Following its successful stock market introduction, which was subscribed by more than 100 institutional investors, Europe's largest retail franchisor in the optical sector has resumed negotiations for the acquisition of an unnamed German retail chain that it would use to build up a similar network of franchised stores in that country. On the other hand, Alain Affelou has stopped working with a Portuguese franchisees who had used the French banner on 3 stores.
Having given up completely on its earlier plans to take over the French Lissac chain, Alain Affelou has also persuaded a dozen affiliated retailers all over France to acquire new sites in order to launch a mysterious new retail format, positioned in a different segment of the market, at the beginning of 2003.
Alain Afflelou scored relatively well in fiscal year ended last Apr. 30, keeping the group's net profit margin at the honorable level of 16 percent of revenues, with a net result of e14.6 million as compared to e12.9 million in the previous year. The group's consolidated revenues grew by 15 percent to e91.4 million, and they included e12.7 million worth of franchising fees, e28.9 million in communication fees, e6.8 million in commissions on negotiated group discounts, e20.6 million in sales of private label products and e23.9 million for retail sales at company-owned stores. The latter grew by 40 percent as their number rose from 21 to 27 in the course of the financial year, but there will not be many additions in the future.
On a comparable basis, excluding new franchised or wholly-owned stores, franchising fees and commissions were up 5.5 percent, and company-owned stores' sales were up 22 percent. The number of franchised stores grew by 2.5 percent to 288 doors, and their revenues grew by 8.4 percent to e353.7 million, with same-store increases of 6.7 percent in the 4th quarter and 9 percent for the whole year. As a franchisor, Afflelou improved its gross margin by 12 percent to a level of e32.9 million, representing 8.75 percent of the franchisees' retail sales.
Operating income remained stable at e22.2 million as a 4 percent gain in the franchising segment was offset by extraordinary costs related to the IPO and a previous management buyout, as well as by increased losses for the group's own pilot shops, which grew in number from 21 to 27 in the past fiscal year.
While they are partly due to high lease costs and to special investments on innovative fixtures and systems, Affelou's test stores are expected to become profitable within the next 3 years. Recently implemented, the most innovative new process is an automatic daily replenishment system for frames, called ?facing fix,? that reduces inventories dramatically throughout the supply chain, while ensuring full availability of the best-selling models. It's being tested out with the support of Safilo, De Rigo and other major suppliers, and the initial results are very encouraging. The Affelou flagship store in Paris' Forum des Halles shopping center is being expanded, and together with a new store in the suburban Créteil Soleil shopping mall, it will pioneer a new shop fit that will be subsequently rolled out throughout the chain.
The group's communication budget has been raised from 6.86 to 7 percent of sales, and it may include the launch in October of a special campaign to persuade the French to buy more contact lenses at Alain Affelou stores. Richard Virenque, the French bike champion, will endorse a new small collection of multi-purpose private label sports eyewear, developed with the help of an Italian designer who works also for Safilo.