The French-based optical retailing group is still far from LensCrafters' 15 percent operating margin, but it made considerable progress in that direction in 2002, raising its own operating profit by 56 percent to 7.6 percent of sales throughout the group, up from 2.4 percent in 2000 and 5.2 percent in 2001, with big differences from one chain and one country to the other. GrandVision's net profit jumped by 240 percent year-on-year to e22.0 million or 3.7 percent of sales which, as previously reported, grew by 6 percent to e602.6 million. The group started generating again some cash flow and its gearing grew to 28.9 percent.

These results immediately led to an increase of almost 10 percent in the group's share value on the Paris stock exchange, which has been going up and down wildly in recent weeks due to intense trading activity. While confirming that GrandVision is not for sale, the management points out that last year's earnings per share were higher than those it had achieved prior to the sale of its photo shops, thanks in part to a buy-back of about 10 percent of the whole equity, indicating that it was a smart move in spite of the relatively high central administration charges.

Another positive factor was the softening of the group's expansion, which helped reduce pre-opening charges by 37.4 percent. The gross margin improved by 1.1 percentage points to about 72 percent, close to Luxottica's levels. On the other hand, the bottomline was affected by extraordinary charges of e11.6 million, including a e6.7 million writeoffs of expenses related to the planned integration of two software programs. A Finnish company, Alldata, had promised that it would have been feasible, but the failure of a test in Spain led GrandVision to stop the program and to sue the developer for e11 million.

The group's French operations still brought the highest profits last year, with their Ebit up 21 percent to 10.8 percent of sales. GrandOptical, whose store network in France will be raised in due time from 76 to 100 units, reached a 12 percent Ebit margin on sales of e152.8 million, and the management wants 15 percent. The Générale d'Optique chain, which sells only unbranded products, improved its profit by 54 percent to an Ebit ratio of 9.7 percent on sales of e118 million. The French Solaris stores improved their Ebit margin from 7.5 to 8.5 percent although their sales grew by only 1 percent to e17.5 million after 4 store openings, largely due to the 12 percent drop estimated by GfK for the French sunglass market.

The group's Vision Express chain in the UK and Ireland improved its operating profit by 31 percent, thanks to better merchandising and marketing, raising the Ebit margin to 7.8 percent on 1 percent higher sales of e230.3 million. That includes £6 million (e8.9m-$9.6m) in dividends from its 89 joint venture stores. Further progress is expected as more stores are converted to service centers like GrandOptical, leaving behind the ancient discount orientation of the Vision Express banner. Out of the existing network of 104 directly owned stores, half have already been converted and 8-10 more are due to follow suit each year until 2006 or 2007.

In the rest of Europe, GrandVision continued to suffer an operating loss of e1,214,000 on sales of e81.2 million, but this loss was 4 times lower than the year before, and an operating profit is now expected for 2003. Results improved dramatically in Belgium, Luxembourg and Switzerland. GrandOptical Italia contributed an operating loss of e3 million, partly due to charges connected with 7 new store openings, but it should breakeven this year when no new openings are planned. Spain and Portugal had breakeven results in 2002.

For this year, the group has budgeted the opening of 10 new Générale d'Optique stores and 4 new GrandOptical stores in France, plus two Solaris units and some openings in Belgium and Switzerland. Ten stores will be refitted in France. The group's first French factory outlet has just been started up at Gonesse, near Paris.

GrandVision sees further room for higher earnings, particularly outside France. In 2002, 48.1 percent of its revenues came from France, 38.4 percent from the UK and Ireland and 13.5 percent from the rest of Europe. In the future, the management would like to see the UK with Ireland and the rest of Europe each contribute 30 percent of sales.

Meanwhile, GrandVision is looking to conclude new master franchising agreements, similar to the one recently implemented in Saudi Arabia, for other parts of the Middle East and other countries such as Greece, Turkey or Russia. At the same time, it's developing further its own high-margin private label program, which involved last year a total of 1,750,000 frames, including an exclusive collection whose development was supervised by Alain Mikli.