Italian eyewear giant Safilo has withdrawn the guidance it issued just a few months ago and said that first-quarter sales were down in double-digits due to the accelerating coronavirus pandemic.
But it also said this week that its supply chain hasn't been significantly impacted by the COVID-19 pandemic so far. It had sufficient stock levels by the end of last year that gave it the flexibility to deal with the temporary shutdown of its Chinese plant.
And since then, the plant in Suzhou has reopened and is working at almost full capacity, while most of its key Chinese suppliers are also back to normal activity levels.
The company makes eyewear for some of the biggest fashion names, including Jimmy Choo, Levi's, Missoni, Max Mara, and Kate Spade.
But it has faced challenges on the demand side recently, despite strength earlier in the year. In the first two months of 2020, it saw a mid-single-digit increase in net sales, but it expects this deteriorated by the end of the first quarter, based on the preliminary data and information it has collected. And this should result in a constant currency sales decline of between 11% and 13% for the quarter as a whole.
“These extraordinary circumstances are having direct and indirect repercussions on Safilo’s economic activity, resulting in negative effects for the group’s sales and earnings performance which are today impossible to predict for the full year,” it said. As a consequence, the 2020 outlook it provided in December “is no longer valid”.
Like other companies, management added that it “has designed a mitigating action plan”. This is focused on minimizing discretionary expenditures and Capex, “adjusting marketing plans to the new consumption scenario and implementing an effective working capital and cash protection management”.