MILAN — In the latest shakeup in the Italian eyewear industry, Prada has ended its four-year joint venture with De Rigo and signed on with industry giant Luxottica Group.
Prada bought out De Rigo’s 51 percent stake in their joint venture company, EID (International Eyewear Distribution), and subsequently sold 100 percent of it to Luxottica for $30.4 million or, in local currency, 26.5 million euros.
Under the 10-year licensing agreement, Luxottica will produce eyewear for both the Prada and Miu Miu brands, as well as manage worldwide distribution.
In a joint statement, Luxottica said it expects the Prada license to generate sales of $137.7 million, or 120 million euros, in the first year of the contract. The first collection to be produced by Luxottica is set to bow in September.
Over the past few months Luxottica has sought to fill the vacancy left by the termination of the Giorgio Armani eyewear license. In January it inked a licensing deal with Versace, just months after Armani ended its 14-year relationship with the luxury eyewear manufacturer.
Although the Versace license was a strong first step in rebuilding Luxottica’s revenues, its expected first-year sales of $103.4 million would still fall far short of what the Armani license brought in. In 2001, Armani eyewear accounted for more than $250 million in revenues, about 7.2 percent of Luxottica’s sales of $3.52 billion. Dollar figures have been converted from the euro at current exchange.
However, with Prada now in its portfolio, Luxottica is one step closer to generating designer and luxury revenues commensurate with those of the past, despite its inability to generate breakthrough sales under the EID banner.
“With this new license — and others we have recently signed — we have restored the importance that designer lines had for us in 2002,” Leonardo Del Vecchio, chairman of Luxottica Group, said in a statement.
The firm, however, warned the Prada license would not have a “significant impact” on its 2003 financial performance.
Formed in 1999, EID produced and distributed eyewear for Prada Group brands, including Miu Miu, Jil Sander and Helmut Lang. Although there was much fanfare behind the deal, the joint venture never quite took off and recently started to incur losses.In 2002, EID sales reached $35.8 million, down 2.8 percent from the previous year, with an operating loss of $1 million.
After lackluster results with De Rigo, Prada is hoping its new partner will fully realize the potential of its eyewear business. “I am certain that the strong technological, industrial and distributive capabilities of Luxottica Group will pave the way to achieve significant economic results in a short amount of time,” Patrizio Bertelli, chief executive of Prada Group, said in a statement.
A source close to De Rigo said the public company decided to sell its stake in EID because it wasn’t satisfied with its evolution.
“Really, both parties were unhappy with the setup,” the source said. “The major part of the management was handled by Prada and De Rigo never had direct control over the business. It was useless for De Rigo to continue with the venture.”
Although De Rigo will no longer be involved in the distribution of Prada’s eyewear collections, it will continue to produce a nominal part of Prada’s eyewear. According to the statement, Luxottica “has the option to rely on third-party manufacturers under its own supervision” and a Prada spokesman confirmed that De Rigo would continue to produce a “very, very small” amount of eyewear for the Prada brand. The spokesman reiterated that Luxottica would oversee any outsourced production.
While the Luxottica deal covers both the Prada and Miu Miu labels, it’s not yet clear what firm or firms will produce eyewear for Helmut Lang and Jil Sander. “We are currently in discussions,” a Prada spokesman said. “When something is finalized we will communicate it.”
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