Kering Signs Deal With Safilo to Bring Eyewear In-HouseAndrew Roberts
Kering SA, the French owner of handbag maker Gucci, plans to take control of its eyewear business as demand for branded frames soars.
Kering signed an agreement with Italy’s Safilo Group SpA to set up a four-year strategic product partnership from 2017, the Paris-based company said today in a statement. As part of the accord, Kering will pay Safilo 90 million euros ($118 million) in three installments through 2018 to terminate the eyewear maker’s Gucci license deal two years early.
“Eyewear is a strategic category,” Roberto Vedovotto, who joined Kering from Padova-based Safilo in 2013, said in the statement. By bringing the business in-house, Kering aims to help its 11 brands that are active in eyewear “fulfill their growth potential.”
Eyewear generates about 50 million euros of royalties for Kering via license agreements with five different partners, the French company said. Yet, the business is worth about 350 million euros in sales and the market for premium high-end frames is growing at a double-digit rate, Kering said.
“We have doubts the solution opted by Kering will result in the group producing an overall higher amount of profit in absolute terms with its eyewear business,” said Luca Solca, an analyst at Exane BNP Paribas. “The challenge for Kering will be to service a customer base that has no overlap with its own.”
Vedovotto, who was formerly CEO of Safilo, will head Kering’s new eyewear unit and be a co-shareholder of the division, the French company said.
Kering shares fell 0.3 percent to close at 161.95 euros in Paris today, paring the gain this year to 5.4 percent, for a market value of 20.5 billion euros.