LensCrafters 2004 Annual Report Download - page 16

LUXOTTICA GROUP IN 2004
15
WHOLESALE
BRAND PORTFOLIO
From a brand portfolio perspective, 2004 saw two
significant trends for Luxottica Group’s licensed
brands: first, the Group signed prestigious licensing
agreements reinforcing the strength and balance of
the overall brand portfolio; second, the new
agreements and recent renewals have a longer
average duration than in the past. Longer licensing
agreements provide more time for collections to
develop and be properly positioned in the market.
The Group signed new licensing agreements with
leading fashion houses Donna Karan and Dolce &
Gabbana. Other license brands, already partners with
Luxottica Group, posted significant growth rates,
ensuring a strong performance for the entire portfolio.
Prada and Versace were fully on target with the
Group’s projections while Bulgari and Chanel, brands
already very strong each within its own distribution
segment, continued to prove their value. This adds to
Luxottica Group’s satisfaction with the renewal in 2004
of the agreements with both brands. Of all the license
brands, Chanel posted the highest level of sales, at
nearly 5% of consolidated sales.
It is important to note that, overall, sales levels of
house brands continued to be particularly significant.
With respect to this, in 2004 Ray-Ban continued its
growth, demonstrating how much the Group has been
able to do with the brand, which is today the leading
sun brand in the world and the best selling brand for
Luxottica Group, representing approximately 15% of
consolidated sales. In fact, in 2003 two new lines were
launched, Ray-Ban Ophthalmic and Ray-Ban Junior,
both of which are enjoying great success. Ray-Ban
Ophthalmic has grown in a little over one year to
represent 20% of total Ray-Ban sales, without
cannibalizing sales of the sun collection, but instead
presenting cross-selling opportunities.
Ray-Ban was not the only brand to perform well, other
Luxottica Group house brands, especially Vogue,
Arnette, Persol and Revo posted positive results for
the year and promise excellent additional growth
potential.
2004 proved to be an extremely rewarding year. The
Group’s increasingly stronger, more balanced brand
portfolio was able to respond to the diverse trends and
demands of the market, while receiving the
endorsement of the prestigious fashion houses that
entered into or renewed licensing agreements with
Luxottica Group.
DISTRIBUTION
The overall strong financial performance and good
reception by the market of the new collections made
2004 a particularly positive year for the Group’s
wholesale division. Wholesale sales to third-parties
reached Euro 908.1 million, up 10.4% from 2003.
Total wholesale operating income improved 14.1% year-
over-year to Euro 233.1 million, representing 21.3% of
sales for the division (up from 19.2% for 2003).
During 2004, the wholesale business continued to
grow with rates above market averages in most of the
countries where Luxottica Group is present. In Europe,
which remains the most important market for its
wholesale business, the Group showed continued
progress, even in markets that did not grow in
absolute terms. The same was true in North America,
where wholesale sales to third-parties and their
profitability improved, thanks to the renewed strength
of the brand portfolio, especially fashion brands.
As for Asia, in the first six months of the year some of
the weakness experienced in 2003 continued, while
the second half of the year showed positive results.
Latin America showed signs of recovery in its two
most important markets, especially Brazil, with
improvements in both sales and profitability.
From a structural perspective, the establishment over
the years of centralized distribution centers helped
improve efficiency in customer service. The Group
continues to invest in optimizing these services and
overall logistics.
Luxottica Group remains an ideal partner for wholesale
clients, who benefit from its incomparable array of
products and services. The service that Luxottica
Group is able to provide clients benefits even from the
retail acquisition that the Group makes. In fact, the
experience in retail distribution helps the Group better
understand the challenges and needs of other retailers
so that it can continuously improve the level of service
it provides them.