NEW YORK — Giorgio Armani's strategy to open a sprawling, 47,000-square-foot, multifaceted retail destination here signals the designer's commitment to substantially boost his U.S. business.
Over the next three years, Armani will spend up to $100 million to significantly expand his company's U.S. wholesale and retail operations, which account for 25 percent of its worldwide volume. In addition to building the megastore, appropriately called Armani/Fifth Avenue, the capital expenditures are earmarked for several key U.S. growth initiatives.
Among them are:
-- Opening additional Giorgio Armani, Emporio Armani and A|X Armani Exchange stores throughout the U.S.
-- Renovating existing Giorgio Armani boutiques in American cities, as well as 155 Giorgio Armani and Armani Collezioni women's and men's shops-in-shops in U.S. department stores.
-- Launching emporioarmani.com this fall, which will offer e-commerce capabilities.
-- Re-launching Armani Jeans, a sportswear and denim line, in U.S. department stores, beginning this spring at Nordstrom and Bloomingdale's.
-- Expanding accessories, fragrance and skin care products in directly owned stores, wholesale accounts and online.
Although the U.S. market is the company's most important in the world in terms of revenues, Armani, chairman and chief executive officer of Giorgio Armani SpA, told WWD, "There remains great potential for further expansion. This investment in the creation of a completely new shopping experience and a new way of looking at the world of Armani demonstrates the very significant commitment we are making to the long-term growth of the Armani brand in the U.S."
For the year ended Dec. 31, Armani earned $310 million, before interest and taxes, on consolidated sales of $1.85 billion — quite a hefty payday for the designer, who completely owns his company. Worldwide, the Armani brand, including licensed products, generated retail sales of more than $6.8 billion. After the U.S., the next four largest markets, in order, are Italy, Japan, the U.K. and Spain.
The centerpiece of the U.S. expansion will be the fall 2008 opening of the New York flagship at 717 Fifth Avenue, a space currently occupied by Hugo Boss. The space, on the southeast corner of 56th Street, will be converted into a multifaceted retail destination based on a concept Armani pioneered on Via Manzoni in Milan (Armani/Manzoni), and has since built in Hong Kong (Armani/Chater House) and Munich (Armani/Munich). There are plans for a fourth complex in Tokyo's Ginza district (Armani/Ginza Tower) in November.These complexes, which range from 20,000 square feet in Munich to 86,000 square feet in Tokyo, all are different in their configuration, design and architecture. For example, the 64,000-square-foot Armani/Manzoni in Milan boasts such amenities as an Emporio Armani Caffe, Armani/Nobu and the Armani/Privé Club.
Armani signed a long-term lease agreement for the Fifth Avenue location, which will house Giorgio Armani, Emporio Armani, Armani Jeans, Armani Junior and Armani Casa, and will carry Armani and Emporio Armani accessories, watches, eyewear, jewelry and fragrances. In addition, Armani/Fifth Avenue will most likely feature amenities such as a sweet shop, a flower shop, an Armani Restaurant and Bar, and a Giorgio Armani Beauty Area.
"Armani/Fifth Avenue will be conceived specifically for this location," said Armani. "It will be flexible, open and eclectic….In many ways, the spirit of this new store will reflect the way we increasingly see the world today: international, cosmopolitan, multicultural and, above all, contemporary."
Armani said he was intrigued with the Fifth Avenue location for several reasons, among them the fact that the street attracts a diverse mix of fashion consumers.
"Today, Fifth Avenue represents one of the world's unique fashion retail destinations characterized by a remarkable heterogeneity, where you see a complete cross section of international fashion consumers, from the highest spenders who are seeking the pinnacle of luxury through to those who enjoy fast accessible fashion," said Armani.
The Fifth Avenue store exemplifies important changes that have occurred in recent years in the shopping habits of fashion customers. "More and more [people] enjoy shopping across price ranges, mixing and matching items, rather than buying total looks," he said. Against this backdrop, he believes the company is in a position to offer a store experience that combines his various lifestyle collections in an original way.
Emporio Armani is expected to be the "main protagonist" of the store because the philosophy of that collection "mirrors perfectly the type of customer shopping on Fifth Avenue," said Armani. As a result, the store will carry the more fashion-forward and higher-priced designs from the Emporio Armani line; items from the Giorgio Armani collection are more accessible ones in terms of style and price.While the total floor space of the new location is 47,000 square feet, currently on four floors, the final retail space may end up being around 30,000 to 35,000 square feet, as the third floor could be dedicated to offices, showrooms and other facilities. U.S. headquarters, however, will remain at 114 Fifth Avenue.
Armani declined to give first-year volume projections for the Fifth Avenue store, since that will be determined by the retail mix and the amenities chosen, he said.
"I strongly believe that Armani/Fifth Avenue will complement and enhance both our direct retail store network and our wholesale stores, bearing in mind that it will attract a different public with its own buying habits," he said.
The designer said there were no plans to close any existing New York locations. "Giorgio Armani Madison Avenue is a world flagship boutique for my main collection. We service a very particular clientele there, which appreciates its ambience and exclusivity," he said.
Over the next 12 months, the boutique will be renovated as part of a remodeling program of the company's significant U.S. freestanding stores. The Emporio Armani store on Madison Avenue will also continue to service the client base it has built over the years.
Underscoring the need to expand the brand in the U.S., the company hired Bridget Ryan Berman as ceo of Giorgio Armani U.S.A. in April 2006.
In a separate interview, Berman said one of her first priorities was to assess the state of Armani's business and brand in the U.S. What she found was that the brand was "very respected and powerful" in the U.S., but the strategy since Sept. 11, 2001, had been "fairly conservative in terms of growth." At the time, the objective was to stabilize the business.
"In the past year, I identified a three-year plan with significant growth opportunities in the wholesale and direct businesses," said Berman. She called it "a very exciting and aggressive strategy."
Among the major initiatives was the renovation of several key Giorgio Armani boutiques in Boston; Costa Mesa, Calif., and Bal Harbour, Fla., and on Rodeo Drive in Beverly Hills and on Madison Avenue here. As categories such as footwear and accessories have expanded, it has become necessary to reconfigure the footprint of the existing stores to accommodate those growing businesses, said Berman. The amount of space allocated to each category depends on the market and where the company sees the greatest potential.The firm will open a 5,300-square-foot Giorgio Armani unit in Dallas' NorthPark Center in late September.
The Emporio Armani business, which Berman described as "somewhat dormant" in the U.S. in recent years, is seeing some revitalization. The company is launching a Web site with e-commerce capabilities, emporioarmani.com, next fall. Armani closed its Emporio Armani store in Plano, Tex., and will shutter the unit in Short Hills, N.J. An Emporio store will open in Boston, and units in Costa Mesa, Calif., and San Francisco will be renovated. The company will launch Emporio Armani men's underwear in early spring 2008 in department stores.
Berman noted that Emporio Armani's (Product) Red line "is doing extremely well." That collection, which hit stores last December, is part of a charitable initiative; a percentage of sales benefits AIDS programs in Africa. It consists of clothing, accessories, eyewear, watches, fragrances and jewelry.
The A|X Armani brand, which is jointly owned by Como Holdings (headed by ceo Christina Ong) and Giorgio Armani SpA, continues to expand globally. Last year, A|X Armani Exchange had a 17 percent spike in sales as the brand branched out into several new markets such as Brazil, Indonesia and the United Arab Emirates. Worldwide, there are 119 A|X Armani Exchange stores, and by yearend, there will be 140. In the U.S., there are 58 full-price A|X stores and six outlets, and five more full-price stores will open by yearend.
Berman explained the company embarked on a capital investment program to renovate the shops-in-shops in department stores that is now 75 percent complete. By yearend, some 155 shops-in-shops for Giorgio Armani and Armani Collezioni will have been renovated. Collezioni is priced 25 to 35 percent below the designer collection.
Worldwide, Collezioni, which is present in about 2,000 doors, had a 6 percent increase in sales last year, while Giorgio Armani collection's wholesale revenues gained 15 percent throughout all geographic areas.
Assessing the Giorgio Armani women's business at department and specialty stores in the U.S., Berman said, "It's an incredibly productive and profitable business." The brand is strategically placed on the selling floor and, with the in-shop renovations, there are many opportunities to increase the business. Where some of the Armani departments have aged, "we're renovating those stores to be more productive." The women'scollection's biggest customers are Neiman Marcus and Saks Fifth Avenue. The line is also sold in Bloomingdale's, Bergdorf Goodman, Holt Renfrew, Mitchell's and Richard's.
As for expansion, Berman noted, "We're very careful about the locations we choose and the points of distribution." She noted the line attracted a wealthy consumer and there were only a number of places that could support that. The firm expects to have 13 Giorgio Armani boutiques operating in the U.S. by yearend.
A new initiative for the company in the U.S. is the relaunch of Armani Jeans, a sportswear brand with a jeans component. The line existed in the U.S. from 2000 to 2005 and was carried in Emporio Armani and a few department stores. It has been repositioned as a more balanced collection and more competitively priced. The jeans retail for $180 and the line is aimed to compete with Diesel, Citizens for Humanity, Seven For All Mankind, True Religion and Rock & Republic. Armani Jeans is being launched this spring at Bloomingdale's and Nordstrom.
"We're going to become aggressive in 2008. We decided to get back into it [Armani Jeans] quickly," said Berman. She noted there was a demand for more casual clothing to complement the Armani Collezioni business. The line is geared to women and men post-college, whereas A|X is targeted to the 18- to 25-year-old customer.
"It [Armani Jeans] is a very well-balanced sportswear line. You can wear it casually or dress it up a bit," she said. The company plans to expand distribution for fall, as well as open in-store shops for Armani Jeans.
Women's footwear and handbags continue to percolate. Worldwide, sales of Armani accessories rose 15 percent last year. The company's bags and shoes are now sold in 1,200 doors worldwide. In the U.S., the handbags and footwear are sold in Armani's freestanding stores, as well as in department stores' in-store shops and main- floor departments.
Whether or not Armani's U.S. business eventually accounts for more than 25 percent of worldwide sales, an Armani spokesman said it might grow a couple of percentage points over the next few years. But the company is also seeing growth in Greater China and Europe.Beauty is another significant category for Armani.
Giorgio Armani Parfums, a division of L'Oréal USA, boasts the first- and second-ranked men's fragrances in the American market — Acqua di Gio and Armani Code, respectively, according to the company. It is rolling out another men's scent, Attitude, which made its debut in 3,000 U.S. department store doors this month. It will expand globally, starting in Europe, followed by South America and Asia, in about 20,000 doors. That would land Attitude in the top five, with first-year retail sales in the U.S. estimated by industry sources at $40 million.
The company this fall will launch a new women's skin care line called Crema Nera, and will unveil Skin Mineral for men next spring. In addition, Armani recently introduced the Emporio Armani (Product) Red Fragrance.
Expected to make a big splash this fall is the debut of Emporio Armani Diamonds, featuring Beyoncé Knowles as the face — and voice — of the fragrance. Knowles will appear in Emporio Armani Diamonds' print and TV advertising, in which she is to sing a song inspired by "Diamonds Are a Girl's Best Friend."
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