By  on April 20, 2007

MILAN — Swift sales of accessories, jewelry and beauty products propelled another year of double-digit profit growth at Giorgio Armani SpA.

Armani said Thursday that its full-year 2006 earnings before interest and taxes rose 19 percent to 246 million euros, or $310 million. Consolidated sales grew 9 percent to 1.47 billion euros, or $1.85 billion, for the year ended Dec. 31.

Dollar figures have been converted from the euro at average exchange rates for the period to which they refer.

The company also issued an upbeat forecast for the current year, touting 9 percent growth in wholesale orders for the group's fall-winter 2007-2008 collections. Armani said it is on track to post "significant" growth in revenue and profitability this year.

Despite that rosy outlook and the fact that the company just converted its bookkeeping to international accounting standards, a Giorgio Armani initial public offering isn't in the works. In fact, the 72-year-old designer told WWD he doesn't feel rushed to decide anything regarding the fate of his empire, which values its worldwide retail sales at more than 5 billion euros, or $6.8 billion.

"I am aware of all the options that are open to us, but see no immediate need to make any such decisions," Giorgio Armani, the company's president and chief executive officer, told WWD. "The Armani Group as an independent company has successfully created its own business and brand model, which is now generating significant growth and profitability year-on-year."

The designer added his company has "more than sufficient liquidity" to fund its expansion independently.

"Regarding our future potential growth, the Armani brand has a remarkable resonance around the world, which we are now just beginning to capitalize upon with our expansion into new and emerging markets, the rollout of our lifestyle brands such as A|X Armani Exchange, product diversification including home interiors, hotels and skin care and product expansion with the accessories," he said. "We are not short on ideas or opportunities, so there is significant scope for our continued expansion."

Armani's 2006 accounts echo a positive trend for the luxury goods business as a whole, said Gian Luca Pacini, an analyst with Intesa Sanpaolo in Milan."The 9 percent growth in consolidated sales reflects the good moment the industry is experiencing in general," Pacini said. "The even greater profit growth indicates that the company is keeping costs and investments under control."

Meanwhile, Armani's retail empire is steadily growing. Last year, the company opened 42 stores, both on its own and through franchise partners. This year, Armani will open another 50 doors, including a Tokyo concept store in a 12-story tower complex, 25 A|X Armani Exchange stores and 20 Emporio Armani boutiques. Armani currently has a network of 392 stores around the world carrying the group's various brands and product lines.

John Hooks, commercial and marketing director at Armani and president of Giorgio Armani Japan, said there's plenty of untapped potential for the company despite its bulk. Markets like China, South America and the Middle East are offering fresh terrain for stores, he said. Elsewhere, Armani is preparing to launch Armani Jeans, primarily a European wholesale label, in Japan and the United States.

"Armani Jeans is probably the only brand in our portfolio that needs to be adapted to the local market," Hooks said, noting casual sportswear has varying connotations in Europe, Asia and the United States.

Last year, Armani's capital expenses totaled 103 million euros, or $129.8 million, slightly down from the 104 million euros, or $130 million, spent in 2005.

The company said its global "wholesale turnover" figure, which tallies up Armani's wholesale business to third parties as well as the wholesale values of merchandise sent to Armani's own stores and licensed products, rose 11 percent to 2 billion euros, or $2.5 billion.

Armani uses this umbrella wholesale figure to break down the size of his business in terms of brand, product category and geographic market.

The company stressed the double-digit growth of several product categories last year, including jewelry, fragrance and accessories. Sales of apparel, the biggest revenue generator at the company, increased 7 percent.

In particular, Armani specified that sales of accessories rose 15 percent. The company said its bags and shoes are now present in 1,100 doors worldwide. Expanded distribution through duty free and travel retail channels helped boost eyewear sales by 20 percent. Fragrance and cosmetics revenue spiked 14 percent.In terms of Armani's various brands, wholesale sales of the top-tier Giorgio Armani brand rose 15 percent, while those at diffusion label Emporio Armani grew 14 percent. A|X Armani Exchange, which the company is expanding internationally, saw its sales climb 17 percent. Last year, A|X Armani Exchange entered several new markets including Brazil, Indonesia and the United Arab Emirates.

Growth was less robust for the Armani Collezioni and Armani Jeans lines, which advanced 6 and 1 percent, respectively. Hooks said Collezioni, present in about 2,000 doors worldwide, is a mature business with limited potential in terms of future expansion. Armani Jeans will benefit from a future rollout in North America and Asia, he said.

Geographically, wholesale sales grew 11 percent in Europe, 10 percent in North America, 9 percent in Asia and 21 percent in the rest of the world.

Hooks said Armani's retail expansion and sales growth in China has partially compensated for sluggishness in Japan. Still, despite a weak yen, Armani managed to boost its sales in Japan by 2 to 3 percent last year, he added.

"We're very optimistic about Japan," Hooks said. "Even if the overall size of the market is smaller, we are hoping we can get a much bigger slice of it."

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