Giorgio Armani has become a director of Luxottica, confirming the growing integration between the fashion and eyewear industries. Instead of simply licensing their hot brand names, Italian fashion houses have been getting steadily more involved, first in the equity and now in the management, of their eyewear licensees (see also previous article). Armani has actually held a stake of around 5 percent in Luxottica for some time. The novelty is that Armani himself will now take part in the strategic decision-making process of the company, which is still planning to get a listing on the Milan stock exchange. About 25 percent of Luxottica's equity is now trading on the New York stock exchange. The group's chairman, Leonardo Del Vecchio, holds a stake of 71.5 percent, but it will be reduced by 10-12 percentage points once the stock is introduced on the Milan Bourse.
Armani takes the place of David Browne, former manager of the American LensCrafters chain, who resigned from Luxottica's 7-member board last Nov. 10, officially for family reasons. The other members are the group's chairman, Leonardo Del Vecchio and his son Claudio along with the company's CEO, Roberto Chemello; Lugi Francavilla, vice president; and two high-ranking bankers, Lucio Rondelli from Unicredit and Tancredi Bianchi, an authority who has run the Italian Banking Association (Abi).
For the designer, his stake in Luxottica has been a good financial investment. In the 1st quarter of this year, Luxottica continued to posted excellent results. As compared to the 1st quarter of 1999, revenues rose by 36.3 percent to 1,171.8 billion lire (e605m-$562m). The gross profit increased at a lower 33.3 percent rate, and was equivalent to 71.1 percent of turnover. The operating income shows an increase of 35.8 percent, bringing it to around 17.5 percent of turnover. On the other hand, the group's net earnings shot up by 55 percent to 135.5 billion lire (e70m-$65m), or 11.6 percent of turnover, versus a 10.2 percent net margin a year ago. The group is forecasting a turnover of 4,200 billion lire (e2,170m-$2,010m) for the whole year, with a net profit margin of over 10 percent.
The acquisition of Ray-Ban helped to boost by 31.1 percent to 7.7 million units the total number of eyewear frames sold. Despite the company's big outlay for this acquisition, debt was further reduced by 146.4 billion lire (e75.6m-$70.2m) in the 3-month period, from 2,189.9 billion lire at Jan 1, 2000 to 2,043.5 billion lire (e1,131.1m-$1,049.7m) at the end of March. Ray-Ban's profitability has made a rapid recovery, with the operating margin on wholesale distribution now at 21 percent, up from 6.9 percent in the 3rd quarter of 1999 and 11.7 percent in the 4th one. Del Vecchio sees this positive trend continuing as the cost of acquiring the brand is gradually amortized and the stock of in-process merchandise previously manufactured by Ray-Ban's American plants is reduced.
Wholesale deliveries of eyewear frames grew by 20.4 percent in the quarter, but the average price has grown considerably, as revenues from the wholesale business were up 44.9 percent to 523.3 billion lire (e270.3m-$250.8m). Group results are positive also at the retail level. LensCrafters' 859 shops in he USA raised their sales by 8.4 percent, or 7.5 percent on a same-store basis, posting a turnover of $347.2 million. Its operating earnings reached $53.5 million, an increase of 29.7 percent.