Andrew Ferguson, who has been commercial director of Dollond & Aitchison since 1997, has been promoted as CEO of the British optical retail chain, replacing Russell Hardy who has left after eight years at the head of the company, owned by De Rigo. Both executives had previously worked in the British supermarket business.
According to company insiders, Hardy decided to leave the sector because he didn't agree with a new strategy set by De Rigo, after a 6-month study commissioned to McKinsey, that advised a stronger positioning of D&A in the medium-high segment of the highly competitive British optical retail market. The study emphasized the need for D&A to concentrate on quality and service, without competing against Vision Express in such areas as the supply of lenses within one hour.
D&A's operating profit before depreciation and amortization (Ebitda) declined by 5.6 percent to €5.1 million in the first six months of this year, and it operating profit was off by 33.3 percent to €0.8 million, according to De Rigo's interim statement for the period. As reported, D&A raised its sales by 6.5 percent in pounds sterling in the first half, translating into a 9.3 percent gain to €127.3 million. Same-store sales rose by 7.6 percent at D&A, thanks largely to the chain's continued aggressive marketing campaigns, which led it to raise its market share while putting pressure on operating margins.
De Rigo's Spanish retail chain, General Optica, had a 1.7 percent increase in Ebitda to €12.1 million during the same period, or 16.9 percent of sales, which compares with D&A's 4.0 percent ratio. GO's Ebit ratio declined from 8.6 to 8.1 percent of sales, which rose by 8.0 percent to €71.4 million. The company attributes GO's softening profitability to increased advertising expenses, but says that these investments will decline in the 2nd half of 2004.
The retail segment's operating profit remained stable for De Rigo before depreciation and declined by 4.3 percent to €6.6 million or 3.3 percent of sales. Instead, its wholesale and manufacturing operations raised their earnings by 43.0 percent before depreciation and by 52.3 percent after depreciation, reaching margins of 22.1 and 19.7 percent of sales, respectively.
Gross margins continued increase in this more profitable segment of De Rigo's business, thanks in part to improved efficiencies in the manufacturing process and a more favorable sales mix. These gains more than offset the loss of Prada's license, which involved relatively low margins from the EID joint venture with the Italian fashion house.
The net result was a 44.7 percent increase in the group's net income to €12.3 million, or 4.5 percent of sales, which led it to reach a positive net financial position of €16.4 million, against a negative position of €3.6 million at the end of 2003. While total revenues increased by only 0.9 percent to €275.9 million, De Rigo's operating income before depreciation and amortization grew by 9.9 percent to €35.5 million. Ebit increased by 18.7 percent to €22.9 million or 8.3 percent of sales.