online market. When it comes to costs, of course, cost synergies leveraging our scale and G&A saving, again, trying to integrate where possible, everything that is not specific to those two brands, so everything that relates to back office and infrastructure.
Sorry, not all. Just to add, not only back office infrastructure is B2C, is marketing, is media, because as I said, we will run a sport portfolio and obviously, we will have common resources running the B2C, common knowledge, common contract with the provider, the savings in terms of resources or marketing, content creation. There's going to be really run like a full portfolio into sport. I think there was a question on Inspecs. I think for me, our position in Inspecs is we think there is a strategic fit. We think that there are some assets into the Inspecs which can really add value to us. We are not in a rush.
We will sit, we will discuss with the consortium at the right time. I mean, we are not on the rush. I think the strategic fit is there. It's very clear why we think that we can add value, but there is no rush. At the right time, we will sit with the consortium, and I'm sure that we will find the best way forward.
Just also to add, the offer period will end, mid-May.
Okay. If I may, maybe just another question is, it's not clear to me what's going on on the tariff side because sometimes we hear that you can ask for a refund, so that you are mentioning that you are mitigating the tariff, so they are still ongoing. It's a situation that I don't understand anymore.
I mean, let's start from Q1. I mean, from Q1, I believe the picture is not very much different versus the exit of last year. Again, last year tariffs were not yet there. I mean, the big increase came during the liberation day in April. In Q1, we still have a pretty important headwind on tariffs. Again, as we commented, fully counterbalanced by the mitigation that we put in place from mid-June last year. Moving forward, I mean, what we hear from the Supreme Court decision is a clear opportunity for us. There is a reduction that is material. It's 10% duty reduction from both China and the other country.
This should translate in a clear tailwind for us from Q2 from 2Q onwards. On the refund, it's not yet fully clear. I mean, we are of course, following tight all options. Of course, if refund coming, it would be a one-off benefit for us, clearly.
Okay, thanks.
Next question is from Andrea Bonfà, Banca Akros.
Hello. Good afternoon. Can you hear me?
Yes.
Yes.
Yes. Hi, good evening. No, most of my question have been answered. I was wondering if you can elaborate on the performance of Asia Pacific and in particular of the approximately 14% decline at constant Forex. How much was the impact on March on the key Gulf countries impacted by the war? The second one, if you can give us some more details on the non-recurring items which affected EBITDA. Thank you.
Just, I think, I mean, when you talk about Asia, you mean also Middle East, right? I'm assuming so.
Yeah.
Which is in our definition is in the rest of the world.
Okay.
Middle East, it's to be honest, the situation is what you read. I mean, if you go to Dubai, assuming that you're able to fly there are not so many people around. I think, obviously Middle East, I mean, thanks to God, for us, the weight is only 2%, as we've been saying previous call. In this moment, talking with all the big chain and the deals there, the fundamental there is no traffic. I mean, some of our key customer had a drop of 80% of the traffic in the shop. Middle East, the only thing is to say when this story is going to end or when the situation can allow people to fly, to fly over, to fly over there.
If we refer to Asia, different performance by country. Overall, let's be clear, we see a soft trading environment. Truth is also that if we compare to last year, more we move along the year, more we should have an easy comparison. Transparently, we see a market. Mainly, it's very interesting because if we look to Australia is going well. Carrera is going well. We launch Stuart Weitzman. I mean, honestly, we don't see any problem in Australia. The area which is depressing the overall Asia numbers are China per se, where we see really in that case, I think is the consumer a little bit really reluctant, and is other distributors.
I would say Australia, well done. No, really no problem. Where we see struggling now is the distributor, but it's more because they are very cautious. It's not, you know, we share with them sellout data. It's not an issue of sellout data. It's more an issue that with all this uncertainty, you know, they try to be very conservative on the buying side.
On the non-recurring, we posted in Q1, EUR 2.9 million, roughly 50/50 between restructuring project in North America to drive efficiency and cost to support the M&A projects.
Thank you very much.
Next question is from Cédric Rossi, Stifel.
Yes, good evening, everyone. I have three questions, please. The first one, again, a follow-up on the acquisitions and regarding more specifically the supply chain. Could you just elaborate a little bit more on how SPY+ and Serengeti will fit within your supply chain footprint in term of production location and so on? The second question is regarding no direct impact from the Middle East conflict, but could you also confirm that you are not witnessing any negative pressure coming from freight cost or raw material cost on that side?
The third question is that, since the marketing spend was relatively stable in Q1, you are guiding to a slight decrease over the year. Can we assume that probably the reduction will occur in the second half of the year since you would probably not change the marketing budget ahead of the sun peak season? Thank you.
Okay. I would start from the acquisition, the two brands. As I said, I think Michele was I think your question is specifically on the supply chain. I mean, like, obviously the two brands are quite different. If you start from SPY+, SPY+ is eyewear and is snow. Obviously there, the synergies on the supply chain is 100%. You know, obviously, you know, there are not so many supply on snow. We are talking about four or five main supplier globally, which obviously happen to be the same than Smith. On SPY+, I would say that there is a 100% overlap, means that we will plug in into the Safilo supply chain, which is almost the same. On SPY+, SPY+ is more eyewear.
In that case, there are two components. One is selling it, sorry. One is the frame, the other are the lenses. Also there, the frames, I mean, we buy quite some frames, so obviously it will get immediately into the Safilo supply chain, plugging in any kind of saving or an advantage. On lenses is where more we need to understand strategically because lenses is complex. Is a glass lens, is mineral lenses, is plastic lenses. Also there, to be honest, I see a plug-in in our sourcing. The day after the closing, all the sourcing for the two brands will completely put into the Safilo organization.
On the second question, inflationary pressure, we are not yet seeing anything material. Q1 has been pretty stable. Of course, the only relevant area for us are the logistic costs that you were mentioning. This will highly depend on how long, of course, oil price will continue to stay at the level it is today. For us, logistic costs represent roughly 5% on sales of the total cost base. All in all, it can become again, if the situation persists as it is, an headwind from Q2 onward, but it will not be a material impact for us.
On the marketing, I think the good thing of how we run the business, we are quite flexible. There is no intention, and by the way, we are not going to slow down on some of the core brands, especially Carrera, Polaroid, David Beckham, BOSS, and Tommy. The only thing we've been doing, considering the situation in the Middle East, obviously, we have been prudent in what to spend there, but we are ready to push the bottom as soon as the situation will improve.
On the other side, what we've been doing always in a very careful way, we are reshuffling some investment on the market and on the brand where we see that there is a grip like Carrera North America or BOSS, in France or David Beckham and Carrera, and Carrera in Italy. I mean, we are very, very flexible. The only decision we have taken so far always is low down in the investment in the Middle East because there is no consumer, no customer there. It was no making sense to spend money. We are ready already with the plan. As soon as the situation will improve, we will start replugging in.
Okay. Very clear. Thank you.
Next question is from Harrison Woodin-Lygo , Berenberg.
Hi there. Good evening. Three questions, if I may. I'm just wondering, are there any I understand it's a small share of your sales, but it's more the signal. Are there any signs of acceleration in demand or sell-through for the Carrera Smart Glasses with Alexa? Did the Winter Olympics provide any noticeable benefit to trading in Q1, especially because it was on your home turf? Finally, a follow-up on the SPY+ supply chain. Will Smith Utah manufacturing facility also be used for production? As in, are you going to bring things in-house following the acquisition? That's it. Thanks.
Okay. Just I will start from the comment on the winter. We saw some positive effect for the European bit. By the way, I think with Smith, also sponsoring few outlets, we won quite some set of medals. The effect we saw was on the Smith Snow Europe, but honestly, it's not dramatically there. I haven't catched so well the question on the smart glasses. Can you just repeat that?
Yeah, yeah. It's just, I'm trying to understand if there's been any acceleration in demand for the Alexa smart glasses?
I think first of all, let's say like this, there's been an important step, you know, with Alexa+ . Alexa+ is being rolled out in the full U.S., you know, they are starting rolling in Europe, which gives a even more solid base. I think, as I said before, we are working. I think that, you know, we are getting slowly closer to the right time. Yeah, we are fully on it. Yeah, time is coming more than in the past. On SPY+, when it comes to goggle, of course there is the opportunity to evaluate potential in-sourcing in our Clearfield plant.
This will highly depend on the technological element of every single product. We'll check exactly what can be in-source, what not. Overall, the price point of SPY+ probably will indicate a mix between Asia and U.S. sourcing overall moving forward.
That's clear. Thank you.
Next question is from Domenico Ghilotti, Equita.
My last two question, first, is on the price versus volumes contribution, in Q1 top line. Just a clarification. When you say that you had a stable cost compared to last year, are you referring to so in absolute value or as a percentage of sales? Is a matter of stability absolute or-
Yeah.
Yeah.
In terms of volumes, I mean, volumes were down low single digits in the quarter. More or less the same in Europe and North America. When it come to cost, the comment was mostly related to incidental sales. As you see, as you can see, I mean, the gross margin and EBITDA progress versus year ago is more or less the same.
Okay. Thank you. Yes.
Next question is from Niccolò Storer, Kepler Cheuvreux.
Hi. Good afternoon. Thanks for taking mine. It's a very quick one. Can you maybe help us understanding again on the 160 basis points EBITDA improvement, which was the FX impact? If I understand well, you said before that was much less than that at the gross margin level, but can you maybe quantify?
Yeah, that's what I mean. On gross margin is roughly 70 basis points Forex tailwind, while it's roughly 30 basis points at the EBITDA level. Yeah.
The remaining is operating leverage, basically?
Indeed. Yes. At constant Forex, yes, slightly positive. Rest is fully coming, of course, from the gross margin.
Thanks.
Yeah.
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Okay. Thanks very much. Thank you. Enjoy the rest of the evening. Thanks very much. Bye-bye. Thanks. Bye.
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