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Armani Net Up 66 Percent in 2007

Company sees double digit growth in all categories.

MILAN — Giorgio Armani keeps building his fortune — and that of the company he founded 33 years ago.

Giorgio Armani SpA on Wednesday released its annual report, which revealed net profits rose 66.2 percent last year to 218.7 million euros, or $299.6 million, compared with 131.7 million euros, or $164.6 million, the previous year. Dollar figures were converted from the euro at average exchange rates for the period to which they refer.

And the company, of which Armani is sole owner, is giving the designer a nice reward for the performance: The report disclosed the firm’s investments last year included 13.4 million euros, or $18.3 million, by its subsidiary GA Yachting Srl in the construction of a new 213-foot yacht for Armani, named Main. In 2006, an initial figure of 11.5 million euros, or $15.7 million, was spent on the yacht, which launched earlier this year.

The company had released operating profits and sales in April, but not net income. Consolidated sales in 2007 reached 1.6 billion euros, or $2.19 billion, up 8.3 percent compared with 2006. At constant exchange rate, sales would have grown 11.9 percent. The company attributed the results achieved to the group’s brand diversification; double-digit increases in categories spanning from apparel to watches and jewelry, eyewear, fragrances, cosmetics, skin care and its home line; growth in mature and emerging markets, and to its global retail expansion.

In his opening letter in the report, the designer said he was “particularly proud” of the group’s performance in 2007. “The company is in great shape from a financial perspective with both revenues and profitability constantly on the rise, reflecting the success of our strategic decisions of recent years and a consistent period of extraordinary creative energy,” said Armani, who also serves as the company’s chairman and managing director.

The 74-year-old designer, who was on vacation and not available for further comment, recently told WWD that he did not feel rushed to decide anything regarding the fate of his company, also banking on “more than sufficient liquidity” to fund its expansion independently. Indeed, the report said the company can count on a cash pile of 373 million euros, or $511 million, up from 109.7 million, or $137.1 million, at the end of 2006.

In his introductory letter, Armani appeared to put questions about the future to rest, underscoring the relevance of change, vitality and innovation in the success of his company. “The creative energy is what satisfies me the most today. My 30 years of history at Armani undoubtedly represent an extraordinary wealth of experience, but our enthusiasm and our sheer energy and commitment remain those of a very young company, capable of renewing and challenging itself day by day,” wrote Armani.

The designer pointed to the brand’s product diversification, which has been a “source of growth…and not a hindrance to, or burden on, other activities.”

In addition to double-digit growth in licensed products, such as watches and fragrances, Armani pointed to the development of the Casa line and the “new areas of activity” connected to this division. In 2007, the home line reported a 133 percent hike, driven by the designer’s new furnishings projects. The first phase of 144 apartments in Dubai’s Burj Dubai development, under an agreement with Emaar Properties, “sold out in a few hours,” said Armani. The first Armani Hotel will open in Dubai in 2009, followed by Milan in 2010. The first Armani Resort will open in Marrakech, Morocco, and other hotels are slated to open in New York, Shanghai and London, according to the report.

In 2007, wholesale revenues grew 14.4 percent to 2.36 billion euros, or $3.23 billion. In Europe, wholesale revenues rose by 18.6 percent, accounting for 37 percent of total volume. Sales in the Far East grew 15.6 percent overall and 24.2 percent in China and Hong Kong. Sales in North America grew 7.3 percent to 556.1 million euros, or $761.8 million. For 2008, Armani said his “new challenge is India.” Giorgio Armani and Emporio Armani boutiques are slated to open in New Delhi sometime this summer.

Last year, investments in property, equipment and intangible assets amounted to 94.7 million euros, or $129.7 million, including 62.9 million euros, or $86.1 million, mainly to open and refurbish directly owned stores. Forty-nine stores, of which 14 are directly owned, opened in 2007 and as many are expected to open in 2008 in both emerging and consolidated markets. In particular, the report stated that the company invested 27.6 million euros, or $37.8 million, in its 65,000-square-foot Ginza Tower megastore in Tokyo, which opened last November. This is Armani’s fourth multibrand concept store. A fifth, on New York’s Fifth Avenue, is slated to open in early 2009.

The Giorgio Armani boutique on Avenue Montaigne in Paris was a 2.8 million euro ($3.8 million) investment, followed by the Giorgio Armani boutique in Dallas, which cost 2.1 million euros ($2.8 million) and the Emporio Armani store in Boston, a 2 million euro ($2.7 million) investment.

Among upcoming new stores: in China, three Giorgio Armani boutiques in Beijing, Dalian and Shenyang; two Emporio Armani stores in Beijing and Shenyang, and an Emporio Armani Café in Beijing. Last January, the company started refurbishing the former Collezioni boutique on Milan’s Via Montenapoleone, which will be turned into a new Giorgio Armani flagship covering 14,040 square feet. The store is expected to open in the fall. The company now counts 471 stores worldwide, of which 158 are directly owned.

The company registered growth across all product categories. Clothing sales, which include shoes, bags and small leather goods, totaled 1.29 billion euros, or $1.76 billion, up 12 percent compared with 2006. This category accounted for 55 percent of total wholesale revenues. Sales of perfumes and cosmetics grew 13.4 percent, accounting for 29 percent of total wholesale sales. Eyewear sales rose 18.8 percent and watches and jewelry 19.9 percent.

Last year, the group initiated a “radical reorganization of the manufacturing companies, to encourage a more modern and integrated industrial structure that meets the requirements of product and feature differentiation.” For example, Armani took control of the residual 20 percent shares in production company Dei Mutti Srl in December. Such projects will take up most of 2008.

Despite bleak macroeconomic forecasts, Armani said he was “looking ahead with confidence,” given the company’s order backlog for fall. “Beyond that, we are already working on our strategies for 2009 and 2010, always aiming to improve. This is the secret of our group’s success. This is our constant goal,” said the designer. �