Higher earnings are expected this year for De Rigo, and its sales should grow to 890-900 billion lire (e460-465m-$425-430m), as compared to 622.6 billion lire in 1999, and then rise to one trillion lire in 2001.
De Rigo's wholesale turnover should remain more or less unchanged this year. Besides the full consolidation of the General Optica chain in Spain, which De Rigo bought only last February, a big contribution to its turnover will come in the next two years from Eyewear International Distribution (EDI), the company's 51 percent controlled joint venture with Prada that manages the Prada eyewear license, and from new licenses with the LVMH luxury group.
De Rigo is working more closely with both of these major expanding multi-brand luxury groups. Earlier this year, as reported, De Rigo signed a license for LVMH's Spanish Loewe brand, which is going to be carried prominently in its own General Optica stores, stimulating competing opticians to do the same. A few weeks ago, De Rigo signed new global licensing deals for the Fendissima and Céline brands. The Céline fashion brands belongs to LVMH. Fendi was taken over a few months ago by a joint venture of Prada and LVMH.
EID is expected to reach sales of 65-70 billion lire (e35m-$33m) in 2000, working up gradually to an annual turnover of about 200 billion lire (e100m-$95m) in the medium term.Inaugurating a new style of highly selective distribution in eyewear, EID will sell the high-margin Prada eyeglasses made by De Rigo only through a maximum of 1,000 shops around the world that are prepared to order certain quantities and to display the range adequately.
The selected Prada eyewear dealers will be mainly independent stores, plus of course Prada's own fashion stores, but department stores in the USA and Japan will also be allowed to carry the line. There will be up to 200 dealers in Italy. EID has already opened sales offices in Hong Kong, Japan and the USA.
In the first quarter ended March 31, the consolidation of General Optica and EID helped boost De Rigo's total turnover by 29.7 percent to 215.9 billion lire (e111.5m-$103.5m). Without GO, group sales would have increased by 8.1 percent, but they would have risen by only 1.6 percent in constant currencies.
A major reorganization of De Rigo's production and logistics caused delays in the delivery of certain products and in the market launch of others, resulting in a 6.9 percent decrease in wholesale and manufacturing sales to 62.6 billion lire (e32.3m-$30m). In terms of volume, deliveries of prescription frames rose by 5.9 percent to 465,000, but deliveries of sunglasses fell by 6.1 percent to 982,000 units.
EID accounted for only 5.1 billion lire (e2.6m-$2.4m) in sales in the quarter. Sales through retail companies shot up by 50.2 percent to 156.2 billion lire (e80.7m-$74.9m), thanks mainly to the inclusion of GO, which contributed sales of 36 billion lire (e18.6m-$17.3m) in February and March. Dollond & Aitchinson's sales contribution rose by 15.6 percent to 120.2 billion lire (e62.1m-$57.6m), but it would have contributed only 3.5 percent more without the strong appreciation of the pound sterling.
On a comparable-store basis, sales increased by 6.1 percent at GO, and by 3.7 percent at D&A. De Rigo is going to work this year on the integration of the Spanish and British chains in order to obtain better margins. The buying functions will be gradually merged, starting with corrective frames in September. Their assortment will be reduced to a smaller number of brands, including those of De Rigo, with a stronger similarity between the two countries.
De Rigo didn't disclose profit figures for the quarter. On a geographical basis, the group's turnover in Europe grew by 8.3 percent excluding GO. Sales in the Americas declined by 17.3 percent, mainly because of a big drop in Brazil. Sales in the rest of the world were up 16.8 percent.
By major product categories, combining the retail and wholesale businesses, eyewear sales grew by 26.2 percent to 131.3 billion lire (e67.8m-$62.9m), and sales of contact lenses rose by 34.6 percent to 18.8 billion lire (e9.7m-$9m). Eye test and franchising fees added another 11 billion lire (e6m-$5m) to the total turnover for the quarter.