De Rigo managed to improve its net income by 50.4 percent to e18.7 million in 2001, or a ratio of 4.2 percent of sales, with solid profit gains in both its wholesale and retail operations. EID, the joint venture with Prada for the distribution of the latter's eyewear, had a slight dip in Ebit (earnings before interest and tax) to 0.4 million euros on sales of e32.1 million, but De Rigo is anticipating a major recovery for this operation this year, with sales up by at least 50 percent and an Ebit margin moving toward the 10 percent range, following a reorganization of its European sales structure.

Since last September, EID has been shifting to a network of more than 20 commission agents to cover the European region, instead of using 4 company salesmen. The new set-up has allowed EID to expand the distribution of Prada eyewear, while advancing by 3 months the ordering process. EID has also implemented a short-term deal with Luxottica to help speed up its introduction on the important Japanese market. No decision has yet been made regarding the US market, where very few opticians are carrying the Prada line for the moment.

De Rigo's retail operations ? Dollond & Aitchison in the UK and General Optica in Spain ? improved their profitability, with the Ebit before goodwill amortization rising by 17.9 percent to e25 million on 5.4 percent higher sales of e358.4 million. At D&A's, it rose by 35.9 percent to e14 million, thanks in part to the recent disposal of its lens processing operations to BBGR. Before depreciation, its earnings were up only 15.5 percent to e22.4 million. GO raised its own operating profit by 0.9 percent to e11 million after depreciation, and by 6.9 percent to e18.5 million before depreciation, reflecting the strong expansion of the Spanish chain.

GO should maintain a 10 percent Ebit margin this year while raising sales by about 9 percent. It hopes for a stronger gain on a comparable basis than last year's 2.6 percent growth, thanks in particular to better use of direct marketing and to higher sales sunglasses, which should represent 10 percent of sales, up from 5 percent in 2000 and 7 percent in 2001.

After opening 14 new stores in 2001, GO will take a pause and concentrate on refitting existing ones, although 80 percent of its 140 stores are already reformatted. A new store franchising program will be implemented at the end of this year. The Spanish chain will also launch a totally new store concept in Zaragoza next month, offering more service. Depending on the results, it will probably start another pilot store in Barcelona shortly afterwards and then decide on its next moves.

For its part, D&A will start to upgrade its own special frame fitting program this year. The new one should be implemented in all the stores by 2004. Sales were lower than expected in the 1st quarter, but then the UK market probably declined in the period, and the chain's lower sales of spectacles were offset by higher sales of contact lenses. D&A is looking at a 4 percent sales increase a slightly stronger profitability. An Ebit margin of 7.5-8 percent is still the target.

GO and D&A should benefit from the gradual establishment of joint buying and logistic structures. The two chains are in the process of negotiating better terms from 5 key suppliers in the Far East. They are also setting up a common product selection platform that will improve stock management. The proportion of De Rigo products sold in GO stores has increased from 20 to 25 percent, the same ratio as at D&A.

As previously reported, De Rigo's wholesale revenues, excluding EID, grew at a faster rate of 26.7 percent last year, reaching the level of e133.2 million. Further major increases are expected in 2002, partly due to the introduction of the new Givenchy line and an extension to Japan of De Rigo's contract with LVMH for Céline eyewear, which previously covered only Europe and Middle East. LVMH recently declined to exercise an option to raise its own stake in De Rigo, but it still plans to do so if Prada does the same.

Overall, De Rigo's wholesale division posted a 53.2 percent increase in Ebit to e11.8 million in 2001, representing a margin of 8.9 percent. The gross operating margin (Ebitda) rose from 11.6 to 12 percent of sales, thanks to higher sales of premium-priced eyewear and despite higher marketing and sales expenses, which will continue to rise. Another negative factor was an operating loss of e1.2 million for De Rigo's Argentinian subsidiary, plus non-recurrent expenses of the same magnitude. As reported, the group's total turnover grew last year by 10.7 percent to e445.6 million.