Safilo's Tariff Refund Turns a Soft Quarter into a Margin Story

A Soft Quarter, Managed with Discipline

The second quarter of 2026 was never going to be easy for Safilo Group. Net sales fell 4.5% at constant FX, and the first half closed 1.9% lower. The weakness was broad-based across North America and Europe, with France seeing a declining optical market and Germany's online channel softening. Yet CEO Angelo Trocchia struck a tone of controlled leadership: “In a more demanding market, we stayed firmly focused on the levers under our control.” — Angelo Trocchia, CEO · 2026-08-04 Those levers—price/mix, cost discipline, and a premium brand skew—delivered.

The headline was the tariff refund. After the February Supreme Court ruling, Safilo filed claims for duties paid in the U.S. and received €22.2 million, of which €20 million flowed into the P&L. CFO Michele Melotti: “To be underlined is the strength of our profitability. We delivered further margin expansion, supported by structural improvements we have built into the business and by a onetime benefit from tariff refunds.” — Michele Melotti, CFO · 2026-08-04 That benefit lifted gross margin by 8 points in Q2, driving an 11.5pp expansion. Even stripping it out, underlying gross margin rose 350 basis points on price/mix, lower dilutive business, and favorable sourcing—evidence that the operating model is improving, not just the accounting.

Adjusted EBITDA margin reached 20.5% in Q2 (up 9.4pp) and 16.8% for the half (up 5.2pp). Excluding the refund, the half-year margin still improved 130 basis points to 12.9%, absorbing lower operating leverage and cost inflation. The company’s pricing action taken last year is now fully in the base, but management expects continued, if more modest, gains from mix and tariffs.

Putting the Windfall to Work

What separates Safilo from some peers is how it is redeploying the one-off cash. Roughly one-third of the refund will be invested in infrastructure—specifically IT/digital for Smith's D2C and prescription platform—and in marketing support behind key brands like Carrera and David Beckham. Trocchia explained: “we are planning to invest approximately 1/3 of the tariff refund benefit. One is infrastructure, which is mainly IT and digital... The other part of the investment is media support behind our priority brands.” — Angelo Trocchia, CEO · 2026-08-04 This is a deliberate bet on brand equity and digital capability during a soft patch, rather than feeding the P&L again.

This is also where the acquisition of SPY+ and Serengeti—completed July 1—fits. These iconic brands bolster Safilo’s sport and outdoor ecosystem, complementing Smith and Blenders. The company also took full ownership of Blenders, a brand that has struggled but now has a clearer role in a three-tier sport strategy. As Trocchia noted, “Blenders covering more the lifestyle, SPY+ between Blenders and Smith…” The expanded portfolio positions Safilo to capture growth in technical luxury and performance optics.

Financially, the moves are self-funded. Normalized free cash flow was €46.9 million in H1, covering the €21.5 million for SPY+/Serengeti and the €6.3 million for the Blenders stake, while also supporting share buybacks. Net debt ended June at just €5.4 million—versus €46.1 million at end-2025—a dramatic swing that underscores the strength of the cash-generative model.

Outlook: Better Days Ahead, But Cautious

The second quarter’s softness was concentrated in April and May, with a marked improvement in June and July. Trocchia was clear on the regional divide: “North America should be positive. We see a faster change in the demand, mainly in North America, less in Europe.” — Angelo Trocchia, CEO · 2026-08-04 While Europe remains mixed—France is still suffering, Germany’s independent channel is softer—the South (Italy, Iberia) is showing signs of strength, and the Smith D2C business is gaining momentum.

Management’s confidence, however, is measured. They expect the tariff benefit to wane—further refunds will be “fairly residual,” per Melotti—and H2 gross margin support will come more from underlying drivers. The company’s tariff refund will not be a recurring item, but the operational improvements it enabled—sourcing diversification, premium mix, and digital investments—are durable. For investors, the takeaway is that Safilo is managing the cycle with discipline, turning a one-off into a foundation.

we manage it in the way we believe a quality business should, protecting margin, generating cash and investing selectively for the long term.