DOLCE & GABBANA ACQUIRES HOLDINGS IN TWO LICENSEES

Byline: Samantha Conti

MILAN--Dolce & Gabbana is growing up.
In a step toward transforming the fashion house into an industrial business, Dolce & Gabbana revealed it had taken a 51 percent stake in Dolce Saverio SpA, its signature collection manufacturer and licensee, and a 6 percent stake in its eyewear licensee Marcolin.
The fashion house, founded in 1985 by designers Domenico Dolce and Stefano Gabbana, said it also had acquired 100 percent of DGS, the distribution company owned by Dolce Saverio. DGS oversees the distribution of the Dolce & Gabbana lines to the company's directly owned stores in Italy.
With the growth fostered by these expansions, the new Gruppo Dolce & Gabbana--projecting three years ahead--said it expected to post consolidated direct sales of about $223 million in the fiscal year ending March 31, 2002. Dollar figures are translated from the Italian lira at current exchange rates.
Including sales of the signature collection, Dolce & Gabbana's direct consolidated sales in the year ended March 31, 1998, were $107.7 million. The signature line accounted for 47 percent; royalties, 27 percent; wholly owned stores, 19 percent, and contributions to advertising, 7 percent.
The controlling stake in Dolce Saverio, based in Legnano, was acquired by the fashion house from Domenico Dolce's father, who continues to hold the remaining ownership.
Dolce Saverio's 1998 volume was $55.8 million.
"We wanted to ring in the new millennium by improving the quality of the business," Gabbana told WWD in a telephone interview. "We also want to change our approach to our work. We want to have more control over the different phases of the business, and rely more on our own resources.
"Dolce & Gabbana's overall strategy is to flank the brand name with industrial power and retail know-how," added Cristiana Ruella, financial director of Dolce & Gabbana. "Our aim is twofold: We want to increase our margins and grow through investments, and give more support to our final customer by improving the overall quality and distribution of the lines."
Ruella also said the company took a minority stake in Marcolin, which is preparing a public offering on the Milan bourse, to reinforce its partnership with the eyewear firm. The fashion house also announced it had renewed its licenses with Marcolin for the production of Dolce & Gabbana and D&G eyewear until 2005.
The Dolce & Gabbana eyewear business generated sales of more than $44.6 million in 1998, according to Marcolin.
Investing in an eyewear licensee is not a new strategy for fashion houses. Earlier this year, Prada announced it had formed a joint venture with its eyewear manufacturer, De Rigo, and for years Giorgio Armani SpA has held a minority stake in its Luxottica licensee.
Under the new strategy, Dolce & Gabbana plans to open 10 flagships in the U.S. and Europe in the next three years, and unveil two new licenses, Ruella said. She declined, however, to give further details. Dolce & Gabbana currently has five directly controlled stores in Italy, four in the U.S. and two in London.
Wholesale volume of all Dolce & Gabbana products, including licensed products, was $322.4 million in fiscal 1998, according to the company.
The firm's second line, D&G, which is manufactured under license by Ittierre, made up 30 percent of sales, while fragrances accounted for 22 percent and the Dolce & Gabbana signature line generated 17 percent. Remaining sales came from eyewear, innerwear and footwear.
The bulk of sales--33 percent--were generated in Italy. Elsewhere in Europe, it was 36 percent. The U.S. contributed 15 percent.

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