Safilo lost the small but high-profile Stella McCartney license to Luxottica, raising some concern that the group could also lose the crucial Gucci brand to its arch-rival. Luxottica signed a long-term exclusive license deal to design, produce and sell Stella McCartney sunglasses worldwide from Jan. 1, 2009.

The deal runs for an initial six years and is automatically renewable for another five years. The first collection will be launched in the summer of 2009. The deal was signed with Stella McCartney Ltd., a joint venture between the designer Stella McCartney and the Gucci Group. Luxottica feels that the brand has a strong image and is well positioned in southern Europe, the U.K. and the USA.

Initial sales will be through premium retail locations in North America, Japan, Hong Kong and the Middle East before the distribution is widened. Luxottica did not give any financial details about the deal but its chief executive, Andrea Guerra, did let it slip that Luxottica's strong distribution network can make the brand very profitable.

The brand is a minor one for Safilo, representing an estimated €2 million in annual sales at the most. However, it's Stella McCartney's connection with Gucci rather than its loss of the contract that sent shivers down the spines of financial analysts.

?Safilo is currently negotiating the renewal of Gucci brands licenses, so, in our view, the loss of a brand of the package, even if a minor brand, does not bode so well for the company,? said Andrea Paladini, analyst at Santander Private Banking. Stella McCartney is of one of a series of brands ? including Alexander McQueen, Bottega Veneta, Boucheron, Yves Saint Laurent and Gucci ? that are part of the Gucci Group.

All the eyewear licenses for these brands expire this year except YSL and Gucci, which expire in 2010. The three licenses expiring this year represent an estimated 4 percent of Safilo's annual turnover.

The big prize for Luxottica would to poach the Gucci brand, which is estimated to represent 15 to 20 percent of Safilo's annual sales, or about €150 million to €200 million in revenues. While Safilo has taken over the Giorgio Armani licenses from Luxottica, the latter has taken over those of Ralph Lauren. Armani recently indicated that its licensed sales of eyewear grew by 19 percent in 2007.

Luxottica does not intend to increase the overall number of licenses it holds but probably will drop some regional brands this year, giving it room to bring on board new opportunities.

In an Italian newspaper interview Safilo's chief executive, Claudio Gottardi, sought to calm the waters by highlighting the fact that the partnership with Gucci is more than 15 years old and is very solid. He indicated that the group plans to renew soon its strategic licenses ? such as Gucci, Armani and Dior ? even if they are not close to expiring, and is ready to drop smaller brands. He also tried to de-dramatize the Gucci issue by saying that ?in our sector licenses come and go? and indicated Hermès and Louis Vuitton, which do not have eyewear licenses, as valid alternatives to Gucci.

Gottardi also noted that first-quarter results were affected by the slowdown of the global economy and of the dollar's depreciation against the euro. About 45 percent of the company's sales are billed in the U.S. currency.

There has been media speculation that Safilo could be de-listed from the Italian stock exchange after the company's share price fell by more than 60 percent since its listing in December 2005. 3T, the holding company of the Tabacchi family that owns 37.6 percent of Safilo, had to deny a report in the daily MF which said it had asked several banks to study the feasibility of delisting the eyewear company. Safilo has already been de-listed once, in 2002.