PRINT THIS STORY:

CHANGE TEXT SIZE:

SAFILO EYEWEAR EMBRACES ITS FUTURE IN RETAIL

By Jesse Serwer

In six years the Safilo Group, a Padua, Italy-based eyewear maker that produces licensed sunglass collections for the likes of Gucci and Christian Dior, has expanded its retail arm, Solstice Sunglass Boutiques, from six stores to 122, all in the U.S. Now the world's second-largest eyeglass manufacturer is in the process of super-sizing its retail footprint through international acquisitions and the introduction of Sunsights by Solstice, a more affordable variant on its extant luxury concept.

Safilo, which entered retail with its 2002 acquisition of Solstice from the LVMH Group, hopes to have as many as 800 retail units in its portfolio by 2012, according to Giovanni Pesce, the company's director of retail in Europe. “We aim to grow by at least 100 stores per year, in accordance with the general economic environment and the availability of good locations,” Pesce said in an e-mail. “A significant portion of this growth will come from organic development, but we're open to evaluate good opportunities for acquisitions, should they arise.”

Several have arisen. In November 2006, shortly after CEO Claudio Gottardi was installed, Safilo made its second retail acquisition: Loop Vision, a 66-store eyewear chain in Spain. This past February the company announced the acquisition of Just Spectacles, a Perth-based chain of 44 stores across western and southern Australia, and its purchase of a 60 percent stake in Grupo Sunglass Island, which operates 38 Sunglass Island and seven Island Optica stores in Mexico.

In 2007 retail accounted for slightly less than 6 percent, or about €70 million ($109 million), of Safilo's net sales, up from nearly 4 percent in 2006. “We expect it to increase its contribution to 9 percent to 10 percent of total turnover this year,” Pesce said. Retail avenues could account for at least 20 percent of sales by 2012, he adds. Safilo's net sales last year totaled €1.19 billion, up 6 percent from the previous year.

The company's board forecasts relatively modest growth for this year, about 4 or 5 percent, but something in the vicinity of 7 or 8 percent over the next five years. The direct retail channel was cited as a significant engine of this anticipated growth.

Safilo is also developing a new prescription eyewear concept it plans to launch in Spain later this year. Just Spectacles and Loop stores, which sell prescription eyewear in addition to sunglasses, could eventually be converted to this model, Pesce says. But luxury seller Solstice, which carries Safilo brands and those produced by other luxury sunglass makers, will remain the centerpiece of the retailing plan, in the U.S. and elsewhere. “For the short term, the [newly acquired chains] will remain under those branded names, but eventually [many] will be converted to Solstice stores,” said Rick Talmage, COO of Solstice Marketing Concepts, a subsidiary of Parsippany, N.J.-based Safilo USA. “Any new stores that would be opened would be under the Solstice name.”

Sunsights by Solstice, which made its debut last year at Westfield's Garden State Plaza, in Paramus, N.J., seeks to tap into the growing demand for high-end sunglasses among teens and young adults by offering products at a slightly lower price point. “Where [the price point] at Solstice stores is between $95 and $600, Sunsights might be $95 to $300,” said Talmage. “It won't carry the top luxury brands. That will allow us to go into additional markets and different centers than we're in today.”

The luxury sunglass market is primed to benefit from higher prices for luxury goods in general, and possibly even from the slowed economy, according to Pamela N. Danziger, president of Stevens, Pa.-based Unity Marketing. “Shoppers in this environment are looking to trade down to more affordable luxuries, and sunglasses is definitely one of those categories,” Danziger said. “For one, it is very in-your-face as far as style, and it's much less expensive then the comparable 'it' bag.”

Sunsights stores are nearly identical to Solstice in presentation and in size, measuring between 600 and 1,200 square feet, Talmage says. There are currently five Sunsights stores in operation, with five more slated to open by year-end. Solstice also has five Solstice Sunglass Outlet centers. “Outlet centers are becoming regional shopping centers now, so we're targeting the top-performing ones,” he said. “We have a store in Woodbury Commons, [and] we're opening one up in Orlando,” Talmage said. “Half the products we sell in the outlets are regular price, so it's not just a clearance avenue for us.”

Sixty-five percent of Solstice customers are women, Talmage says, and range in age from about 25 to 50. Safilo-produced brands make up just 50 percent of Solstice's assortment. The mix of in-house and competing brands gives Solstice an advantage over Ilori, the luxury sunglass concept launched last year by Luxottica Group, Safilo's chief competitor. (Luxottica also owns LensCrafters and Sunglass Hut). “They have Luxottica brands, but they don't have Safilo brands, so they can't compete when it comes to assortment,” Talmage said.

Solstice already has stores in most major U.S. markets, but its immediate plans include opening additional units in certain key regions, such as Arizona, Florida and New York City, and entering Canada. “In New York we have three stores, but we could easily have eight or 10, same with Florida,” Talmage said. “Montréal, Toronto and Vancouver are target cities for us.”

Malls with Saks Fifth Avenue, Neiman Marcus or Nordstrom anchors and where sales are $450 per square foot at minimum are ideal, he says. “Anytime there's luxury brands those definitely help. We try to be in very visible, 50-yard-line locations in centers, near high-traffic retailers.”

China, where Safilo is close to completing a production facility outside Shanghai, is also under consideration as a future market, along with continental Europe. “[Solstice] could be successfully exported outside the U.S., potentially anywhere, without major adaptations,” Pesce said. “We will give priority to countries where we currently run retail operations, and therefore extract all synergies.”