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Armani Net Jumps 22.7% for 2005

Giorgio Armani SpA's annual report shows its net profit for the year ended Dec. 31 spiked 22.7 percent to $193 million.

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MILAN — Call Giorgio Armani the 100 million euro man.

That is how much the designer received in dividends last year as his company’s sole shareholder — a payout that resulted from Giorgio Armani SpA’s strong financial performance in 2005.

The company revealed in its annual report released this week that its net profit for the year ended Dec. 31 spiked 22.7 percent to 154.8 million euros, or $193 million, boosted by 39.8 million euros, or $49.75 million, in extraordinary income from real estate and stock market deals. Dollar figures have been converted from the euro at average exchange rates for the period to which they refer.

Calling 2005 “a record-breaking year,” Armani touted a series of business developments, including the birth of the couture line Giorgio Armani Privé and the formation of a joint venture to expand the A|X Armani Exchange brand worldwide. Those two moves consolidated Armani’s presence on both ends of the fashion spectrum, from custom-made gowns to T-shirts.

“Through the introduction of the Giorgio Armani Privé couture label at the start of the year and the signing of a joint venture agreement for the worldwide expansion of the A|X Armani Exchange brand at the end of the year, we effectively closed the circle on our unique multibrand approach, so that we are now able to reach all levels of the marketplace with carefully differentiated lifestyle fashion collections under the Armani master brand,” the designer said in the annual report’s opening letter.

Operating profit and revenue figures were in line with preliminary figures released in April. Earnings before interest and taxes rose 17.6 percent to 191.4 million euros, or $239.3 million. Sales advanced 10 percent to 1.43 billion euros, or $1.79 billion.

Two financial operations boosted Armani’s bottom line significantly. Last year, Giorgio Armani sold 49 percent of ManzoniUno Srl, the company that owns Armani’s flagship on Milan’s Via Manzoni, to another firm controlled by the designer. That deal generated a gain of 18.4 million euros, or $23 million, for the Giorgio Armani group’s coffers. Armani sold off 51 percent of ManzoniUno in 2004, similarly to another firm controlled by him.

Giorgio Armani SpA also booked a 21.1 million euro ($26.4 million) gain off its 1.5 percent stake in eyewear company Safilo SpA, which relisted on the Milan Stock Exchange last year. Armani received the shares as part of an agreement with Safilo, which produces Giorgio Armani and Emporio Armani eyewear.

This story first appeared in the September 5, 2006 issue of WWD.  Subscribe Today.

Although Armani hasn’t issued any official estimates for the first half of 2006, a spokesman said sales grew at least 10 percent in the first six months of the year, keeping pace with 2005’s performance.

The report issued an upbeat forecast for the current year, citing “positive prospects” in all of Armani’s markets.

“There is a considerable and steady rise in retail sales in key international markets, particularly the Far East and Europe, and significant growth in the orders portfolio, especially in the accessory and home lines,” the document stated.

The report also detailed some of the company’s investments and expenditures. Last year, the fashion house invested a total of 104 million euros, or $130 million, which went toward a combination of store openings and renovations, expanding production facilities and the reorganization of various subsidiaries within the firm.

Specifically, Armani injected 36 million euros, or $45 million, into its retail network, opening 41 stores and renovating 22 existing boutiques. The company is now preparing to open a new flagship and corporate headquarters in Tokyo’s Ginza district next fall. Another Armani retail priority is to double the size of the 96-store strong A|X Armani Exchange chain over the next three years with partners Christina Ong and her husband, Ong Beng Seng.

In line with the company’s overall strategy to buy out minority shareholders in its subsidiaries, Armani purchased 40 percent of apparel manufacturer Borgo 21 for 35.2 million euros, or $44 million, in April, the report stated.

“[Giorgio Armani] has now acquired total control over the companies that manufacture and market Giorgio Armani label clothes,” the company said of the Borgo 21 deal.

Elsewhere, Giorgio Armani spent more on raw materials, promotion and travel. The company said the cost of goods and consumables rose 24.7 percent to 12.3 million euros, or $15.4 million, as it bought more apparel, accessories and fabric for the Armani Privé, Armani Jeans and Armani Casa collections.

Armani spent 66.65 million euros, or $83.31 million, on advertising, promotion and fashion shows. That’s a 7.8 percent increase from 2004. Travel and other personnel-related expenditures rose 23.1 percent to 10.57 million euros, or $13.21 million.

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