MILAN (Reuters) - French luxury goods group LVMH (LVMH.PA) will set up a design and manufacturing joint venture with spectacles maker Marcolin, and take a 10 percent stake in the Italian company, to give it more control over its prestigious eyewear brands.
LVMH is following rival Kering’s (PRTP.PA) lead in moving away from the traditional licensing model, which boosts eyewear manufacturers’ sales while brand owners earn royalties.
Marcolin said in a statement it would make eyewear for LVMH’s Celine and Louis Vuitton brands from 2018, aiming to gradually become the French group’s preferred partner in the eyeglasses business.
The move will be a blow to Italy’s Safilo Group (SFLG.MI), the world’s second-biggest eyewear maker, which currently holds LVMH licenses worth 340 million euros ($366 million), more than a quarter of its annual sales.
LVMH will own 51 percent of the joint venture and Marcolin the rest. As part of the deal, LVMH will subscribe to a reserved 22 million euro ($24 million) capital increase at Marcolin, taking a stake of around 10 percent.
Rival Kering, which owns brands including Gucci and Yves Saint Laurent, announced in 2014 it would bring its eyewear business in-house to support profit margins with a direct presence in a steadily expanding 95-billion-euro market.
LVMH’s move is expected to have little impact on market leader Luxottica LUX.MI. It makes glasses for LVMH-owned Bulgari but analysts estimate they account for less than 1 percent of Luxottica’s 9 billion euro annual sales.
Adding pressure on Safilo, Luxottica’s growth prospects have been strengthened by its planned merger, announced last month, with top lens producer Essilor ESSI.PA to create an eyewear powerhouse with more than 15 billion euros in annual sales.
LVMH could not immediately be reached for comment. Its CEO Bernard Arnault said last week the group would unveil its new eyewear strategy later this year.
In January a source had confirmed a report that LVMH was set to take a stake in Marcolin, which drove Safilo shares down 15 percent.
Safilo’s shares were down 6 percent by 1131 GMT on Wednesday.
Safilo CEO Luisa Delgado told Reuters last week that the group would be able to make up for the loss of LVMH licenses by expanding its own brands and striking new deals. She ruled out the group would need to restructure.
Safilo recently renewed a key Christian Dior license with LVMH until 2020. Its Celine license expires this year while Givenchy, Fendi and Marc Jacobs deals end between 2021 and 2024.
Additional reporting by Valentina Za in Milan and Pascale Denis in Paris; Editing by Susan Fenton