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Armani Sales Boost Annual Profits 9.7%

Double-digit sales gains in jeans, watches, cosmetics and perfumes allowed Giorgio Armani to post a 9.7 percent increase in pre-tax profits last year.

MILAN — Double-digit sales increases in jeans, watches, cosmetics and perfumes allowed Giorgio Armani to post a 9.7 percent increase in pretax profits last year despite less robust growth in other parts of its apparel business.

This story first appeared in the April 11, 2003 issue of WWD.  Subscribe Today.

Armani’s pretax profit for the year ended Dec. 31 rose to $214.5 million from $196.2 million. Sales advanced 2.3 percent to $1.4 billion from $1.37 billion, in line with preliminary figures released earlier this year, but slower than the 5 percent growth in the first half of 2002. Dollar figures are converted from the euro at current exchange rates.

Giorgio Armani, president, chief executive and owner of the privately held designer house, said he was optimistic that the company will continue to deliver positive results despite tough times, but declined to offer specific forecasts.

“I never try to be involved in making predictions on the economy,” he said in an interview. “What is important to me is to run the business in a way that is prudent and appropriate to the current market conditions.”

However, in a reference to the difficult trading conditions currently affecting world markets, he noted, “Any brand that is interested in building its business over the long term has to be able to manage through economic cycles. There will be more buoyant times again as there always are. In the meantime, being successful means being practical in answering the real needs of your customers.”

Earnings before interest, taxes, depreciation and amortization rose 7.2 percent to $283.5 million from $265.2 million in 2001. A company spokesman said net profit for the year, which is expected to be released later, also rose about 7.2 percent.

“I look to the future with confidence in the strength of the brand and in our proven strategy for expansion, which has achieved a 14 percent compound annual growth rate for the company over the last five years,” Armani said. “We are fortunate in having a loyal client base which we enjoy serving season after season.”

Armani said wholesale revenues last year rose 6.4 percent to $1.8 billion from $1.71 billion.

The company also produced for the first time a breakdown of 2002 wholesale sales by brand and product category. The Emporio Armani and Armani Casa brands were the two largest revenue generators, each accounting for 19 percent of the total.

Giorgio Armani fragrances accounted for 17 percent of revenue. Giorgio Armani apparel and Armani Jeans represented 16 percent and 13 percent of the volume, respectively.

For the remainder, Emporio Armani fragrances generated 8 percent of sales while A|X Armani Exchange accounted for 7 percent.

Armani noted that it has spent more than 10 percent of its wholesale volume, or more than $180 million, on advertising and public relations efforts for its brands.

Turning to product categories, the company noted apparel sales rose 4.7 percent, with the AJ/Armani Jeans label seeing an especially strong 19 percent jump. Apparel is by far the biggest revenue generator for the group, accounting for 51 percent of the wholesale turnover.

Sales of Emporio Armani watches rose by 24 percent, while those of Giorgio Armani and Emporio perfumes and cosmetics added 11 percent.

Europe is responsible for more than half of the firm’s sales, with Italy generating 16 percent of wholesale turnover and the rest of Europe accounting for another 36 percent.

North America makes up 28 percent of sales. Japan and other Asian Pacific countries account for 6 percent and 5 percent, respectively, with the remaining 9 percent coming from other markets.

The company invested $93.8 million over the course of 2002, including $42 million to open 30 new stores and restructure 16 others. Another $12.9 million went toward offices and infrastructure and $8.6 million was allocated to boost production.

“We will continue with our strategic investment program in the coming year, as always, using internally generated funds, to further expand our direct retail network and, in particular, to support the new product lines we have launched in the last couple of years,” said Armani, who said he plans to open another 20 stores this year.