Despite its strong and rising market shares in the German-speaking countries, Fielmann sees further possibilities for growth through expanded sales of progressive lenses, sunglasses, contact lenses and hearing aids, according to its annual report. While expanding the average size of its existing stores to help meet the growing demand from the public, it is also considering a possible new move into franchising in order to cover smaller urban areas and the Netherlands.

No decision has yet been made on franchising. Out of the 524 stores that the company operates in Germany, 32 are franchised, but none of them was opened after the year 2000 because Fielmann had enough cash flow to invest in its own stores. They are all run as individual subsidiaries in which the store manager often has a minority interest. On the other hand, the company prefers to invest in stores that can address at least 60,000 customers in their immediate surroundings. A smaller catchment area is regarded by Fielmann as potentially unprofitable.

At the end of the first quarter, the company also had 14 stores in the Netherlands, two in Luxembourg, 10 in Poland, 24 in Austria and 30 in Switzerland. The Dutch stores are just about breaking even in the face of strong competition from local players and from Specsavers, which operates on a franchising basis in the country.

Fielmann can boast that its particular store concept and the well-oiled supply chain behind it make it very competitive. In Germany, while other optical retail stores sell on average less than 600 pairs of glasses per year, or less than two pairs per day, the average Fielmann store sells 10,000 pairs annually, or 35 pairs daily. On average, each Fielmann store brings in €1.6 million in sales in Germany, €2.5 million in Austria and €4.0 million in Switzerland. In Germany, its own stores generate a minimum annual turnover of €800,000, while the others have average sales of only €300,000.

Fielmann says that 90 percent of the German population is familiar with its brand, and that it sells every second pair of glasses in the country. Its market share is 21 percent in value. In terms of units it stands at 48 percent, up from 38 percent five years ago. In Switzerland, Fielmann claims market shares of 17 percent in value and 33 percent in unit sales. In Austria these figures are 13 percent and 23 percent, respectively.

There were 10,016 optical stores in Germany at the end of the year according to ZVA, the national optical retailers' association. Together, they sold 10.6 million glasses in 2007, a 0.5 percent increase over the previous year, with revenues of €3.8 billion, up by 2.8 percent. But including the 3 percent increase in the VAT on Jan. 1, 2007, that number was flat.

Average selling prices are higher in Switzerland, where one million pairs of glasses were sold last year, a 3 percent increase, with a corresponding increase in revenues to €500.0 million. Austria saw a 2 percent increase in unit sales to 1.3 million pairs of glasses, with a 7 percent increase in value to €400 million. Austria and Switzerland each have 1,100 specialist opticians, so the average store sells 909 pairs per year in Switzerland and 1,180 pairs in Austria, but Fielmann stores score better in both countries, where the company grew faster than the market last year.

In Switzerland, Fielmann saw 6.3 percent growth to €89.0 million, selling 350,000 glasses, a 4.5 percent rise in unit sales. In Austria, 298,000 pairs of glasses were sold by the company, a 6.4 percent increase, leading to sales growth of 12.2 percent to €45.0 million. The company generated pre-tax profit of €19.5 million in Switzerland and €7.7 million in Austria.

It sold 5 million pairs of glasses in Germany, up from 4.9 million, with revenues up by 4.5 percent to €713.1 million. Pre-tax earnings increased by 28.4 percent to €110.4 million, yielding a 15.5 percent pre-tax return on sales.

As previously indicated, higher selling prices in the first quarter gave a boost to Fielmann's revenues in the period, and this was partly due to higher demand for multi-focal lenses and expensive designer eyewear. In its annual report, the German retailer said it expected the proportion of varifocals it sells to grow by more than 50 percent in the next few years, without even garnering new customers. In reporting sharply increased sales in Germany for the first quarter of this year, Essilor attributed this largely to stronger demand from Fielmann for its Varilux progressive lenses.

Fielmann also thinks that its revenues from contact lenses and accessories could double in coming years. Only 5 percent of Germans wear contact lenses right now, a figure that reaches 13 percent in Switzerland and 12 percent in the USA. Pointing to higher demand for designer sunglasses in its stores, Fielmann notes that Germans buy 20 million pairs of sunglasses per year, but only one in five pairs is sold by an optician.

As previously reported, Fielmann's total consolidated sales were €839.2 million, a rise of 5.8 percent over 2006, and external sales including VAT were up by 7.8 percent to €984.4 million.

The company laid out its current plans for the medium term in the annual report. It aims to sell 6.5 million pairs of glasses in Germany from 700 branches, bringing in sales revenue of €1.1 billion and pre-tax profit of €120 million. In Switzerland, Fielmann is looking at 40 stores with sales of 400,000 units, resulting in revenues of €120 million and pre-tax profit of €24 million. It hopes to have 40 branches also in Austria, selling 450,000 glasses with revenues of €85 million and pre-tax profit of €10 million.

The board of directors has proposed a dividend of €1.40 per share, 20 cents more than one year ago and a 3.1 percent yield on the €45.00 closing price at the end of 2007.