PADOVA, Italy—Sàfilo Group S.p.A.( SFLG.MI) reported that sales and net income for the first six months of 2008 “have suffered from the marked weakness of the U.S. dollar” and the company reported that its net sales fell 4.6 percent in the first half of 2008 to €637 million compared to €667.8 million in the first half of the prior year. At constant exchange rates, net sales in the first half registered a 1.3 percent growth.

Net profit for the Group was €21.1 million compared to the €33.3 million for the first six months of 2007, a decline of 36.7 percent.

In a conference call with finanicial analysts, Massimiliano Tabacchi, vice chairman and CEO of Sàfilo said, “Of course things can always be better. I am extremely committed to making sure the whole organization is committed to improving our business, especially through improved product development and engineering, which is an extremely important project for us, and by refocusing on countries which are more performing than the European market, like Mexico and Australia.”

He also said, in reply to a question on the call, “We are working together with the Gucci Group on the license renewal, which is very important to us. All the major points have been checked and the negotiations are going pretty good. We expect to close it as soon as possible and find the best solution for both companies.”

For the second quarter, Sàfilo recorded revenues of €311 million Euro, a decrease of 4.7 percent compared to the same period of 2007. At constant exchange rates, growth in the second quarter was equal to 1.8 percent.

In the geographical breakdown, for the first six months of the year, sales in America fell 0.5 percent at current exchange rates or an increase, at constant exchange rates, of 12.6 percent. The company cited the contribution of the Mexican Sunglass Island stores, acquired at the beginning of 2008, and to the satisfactory results achieved in the U.S. by the collections of prescription frames sold in independent opticians’stores.

Asia, in the first six months, registered an increase of 5.7 percent at current exchange rates or 15.3 percent at constant exchange rates, the company said, noting good sales performance in all the main countries of the area (with the exception of Japan) and in particular in China and Korea. During the second quarter of 2008 two directly operated stores, dedicated principally to the sale of prescription frames, were opened in Asia.

The company said sales in the European market, in the first six months of the year, experienced an overall fall of 5 percent, due also to the particularly difficult comparison with the first six months of 2007 which saw strong growth particularly in Europe.

The company directly operated 283 retail stores by the end of June 2008, compared to 163 in the prior year period. Sàfilo said the growth of the retail channel in the first six months of 2008 was 47.6 percent at current exchange rates, or 61.3 percent at constant exchange rates, all of the growth attributed to the two acquisitions concluded at the beginning of the year in Australia and Mexico.

In the U.S., the sunglass chain Solstice achieved an improvement in sales of 17.7 percent at constant exchange rates, the company said.

In Spain, the Loop Vision chain suffered from the slowdown of the country, and registered a fall in sales of around 8 percent, due also to the closure of two stores during the period.

Sàfilo’s overall wholesale business registered a fall of 2.1 percent at constant exchange rates in the first six months of the year (7.6 percent at current exchange rates), caused above all by the evident weakness of the European markets and the general tendency to purchase prescription frames and sunglasses with more competitive price points, the company’s statement said.

“The first half of the year was characterized by strong volatility in consumer patterns, above all in Europe, our reference market.” stated Tabacchi. “In the American market, we continue instead to achieve significant results as well as we maintain good growth rates in the Far East, where we have also opened the first two directly operated stores. We are continuing with the development of our retail business, and are paying greater attention to those markets today. We believe that the European market will continue to remain weak even in the upcoming months and we are therefore looking to the second part of the year with greater caution.”

The company amended its year-end guidance, anticipating revenue growth for the current fiscal year, at constant exchange rates, at around 4 percent compared to the previous forecast of an increase of 7 percent to 8 percent. The company also said that on the basis of actions being taken at the gross margin level and cost containment policies expected in the second half of the year, EBITDA for the full year is now estimated at around 13.5 percent to 14 percent of revenues (compared to the previous estimate of around 15 percent), while net profit should reach 3 percent to 3.5 percent compared to prior estimates of 4.5 percent to 5 percent.