The giant German retailer wants to set up 120-140 more stores in Germany over the next few years, although it already claims a market share of 53 percent in its home market in terms of volume and a share of 28 percent in value. The expansion will take place mainly in the Southern part of Germany, with the idea of getting a market share of more than 50 percent in every region of the country. Each store should service on average a population of 100,000 people.

To set itself apart from the competition, it will also open some new large stores like its flagship in Hamburg, starting with a big Fielmann Supercenter due to be opened on a highly visited shopping street of Cologne, the Schildergasse, sometime next year. In the larger cities, its supercenters generate annual sales of between €10 million and €16 million.

Elsewhere in Europe, Fielmann will continue to concentrate its efforts on the two other German-speaking countries, Austria and Switzerland, where it is getting the biggest and fastest paybacks on its investments. Its business in these two countries contributed last year 30 percent of group profits with only 10 percent of group volumes sold. The growth in Poland will be slower. Fielmann remains market leader in Switzerland. It's not quite there yet in Austria, but Fielmann hopes to overtake Hartlauer in due course.

Overall, 25 new store openings are on the drawing board for this year, five of which are going to be in Austria and Switzerland. Six new Fielmann stores started up in the 1st quarter, taking the total door count up to 544 units. The medium-term goal is to reach a pre-tax profit of €100 million in Germany with a turnover of €1 billion and sales of six million pairs of glasses through 600 stores. Taking in Austria and Switzerland as well, the goal is a pre-tax profit of €120 million, sales of 6.8 million pairs and revenues of €1.2 billion.

In the 1st quarter of 2006, Fielmann's pre-tax profit jumped by nearly 150 percent to €25.1 million, leading to a similar increase in net profit of €16.6 million. The big improvement was mainly due to an extraordinary investment during the same quarter of last year of more than €20 million in marketing expenses to support Fielmann's introduction of a new insurance policy, intended to supplement the phase-out of the German government's previous subsidies for eyewear purchases.



The insurance policy has been a great success, allowing Fielmann to win new customers in spite of a difficult situation of the German market, which lies 20-25 percent below the level of 2002, the last normal year before the latest health reform. Since the introduction of Fielmann's insurance program in October 2004, a total of 1.4 million customers have already used this original facility, including about 400,000 during the 1st quarter of 2006.

As reported, excluding external sales, the group's revenues grew by 13.8 percent to €192.3 million in the quarter, as compared to one year ago, but the number of glasses sold by the group remained stable as compared to the year-ago period, where more new customers used the insurance program to get a free pair.

Under Fielmann's insurance scheme, the client pays only €10 a year to pick out a pair of single-vision glasses from its generic catalog of 70 frame models, fitted with Zeiss lenses, as frequently as every other year. The fee rises to €50 a year for a frame with multi-focal lenses. If the client prefers to buy a different style of frames, he or she gets a discount.

The chain's management hopes that the program will lead German customers to buy new glasses again more frequently. They tend to do that now every four and a half years on average, compared with three years back in 1988, partly because the average price has increased from €167 to €360 because of their increasing sophistication. Over the same period, Fielmann's average prices grew by only 18 percent thanks to its enormous buying power ? equal to that of all the opticians in Austria, Denmark, the Netherlands and Switzerland together. Depending on the style and on the brand content, its prices are between 15 and 70 percent below the national average. While German opticians have on average annual revenues of about €300,000 per store, the average turnover of a Fielmann store is €1.5 million in Germany, €2.6 million in Austria and €3.8 million in Switzerland.

The eyewear market in Germany grew last year by 8 percent to 9.1 million pairs, according to Fielmann. It remained flat in Switzerland at about one million pairs and it fell in Austria by 9.5 percent to 1.2 million pairs, due to the new health reform in the country (see next article). Fielmann scored better in all three countries: its sales in Germany rose from 4.4 to 4.8 million pairs. They grew by 10.2 percent in Switzerland to 325,000 pairs. They rose even in Austria by 9.1 percent to 240,000 pairs.

Pre-tax profits grew by 12.4 percent in Germany to €67.0 million, resulting in a margin of 10.6 percent of sales. They increased in Switzerland by 25.7 percent to €17.6 million or 22.3 percent of sales. Because of major expenditures on the start-up of new outlets, they fell in Austria to €2.8 million or 8.6 percent of sales, compared with a level of €5.5 million in 2004.

As previously reported, the group sold a total of 5.7 million pairs of glasses in 2005, or 10.8 percent more than in 2004, generating 9.7 percent higher revenues of €733 million and a 19.3 percent increase in net profit to €57.8 million, representing a net margin of 7.9 percent.

Further major increases are expected in group sales and profits for this year. Analysts are projecting a profit of almost €100 million on consolidated sales of about €800 million. With a price increase of 34.5 percent to about €7.50 since the beginning of this year, Fielmann's share price continues to be a star on the MDAX, which rose by only 20 percent during the same period. The board of directors, which is still dominated by a healthy Günther Fielmann, who is now 66 years old, proposes to raise the dividend by nearly 19 percent to €1.90 a share, or a payout ratio of about 70 percent.