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Giorgio Armani on a Roll: Sales Surge, Stores Open, Product Keeps Expanding

Giorgio Armani scored double-digit profit and sales growth in 2005, opening dozens of stores and adding accessories and home goods.

MILAN — Giorgio Armani SpA on Wednesday reported double-digit growth in 2005 profits and revenue as it opened dozens of stores and further diversified into areas such as accessories and home furnishings.

The company also said first-quarter retail sales were up 8 percent.

Earnings before interest and taxes for the 12 months ended Dec. 31 surged 18 percent to 191 million euros, or $238.8 million. Sales for the period advanced 10 percent to 1.42 billion euros, or $1.8 billion, which Armani termed a “record level.”

All dollar figures have been converted from average exchange rates for the period to which they apply.

The numbers show a significant improvement from 2004, when sales advanced 3.5 percent and advertising costs bit into profits. Armani will release net profit figures in May, when it publishes its annual report.

President and chief executive officer Giorgio Armani, who is 71 years old, referred in a statement to speculation surrounding the business and his succession plans.

“As the sole shareholder of an independent company, I am often asked about plans for the future,” Armani said. “The performance of this company speaks for itself.”

Stating that his brand is worth 5 billion euros, or $6.1 billion, at retail, Armani said he is among the world’s most powerful brand names. In addition, he said there are significant internal resources at the company to fund organic growth and praised his management team as one of the best in the industry

“We can look forward to the future with great optimism and confidence,” he concluded.

Armani has said at various points he doesn’t want to sell his company and answer to a new owner. In an interview with The Wall Street Journal published Monday, he denied that the firm was preparing for an initial public offering. However, Armani didn’t completely dismiss the idea, and has alluded to the possibility on occasion, suggesting that he has gradually warmed to the concept of the stock market over the last few years.

“The most suitable solution is perhaps the stock market….I need to give a signal to the market … I have to think of the future of the company,” he told the newspaper. “I also have to give signals to the people who work here.”

This story first appeared in the April 13, 2006 issue of WWD.  Subscribe Today.

As for 2005, the company said it made capital investments of 104 million euros, or $130 million, over the period, including 36 million euros, or $45 million, on the retail network. Last year, the company opened 41 stores and renovated another 22 boutiques.

John Hooks, the firm’s commercial and marketing director and president of Giorgio Armani Japan, said the company plans to keep pace with its retail rollout, opening at least 40 stores this year and next year.

“I think that we’ll be able to match that figure in 2006 and in 2007, as well,” he said. “We want to maintain this sort of momentum.”

Retail sales at Armani stores account for about one-third of Armani’s consolidated revenue, which works out to 476 million euros, or $595 million. Armani specified that retail revenue grew 3 percent in the U.S., 10 percent in the European Union and 11 percent in Japan. Revenue in China rose 24 percent, thanks to a flurry of store openings there over the past couple years.

Armani also specified that Armani Casa’s retail revenue rose 40 percent to 30 million euros, or $37.5 million, as it added 30 points of sale last year, bringing the worldwide total to 75. Another 40 points of sales are slated to open this year.

Armani also has cash-rich coffers. The company’s net financial position has a positive balance of 443 million euros, or $553.8 million, compared with 397 million euros, or $496.3 million, the year before.

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, increased 10 percent to 1.85 billion euros, or $2.31 billion.

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

Apparel was still the largest product category by far, generating 52 percent of wholesale revenue. Fragrances was second with 28 percent of sales. Giorgio Armani and Emporio Armani are the group’s two biggest brands, together accounting for 59 percent of sales.

Armani said there were many reasons for the company to celebrate last year, including the launch of the Giorgio Armani Privé couture collection, retail expansion into China, a growing accessories business and a real estate deal to build a new flagship and headquarters in Tokyo’s Ginza district. The 12-floor tower is to open next year.

Last year, Armani also formed a venture with billionaires Christina Ong and her husband, Ong Beng Seng, to grow the A|X Armani Exchange business worldwide in markets such as Japan, China, the U.K., the Middle East and Latin America.