The world's third largest supplier of ophthalmic frames and sunglasses continues to grow faster than the market. Aided in part by the weakness of the dollar, which boosted its revenues from Europe, Marchon raised its sales by over 15 percent in the first half of 2008, and the management hopes to maintain the same pace for the rest of the year, reaching or approaching the level of $600 million for all of 2008, in spite of a difficult economic situation that is softening growth rates in the USA as well as in Europe.
This big private American company, which is celebrating its 25th anniversary this year, usually doesn't comment on its results, but company officials told EyeWear Intelligence that its consolidated revenues reached $525 million in 2007, contrary to a previous report, which indicated a lower figure. That was a big jump from a turnover of $450 million in the previous year. Marchon is also very profitable, generating operating income before amortization and depreciation (EBITDA) equal to more than 15 percent of revenues.
With these performances and a growing stable of premium brands, it would seem logical for Marchon to be arousing the interest of some strategic and financial investors. Al Berg, the hard-working 56-year-old president of the company, would not comment on a possible tie-up with LVMH, Luxottica, Safilo or any other strategic investor. He said he was «exploring longterm strategic directions» for the company, but refused to be more specific.
It could make some sense for LVMH to develop closer ties with Marchon. LVMH has been licensing more and more of its own fashion brands to Marchon for eyewear. The last one to have joined its portfolio was Emilio Pucci last January. Marchon has done wonders with another LVMH brand, Fendi, whose license was extended to cover the whole world in 2005. It was previously shared with De Rigo, a company in which LVMH had a small stake until a few years ago. However, the eyewear license for another LVMH brand, Donna Karan, was transferred from Marchon to Luxottica three years ago.
LVMH's star brand, Louis Vuitton, has been using contractors such as De Rigo rather than licensees for eyewear and other products because they are all sold exclusively through its own stores, but it's a fair assumption that Marchon could be selected as an exclusive partner if LVMH were to acquire a sizeable share in the company. Bernard Arnault, president and major shareholder of LVMH and Christian Dior, may then even decide to transfer the Dior license from Safilo to Marchon when the current contract expires at the end of next year. Berg would not comment.
Part of Marchon's recent growth has been triggered by the launch of new lines such as Coach and Sean John. More recent contracts such as those struck with Karl Lagerfeld, whose eyewear line came out in April, and with Jil Sander, whose launch will follow next January, will help to sustain the momentum. Sander was previously licensed by De Rigo, which had a joint venture in the eyewear field with the brand's former owner, Prada. Indicating that he would like to add one major new license each year, Berg says he has a big one in store for a launch in January 2010, but he would not disclose its name.
Calvin Klein and Nike still are the two biggest licenses for Marchon. The contract with Nike, which generates sales of more than $100 million a year, was going to expire in 2009 but has been extended through 2012. A few weeks ago Marchon announced that it had obtained the global rights to the Calvin Klein license by taking over those held in Japan by Nikon, virtually ensuring that the worldwide rights will be extended after they expire in 2010. The Japanese producer of cameras decided to get out of prescription frames and sunglasses last September, while keeping its joint venture with Essilor for ophthalmic lenses.
Maintaining regional headquarters in Amsterdam, Tokyo and Hong Kong, Marchon has been expanding its global sales force and adapting its management and sales structure to the growing range of its eyewear lines. In Europe, as we have previously reported, Marchon has regionalized its sales structure. While Andy Skidmore remains as European manager, based in Amsterdam, Micha Siebenhandl has been promoted as business director responsible for Germany, Austria, the UK, Ireland and Spain. An 11-year veteran of Marchon, Siebenhandl was previously country manager for Germany and Austria, but he became responsible for the U.K. as well at the end of 2006, after the departure of a former country manager, Andrew Cockayne, who recently took up a job with De Rigo.
The company supports the sell-through of its products with the development by an award-winning advertising agency of a number of point-of-purchase displays, ads and a variety of other marketing materials. It remains one of the biggest exhibitors at all the major trade shows. A very active public relations department takes care of celebrity endorsements and editorial coverage by leading fashion publications. Its website gives customers tips on how to choose the right frame.
Marchon has learnt to cooperate well with the brands, paying a lot of attention to details in order to reflect the unique spirit and message of each one of them. It has three design offices in New York, Italy and Japan that develop about 1,000 new styles every year. They are linked to one another and with the production facilities by CAD technology.
The company has a total staff of about 2,500 persons around the world, including nearly 1,000 employed at its production facilities in China. It also employs about 300 persons at its office and factory in Italy, mostly on the production side, but about half of the total production is outsourced. Thanks to this set-up, Marchon has a high degree of flexibility in the choice of styles and materials and in its reactions to major changes in currency exchange rates, in contrast with the major Italian producers.
Other brands licensed by Marchon are Michael Kors, Disney, Nautica and X Games. Unlike Luxottica, Safilo or De Rigo, Marchon doesn't have any big house brands other than its Flexon line of memory metal frames and Ventana, a small line inspired to the American Southwest introduced last year, and an American collection called Treasjolie. Apart from these lines, it relies on its licensing partners for the vast bulk of its business. Unlike those Italian companies, it is not involved in retailing, at least for the moment. It has no plans to be involved in vision care insurance like Luxottica or Viva International through the latter's new parent company, Highmark.
On the other hand, Marchon has a good grip on the American optical retail market through a formidable network of sales agents and through the sale of a vast package of sophisticated store management software, which is now installed in more than 10,000 points of sale throughout the USA. Called OfficeMate, the complete software program also allows the optometrist to keep track of the patient's vision. This business generates annual sales of about $20 million and Marchon doesn't exclude its possible application in other countries.
Berg previously shared Marchon's ownership and executive functions with a former high school friend, Jeff White, and with another American executive, Larry Roth. They founded Marchon from scratch 25 years ago. White, who was very active on the operational side at Marchon, passed away three years ago at the age of 54. Roth continues to be deeply involved in the business as vice president of Marchon in charge of global sales.