PARIS — Kering is flexing its muscle in the eyewear category.
In the latest twist in the fast-changing eyewear sector, the French group said on Tuesday its Kering Eyewear division will take over the development, production and distribution of Cartier eyewear, marking its first license deal with a brand outside the group.
As part of the strategic partnership, Cartier parent Compagnie Financière Richemont will buy a 30 percent stake in Kering Eyewear. Financial terms of the deal were not disclosed.
Kering Eyewear will absorb the Manufacture Cartier Lunettes plant in Sucy-en-Brie, France. It is set to present its first collection for Cartier, for spring 2018, at the Silmo trade show in Paris in October.
The aim of the partnership was “to create a stronger platform for the development, manufacturing and worldwide distribution of the Cartier eyewear collection,” Kering said in a statement. The project is subject to clearance by antitrust authorities.
“We believe this is a positive for Richemont because we understand that the Cartier eyewear business — and in particular their factory in France — was losing material amounts of money,” Luca Solca, managing director of equities and sector head of luxury goods at Exane BNP Paribas, said in a research note.
“We would reckon that Richemont takes a stake in Kering Eyewear at no cash disbursement, but rather in exchange for committing the megabrand Cartier to the business. We expect Kering Eyewear will pay royalties to Cartier the same way as with their other licenses,” Solca added.
Officials at Cartier were not immediately available to comment. Roberto Vedovotto, chief executive officer of Kering Eyewear, likewise was not available to provide additional details on the agreement.
Kering took back control of its eyewear activities in 2014 and launched its first collections the following year. The Padua, Italy-based division now covers 12 in-house brands: Gucci, Bottega Veneta, Saint Laurent, Alexander McQueen, Brioni, Christopher Kane, McQ, Stella McCartney, Tomas Maier, Boucheron, Pomellato and Puma.
Jean-François Palus, managing director of Kering, recently said gross margins were good and the division was on track to post revenues of 340 million euros, or $367 million at current exchange, this year, before the elimination of intra-group flows.
“We consider our strategy validated not only by the success of our launch, which will now start to bear fruit, but also by the recent changes that are reconfiguring the sector. Our growth prospects are considerable in a global market that continues to post double-digit growth,” Palus said.
At the time of the launch, Kering estimated its brands’ business at roughly 350 million euros, adding that this made it one of the top five players in the industry. Of the 11 Kering brands that were active in eyewear at the time, nine were managed through license agreements with five different partners, generating consolidated royalties of about 50 million euros.
Speaking at Kering’s full-year results press conference on Feb. 10, Palus said Kering Eyewear has produced 1,900 styles for a total of 8,500 references. Production is outsourced to some 20 partners, mainly in Italy and Japan, and the collections are distributed in a total of 85 countries.
The new business model gives Kering full control of the eyewear value chain, from design to product development and supply chain, and from branding and marketing to sales.
Bringing the eyewear collections in-house has resulted in more coherent collections and a better alignment of communications campaigns, with brands able to showcase their latest eyewear designs during their catwalk shows, the executive noted.
“Sales are much higher than under the licensing model. Bottega Veneta has already close to tripled its revenues, while Saint Laurent and Stella McCartney have more than doubled theirs,” Palus said. In addition, orders for Gucci eyewear were largely above target at the end of 2016, he added.
As part of its strategic move into eyewear, Kering terminated its Gucci license agreement with Safilo in December, two years earlier than planned. Safilo’s share price has fallen by more than 20 percent since the start of the year.
Meanwhile, eyewear companies Luxottica and Essilor revealed in January that they were merging to create a $16 billion eyewear colossus, while LVMH Moët Hennessy Louis Vuitton formed a joint venture with Marcolin that will give it the lion’s share of its eyewear business.