Kering, the big French group that owns Gucci, Puma and other important luxury goods and sports brands, is planning to put more money into Kering Eyewear, the new company that it is setting up with Roberto Vedovotto, former chief executive of Safilo, to take care of the eyewear collections of a dozen brands in its portfolio.
As we have previously reported (EWI no. 15-15+16 of Sept. 25), Kering plans to gradually terminate the eyewear licensing deals that it has in place for its own brands with other companies including Luxottica, Safilo, Charmant, Marcolin and Gold & Wood. Kering Eyewear will cash in the royalties on these licenses before they expire and manage the development and distribution of the previously licensed eyewear lines and new ones that are not yet licensed, such as Brioni's eyewear. It will also run Electric, a brand of sunglasses that it bought a few years ago through an action sports company, Volcom, that is part of its sport & lifestyle segment.
Reports from a recent meeting of Kering Eyewear's board of directors indicate that the new company will be given all the financial resources required for its activities through a new capital increase that will be entirely supported by Kering. The latter currently holds a 60 percent share in the new company. Vedovotto, who is acting as chief executive of Kering Eyewear, has invested €15,000 to obtain a 35 percent stake in the new company. The balance of 5 percent is held by another manager of the company who comes also from Safilo, Massimo Liset.
As reported, Kering has pledged to pay a cancellation fee of €90 million to Safilo for the termination of its Gucci license. Kering Eyewear is expected to cash in annual royalties of around €50 million at the start, and then generate annual revenues estimated at €350 million in due time, delivering a nice operating margin. In view of the related financing requirements, Kering Eyewear's board has decided to increase Kering's share from 60 to 80 percent, reducing the stakes of the other shareholders. The board has also stipulated that the shares will not be transferable for nearly four years until Oct. 15, 2019.
Observers feel that Kering Eyewear will be able to use the strength of its parent company's presence in markets like China to optimize its revenues, while using a more consistent brand strategy across the entire product range.
Kering Eyewear is scheduled to start up at the beginning of 2015. It will become operational gradually in the course of next year and introduce its products on the market from January 2016, coinciding with the planned expiration of the first licenses. Kering has already indicated that it is prepared to wait until the end of 2016 to break its licensing agreement with Safilo for Gucci, and to subsequently use Safilo as a subcontractor for four years.
Kering Eyewear will have no production facilities of its own. Its head office will be housed in Villa Zaguri, a famous ancient villa in Padua near Venice, close to Safilo's headquarters and to the eyewear manufacturing cluster the Veneto region.