This year's results will be affected by higher-than-expected costs for the acquisition or renovation of stores, but some tangible positive effects of this policy of accelerated expansion should be felt in 2001. GrandVision will have opened or acquired a record of 120 stores of all kinds in the year 2000, or 20 more than originally planned, causing among other things increases of 19 percent in amortizations and 90 percent in interest charges during the 1st half ended June 30. Barring unforeseeable opportunities, the group should add fewer stores next year, while the growth of the existing units on a comparable basis will probably accelerate, with an immediate effect on the bottomline.

As previously reported, GrandVision's optical stores had sales increases of 5.5 percent on a comparable basis in France during the first 6 months of this year, and its renovated British optical stores did 13 percent better on the same basis. GrandVision now reports a net profit of 8.9 million euros for the 6-month period, up 16 percent from the same period one year ago. The gross margin improved, but the operating profit before interest and tax grew by only 6 percent to e26 million on 14 percent higher sales of e411 million. The results would have been better without the group's costly expansion in Italy and the renovation of the former Vision Express stores in the UK. This situation should persist in the 2nd half because of the recent acquisition of numerous shoe shops in France, which are being transformed into optical or photo shops, boosting to 80 the total number of openings planned during the period. Like in 1999, 60 percent of the group's annual earnings should be obtained in the 2nd half.



Anyway, the group's operations in France and the UK improved their performance in the 1st half. The optical stores in France ? trading under the GrandOptical, Solaris and La Générale d'Optique banners ? managed to raise their own operating income by 14 percent and reached an operating margin of 8.8 percent, while their sales grew by 9 percent to e125 million. La Générale d'Optique improved its profitability at an even faster pace and should reach a margin of 5-6 percent this year, against 2.5 percent in 1999. The group's 450 Photo Service stores, which are all in France, raised their sales by 7 percent in the 1st half, and their operating income rose by 27 percent to a nice 13.3 percent margin.

With 51 British and Irish stores converted to the successful Vision Express Optical Lab format in the 1st half, the group's operating in that part of Europe improved by 73 percent in the period and reached a margin of 3.4 percent on sales, which rose by 24 percent to e136 million. As previously reported, GrandVision is moving aggressively into the Italian and Swiss markets, and this is weighing heavily on its results outside France and the UK, which showed a big operating loss of e10 million on sales of e37 million, but the group hopes to obtain less negative results in the 2nd half of this year and to start breaking even in certain new West European markets in the 2nd half of 2001. It's soft-pedalling its investments in Poland because of rising rental costs and new regulations for the opening of large retail outlets. The same goes with GrandVision's investments in Argentina, which has been going through various economic problems lately.

The costliest investments for 2000 will have been the flagship stores in Zurich and London and the opening of no less than 8 GrandOptical stores in Italy. The new 700-square-meter flagship store that will open on London's Oxford Street will cost a total of about e1.8 million. Its rental costs will be 60 percent higher than those of the enlarged GrandOptical flagship on Paris' Champs-Elyseés, which has about the same personnel of 75-odd employees. Reopened last December on double its previous space, but paying 9-year-old leases, the latter unit is highly profitable. It has experienced a 72 percent sales increase sofar this year, as compared to the level it had achieved in the comparable 1998 period, before its expansion and renovation, and it's seems to be well on its way to reach an annual turnover of about e15 million in 3 years' time.

It's going to be tough for GrandOptical to find a suitable location at a reasonable price for a flagship store in Milan. It's proving difficult to find also 300-sqm. locations in the right spots for the smaller stores that the chain wants to set up rapidly throughout Italy. Meanwhile, it's taking advantage of all available opportunities. It opened recently in two shopping malls in Turin (Gru) and near Milan (La Riscaldina), and it's going to follow up with downtown locations in Padua next month and in Rome next January.