De Rigo's good relations with LVMH have been reinforced by the finalization of an agreement to manufacture and distribute a new collection of eyewear and sunglasses that will come out in 2002 under the name of Marc Jacobs, the American designer of Louis Vuitton, who also has a fashionable apparel line under his own brand name. Unconfirmed reports indicate that De Rigo is also making now frames under the Louis Vuitton name for exclusive sale in Louis Vuitton stores.
Meanwhile, the Italian eyewear company reports a 95.7 percent increase in its net income to 13.7 million euros, or 5.1 percent of sales, for the 6 months ended last June 30, as compared to e7 million or 2.9 percent of sales in the same period a year ago. Excluding the effect of a year-end adjustment in goodwill, net income was up 74 percent to e16.8 million, or 6.2 percent of sales.
As previously reported in greater detail (EyeWear Intelligence of Sept. 3), De Rigo's revenues rose by 13.4 percent to e269.5 million in the 1st half of this year, with particularly strong growth in the group's wholesale & manufacturing operations and in the Eyewear International Distribution joint venture with Prada. The establishment of new distribution subsidiaries in Japan, Hong Kong and Singapore, as well as the full consolidation of the General Optica chain in Spain played a role as well.
In fact, De Rigo began to reap the benefits of greater economies of scale. The gross margin improved from 62.3 to 63.1 percent of sales. Operating expenses rose by only 10.4 percent to 54.7 percent of sales, thanks in part to improved results at Dollond & Aitchison, the reorganization of certain manufacturing operations and a higher proportion of premium-priced eyewear in the total product mix. Advertising and promotion expenses remained stable in absolute terms, but they declined as a percentage of sales from 7.3 to 6.5 percent. Selling expenses rose by 12.8 percent, partly because of the new foreign subsidiaries and because of the start-up of 8 new GO stores, but general and administrative expenses increased by only 7.7 percent.
As a result, group operating income rose by 55.9 percent to e22.6 million, or 8.4 percent of sales, with the biggest improvement in the wholesale segment. In the retail sector, De Rigo's EBIT grew from 11.3 to 15.1 million euros or 8.3 percent of revenues of e182.1 million. Interest charges nearly doubled, but the tax rate declined markedly. Net debt was further reduced to e43.8 million as of last June 30 from e49.7 million as of last Dec. 31.