Kering's eyewear integration pays off

By

Dominique Muret

Translated by
Nicola Mira

Published
Feb 15, 2017

The Kering group's directors were more than satisfied last Friday, when the luxury group's annual results were published. Not simply because the group's revenue last year reached the record level of €12.38 billion, but also thanks to the highly promising performance of Kering Eyewear, the company created in 2014 to manage internally the profitable eyewear segment, formerly under licence.

Recent developments in the eyewear industry, which is heading towards greater concentration, appear to vindicate Kering's pioneering initiative. In early February, Kering's competitor LVMH has in fact followed suit, announcing its intention of establishing a joint-venture with Italian eyewear manufacturer Marcolin for the Céline and Louis Vuitton labels from 2018. Earlier in the year, eyewear industry giant Luxottica merged with Essilor, Europe's leading lenses manufacturer, in a deal reportedly worth €4 billion.

"As recent developments show, our strategic decision of creating Kering Eyewear was sound, enthused the group's CFO Jean-Marc Duplaix. The internal management model gives us control over the entire value chain. In a short period of time, we have activated the commercial development of 12 brands and launched 5 collections featuring 8,500 items, including Gucci's highly successful collection."

Kering Eyewear is led by Roberto Vedovotto, former boss of eyewear manufacturer Safilo and owner of a 30% stake in the new company, which is based in Padova, Italy. Kering Eyewear has taken over the collections formerly managed under licence by Safilo, including Gucci's, worth nearly €350 million in revenue, as well as Saint Laurent, Bottega Veneta, Alexander McQueen and McQ, plus Puma, Boucheron, Brioni, Christopher Kane, Pomellato, Stella McCartney and Tomas Maier.

Manufacturing is in the hands of 20 contractor partners, the majority based in Italy and some in Japan. Logistics are managed via three regional hubs, since the collections' distribution extends across 85 countries, and 20 brands are distributed directly.

The investment for the creation of Kering Eyewear, including indemnities to Safilo for the termination of the licensing contract, have had a negative impact on Kering's 2016 financial results in the region of €90 million, part of the group's €506 million of net operating expenses.

"The costs are in line with our forecasts. Kering Eyewear's net economic result will be highly beneficial for the group. We are forecasting a positive EBITDA from 2017, which is actually the company’s first full year in business," said Jean-Marc Duplaix, underlining "the tangible competitive benefits" issuing from this strategy, which is both "more synergistic and efficient."

"The range is richer and more market-focused. Thanks to the close-knit collaboration between the design and merchandising areas, and an improved coordination with the fashion show calendars, in 2016 Kering Eyewear's results have exceeded our expectations. Sales for Bottega Veneta eyeglasses trebled, and those for Stella McCartney and Saint Laurent doubled," he concluded.