By  on March 16, 2006

MILAN — The Gucci brand had a record year in 2005 and its president and chief executive officer, Mark Lee, is equally upbeat about 2006. The executive reiterated his support of creative director Frida Giannini and outlined plans to grow the brand, both through increased sales of ready-to-wear and flagships in Hong Kong and Tokyo.

"We had the best year in the history of the company, so we are quite proud and happy about that," Lee told WWD in an interview.

PPR reported full-year 2005 results last week that showed a 14.7 percent jump in the Gucci brand's recurring operating income to 485 million euros, or $606.3 million at average exchange, for the period, and a 13.6 percent leap in sales to 1.81 billion euros, or $2.3 billion. Lee clarified that sales would have grown 18 percent at constant currency rates.

The ceo said a 16 percent surge in sales of Gucci rtw in the fourth quarter illustrates the positive reception of Giannini's cruise collection. Gucci women's rtw sales for the full-year grew 7.6 percent on a comparable basis and at constant currency rates.

Growth at the Gucci brand is vital — Gucci Group ceo Robert Polet has set the goal of doubling the size of the brand within the next seven years while increasing group gross margins to 70 percent.

"There's a lot of potential for growth," said Lee. "I would really consider that both women's and men's ready-to-wear are underdeveloped and underpenetrated and they've been growing below the curve of Gucci.

"It's unusual that your biggest categories are growing the fastest," he said, referring to the accessories business. "Logically your less-developed categories should be able to grow even faster because it's easier, obviously, on smaller numbers and from a smaller base of business."

In a breakdown of major categories for 2005, rtw accounted for just 12.2 percent of Gucci brand revenue, or 221.2 million euros ($276.5 million); leather goods made up 54.3 percent of the business, or 981.8 million euros ($1.2 billion), and footwear comprised 12.7 percent, or 229.8 million euros ($287.3 million).

"All of our numbers are public, so it's not a secret that, in the last several years, the ready-to-wear has been a little bit stagnant," Lee said.

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