MILAN — News that Giorgio Armani is terminating his licensing pact with Luxottica has kicked the Milanese speculation machine into overdrive on how the eyewear giant will compensate for losing 7.2 percent of its revenue and where Armani will produce his stylish frames.

The talk here has Luxottica negotiating with LVMH Moët Hennessy Louis Vuitton about a Louis Vuitton eyewear license and there is also buzz that the company could buy smaller competitor De Rigo, which produces Prada eyewear though a joint venture. De Rigo has links to LVMH by producing eyewear for Fendi, Givenchy, Loewe and Céline.

Meanwhile those in the industry are pondering the future of Armani’s eyewear business. Armani and Safilo declined to comment on local press reports that have Armani in talks with Luxottica’s smaller rival Safilo. And a source close to De Rigo confirmed that Armani is also in talks with that group.

"We are continuing to look at all of the options," said Robert Triefus, executive vice president for worldwide communications at Armani SpA.

Marcolin, another major player in the Italian eyewear market, was not available for comment on possible interest in the Armani license.

Together, the Giorgio Armani and Emporio Armani licenses accounted for 7.2 percent of Luxottica’s revenue. Based on Luxottica’s 2001 revenue of $3.05 billion (converted from euros at current exchange rates), Armani sales came to $225.3 million.

Luxottica, which said last week it is negotiating a fresh licensing deal and mulling retail acquisitions, declined to comment on its plans.

A Vuitton spokeswoman said eyewear is slated for introduction in late 2003 or early 2004, but declined to give further details about pricing, positioning, styling — or which company might be engaged to manufacture the product.

In a recent research report, Merrill Lynch’s luxury goods research team said, "There are not many brands that can allow Luxottica to offset the loss of the Armani brands. In our mind, we only have two names: Prada and Louis Vuitton."

Vuitton officials have identified eyewear as its next project. Best known for its handbags and luggage, Louis Vuitton has been carefully expanding its product range in recent years.In 1997, Vuitton named Marc Jacobs its artistic director and introduced ready-to-wear and shoes under his direction in 1998. Recent additions to the line include jewelry and watches.

While Armani has a history of terminating licensing deals and bringing production in-house through acquisitions, buying an eyewear company could be tricky from a distribution standpoint, according to one industry expert.

"Even though eyewear is a fashion product, it needs a different kind of distribution than jackets," said Renato Sopracolle, president of Sipao, an association representing eyewear manufacturers from the area around the Belluno section of Northeastern Italy. As an example, he cited Luxottica, which has a vast retail presence with its LensCrafters and Sunglass Hut chains.

"It would be hard for [Armani] to control everything because it would mean creating a distribution network that he doesn’t currently have," Sopracolle said.

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