KER Kering

German sportswear firm Adidas AG said Thursday it had signed a license agreement with a small Italian company, Italia Independent SpA, to make eyewear for its Adidas Originals collection, as both firms try to boost their brands by tapping into a larger customer base with medium-priced eyewear.

The agreement, which will last four years, also marks a different approach to licensing, typically one of the most important sources of revenues for eyewear makers, at a time when the sector is undergoing massive reorganization. Companies such as Luxottica—a sector giant with €7.7 billion ($8.54 billion) in annual revenue—have made their fortune through signing licensing agreements with luxury goods houses such as Armani and Chanel. Others, like French conglomerate Kering SA—owner of Gucci and Saint Laurent—have recently decided to bring eyewear production in-house to have a closer tie on distribution and full revenues rather than only royalties.

Adidas has been trying to lift its street cred lately after losing market share in the sportswear and apparel segments in the U.S. Its Adidas Originals line is aimed at a young and urban crowd and includes streetwear, retro sneakers and accessories like bags, hats and watches. Last year, Adidas signed a design and marketing deal with rapper Kanye West to boost sales at its Originals unit. It also collaborates with other famous artists including singer Rita Ora and rapper Pharrell Williams.

In the first half of the year, Adidas reported a double-digit sales increase at its Originals business.

Unlike traditional licensing agreements, the new eyewear collection will bear both companies' names. Italia Independent, founded in 2007, says it will try to build brand awareness through its association with Adidas. "This deal comes at a time when we need an important communication boost," said Italia Independent's Chief Executive Andrea Tessitore.

The new eyewear will have an average price of €90—lower than most luxury-goods firms' products which, according to Mr. Tessitore, is the largest share of the market.

"There's a strong appetite for aspirational products at an adequate price," said Mr. Tessitore. "The share of the luxury eyewear segment, with prices over €200, makes only about 10% of the total market in Europe, but there are so many players there. The bulk of sales are in the lower price segment."

Italia Independent, whose annual revenues were €33 million, up 32% compared with the previous year, is trying to cash in on the deal, both in terms of increasing popularity and sales. But many other players have taken opposing strategies as licensing is seen as increasingly unstable.

Recently, Kering decided to cancel its licensing agreement with another Italian eyewear maker, Safilo, which had a significant part of its revenues coming from the deal. Kering said that it estimated that the group's eyewear sales, which includes products for 11 brands, could be about €350 million, but because of the licensing agreement in place, the French conglomerate only got a tiny portion of it in royalties.

Given the instability of the licensing business, Safilo recently decided to also focus on proprietary brands to avoid being too dependent on licensing, Chief Executive Luisa Delgado said in an interview last year.

Luxottica, on the other hand, has always kept a fairer balance between its own brands, such as Ray-Ban and Oakley, its retail activities and the licensing agreements with luxury houses, which supported the company's constant growth in the last decades.

The new collection will be presented in January 2016, the companies said.

Write to Manuela Mesco at manuela.mesco@wsj.com and Ellen Emmerentze Jervell at ellen.jervell@wsj.com

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(END) Dow Jones Newswires

September 03, 2015 12:35 ET (16:35 GMT)

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