Safilo and Kering Announce Changes to Gucci Agreement as Kering Takes Control of Eyewear Business In House

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PADUA— Safilo (SFL:MI) and Kering (FR 0000121485, KER.PA, KER.FP) have announced changes to their Gucci licensing agreement in the context of Kering’s decision to internalize most of its eyewear business.

As part of this strategic move, Kering and Safilo have agreed to evolve their 20-year-long partnership. They jointly agreed to terminate the current Gucci license agreement two years early on Dec. 31, 2016. In compensation, Kering will pay Safilo €90 million, in three installments between 2014 and 2018.

In order to benefit from Safilo’s expertise and production capabilities in manufacturing, the two groups have further agreed to put in place a strategic product partnership agreement for four years starting in January 2017 which is renewable upon mutual agreement. This agreement covers the product development, manufacturing and supply of Gucci eyewear products by Safilo, and is subject to the signing of long-form agreements by the end of the year.

“We are satisfied with furthering our partnership in a way that leverages the heart of Safilo’s strengths in eyewear product excellence,” said Luisa Delgado, CEO of Safilo Group. “We have a unique tradition in the market as strategic partner for those brands that consider eyewear as strategic category. Through this agreement we confirm our capabilities as trusted partner.”

Jean-François Palus, group managing director, Kering, added, “We are satisfied to count on Safilo as a partner because their know-how in product development and manufacturing is important for the quality and craftsmanship that we want more than ever for our Eyewear business.”

According to Kering, the company plans to take back control of its eyewear business after assessing the growth prospects of the eyewear market and the business potential of its brands in the category. Kering has initiated a strategic move aimed at building in-house eyewear expertise for its Luxury and Sport & Lifestyle brands, the company said in its own announcement.

The current size of the Kering brands’ collective business in eyewear is roughly €350 million, which makes Kering one of the top five players in this industry, the company said. The 11 Kering brands that are active in the eyewear category, of which nine are managed through license agreements with five different partners, generate consolidated royalties of approximately €50 million.

In order to maximize the potential of its brand portfolio, Kering is setting up a new business model through which, together with its brands, Kering will fully control its eyewear business, from design to product development and supply chain, and from branding and marketing to sales. Kering’s statement did not detail the timetable for the other brand partnerships, outside of Gucci/Safilo.

All brands will continue to control separately their creative process under the leadership of their respective creative director, but Kering is establishing a dedicated entity specialized in luxury, high-end and sport eyewear under the direction of Roberto Vedovotto, CEO of Kering Eyewear. Vedovotto and his team will be co-shareholders of this new entity. The entity will eventually retain full activation of the brand portfolio in both Luxury and Sport & Lifestyle and will control internal design, product development and sales force, as well as full control over a network of external manufacturing suppliers and enhanced distribution across all channels with specific focus on Kering brands’ directly operated stores network.

Vedovotto said, “Eyewear is a strategic category for Kering brands. Through this innovative project, Kering aims at helping them fulfill their full growth potential in this business segment while leveraging the unique appeal of each of them.”

Kerig is a world leader in apparel and accessories and develops an ensemble of powerful Luxury and Sport & Lifestyle brands: Gucci, Bottega Veneta, Saint Laurent, Alexander McQueen, Balenciaga, Brioni, Christopher Kane, McQ, Stella McCartney, Tomas Maier, Sergio Rossi, Boucheron, Dodo, Girard-Perregaux, JeanRichard, Pomellato, Qeelin, Puma, Volcom, Cobra, Electric and Tretorn. Present in more than 120 countries, the Group generated revenues of €9.7 billion in 2013 and had more than 35,000 employees at year end.