Spy hopes to generate a turnover of about €5 million in Europe next year, following the establishment of a rather comprehensive sales organization for the region over the past few months. For many years, Spy had a European sales office, located in the premises of its LEM laboratory in the Italian town of Varese, but a year ago, after finding a buyer for the lab, it decided to close the sales office down, laying off 20 people, because it was not a profitable operation.
Under the new set-up, a large part of the continent will be covered by Logo Eyewear. The French company signed a contract a month ago to handle France, Italy, Austria, Germany, Switzerland and the U.K. for Spy. Logo will concentrate on the optical retail sector, which is expected to represent more than half of the brand's total sales in the future, in line with what has been happening at Oakley. Spy's former European sales organization had targeted instead mainly the sports retail circuit, with dismal results.
Distribution contacts have also been signed for Spy recently with other partners for Russia, Hungary, the Czech Republic, Slovakia and Slovenia. Prior to September's Silmo trade show in Paris, where the American brand had a booth, a distributor had been appointed for the Scandinavian countries. It's a company called Brown Couch and run by Patrok Malmberg, who has worked in the past for Ray-Ban and Maui Jim. Brown Couch will also cover the sports circuit in Norway, but in Sweden, this difficult sales channel is handled by a dedicated agent, Tom Helleberg.
The new sales organization has been established by Bjorn Blomqvist, a Finnish-born sales expert who started off in the optical sector with the Finnish distributor of Alain Mikli and other brands. Blomqvist, who speaks seven languages, spent the past nine years in France and the U.K. taking care of Lafont's sales in the Nordics and other parts of Europe including the U.K., Germany and Italy.
Blomqvist plans to appoint an agent for the Spanish market and to relocate to Barcelona next February. He is going to provide input for the adaptation of Spy's collections to the European market, and he is going to ensure a good level of service to optimize the performance of the distributors.
Meanwhile, Spy reported further progress in its financial and sales recovery program during the third quarter ended Sept. 30. Sales rose by 3 percent to $10.2 million from the same period of a year ago, and the company made an operating profit of $0.5 million compared with an operating loss of $1.2 million thanks to lower expenses and an improvement of two percentage points in gross margins. It still made a net loss of $0.3 million but it was lower than the $1.8 million of the previous year.
The company's results have been improving at the operating level for three quarters in a row. For the first nine months of the year, its sales were up by 6 percent to $29.1 million. They consisted almost exclusively of Spy branded products, whose sales were 8 percent higher than in the same period of 2012 and 19 percent higher than in 2011. No other products were sold after the second quarter. Thanks largely to Spy's new Happy Lens collection, sales of prescription products had year-on-year growth of 110 percent, while goggles were up by 13 percent.
The company turned around to an operating profit of $0.8 million for the first nine months of this year from a loss of $4.5 million in the year-ago period. Its net losses declined to $1.6 million from $6.0 million. The company generated net cash of $2.5 million during the period in contrast with a negative cash flow of $4.1 million in the comparable 2012 period.
After releasing these relatively good results, the company announced that its president and chief executive, Michael Marckx, has been made a member of its board of directors. A passionate bicycle racer, Marckx joined Spy in February 2011 as vice president of marketing, but he was promoted soon after to president of the company. He subsequently took both the roles of president and CEO.
Marckx is credited for the development of a new approach to the market, positioning Spy as a brand that puts “happy smiles” on the faces of everyday people. Seth Hamot, chairman of the company, said that Marckx has been “instrumental, and inspirational, in ensuring that Spy's truly innovative products and its unique message are resonating throughout the marketplace.”