Safilo Q3 core earnings fall 10.5 percent

MILAN, Italy - Italian eyewear maker Safilo posted a 10.5 percent drop in third-quarter core earnings on Thursday as investments offset higher sales, and said it needed a strong last quarter to be able to match last year's profitability at the operating level.

Safilo is under pressure following French luxury group Kering's recent decision to create an in-house eyewear division. That move will lead to the early end in 2016 to the licensing accord between Safilo and Kering over the French group's Gucci brand.

Before the latest blow, Safilo had been working to recover from the loss at the end of 2012 of the key Armani licence to bigger rival Luxottica.

Under Chief Executive Luisa Delgado, who took charge about a year ago, Safilo is investing in marketing in a bid to boost its own brands, such as Polaroid and Carrera.

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A current overhaul of its commercial strategy is also requiring investments in distribution.

The changes in distribution have contributed to a build-up in inventories, Delgado told analysts during a call. She said the speed of the de-stocking process would play a role in determining by how much "underlying operating profitability" in the fourth quarter would beat the previous year's figure.

As for the full year, "to stay in line with last year's profitability (at the operating level)... would require a very strong last quarter and we're fully focused on getting as close as we can."

Last year Safilo reported adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) equal to 10.9 percent of total sales.

Third-quarter 2014 EBITDA totalled 14.6 million euros ($18 million), down from 16.3 million euros a year earlier.

Net sales rose 7.3 percent over the same period to 261.2 million euros.

Much lower financial charges helped drive net profit up 38 percent to 2.4 million euros in the three months to September.

1 US dollar = 0.8053 euro