LONDON — The Alexander McQueen and Stella McCartney brands have hit their long-awaited profit targets on time, but that is just the first of many hurdles they have to overcome.
On Wednesday, PPR reported that both London-based businesses had moved into the black in 2007, a goal that Robert Polet, chief executive of their parent, Gucci Group, had originally set in December 2004.
Although PPR does not break out sales or profits for the individual brands at Gucci Group, it did say that year-on-year, recurring operating income more than tripled to 33 million euros, or $45.2 million, from 10 million, or $12.6 million, in the division that includes McQueen, McCartney, Boucheron, Balenciaga and Sergio Rossi.
"As planned, we're in the black and it's good to be there," said Jonathan Akeroyd, ceo of McQueen. "This business is totally different than what it was three years ago."
An upbeat McQueen told WWD his single biggest challenge so far has been "communicating that I am a businessman — as well as a creative director," adding that his biggest reward has been "witnessing the transition from niche brand to key player in the luxury goods sector."
But McQueen and McCartney have chosen different paths to profitability.
McCartney has focused on building her brand outward in a variety of directions, forging long- and short-term deals with Adidas, LeSportsac, Target in Australia, the Lane Crawford Joyce Group and lingerie company Bendon. She also has a flourishing fragrance and skin care business with YSL Beauté, which Gucci Group plans to sell to L'Oréal.
McQueen, meanwhile, has remained under the media radar, and mostly focused on ramping up the in-house ready-to-wear and accessories business. The company has two licenses, with Puma and Samsonite.
Akeroyd said his main goal is for the company to generate annual sales of 200 million euros, or $302 million, in five years' time. He said the brand plans to stick to its basic strategy of focusing on rtw and accessories.
"We have huge ambitions for our core categories and the McQ line. In the future, we won't be going around looking to add on licenses," he said.That said, McQueen is right now renewing the agreement with Puma, which is now majority owned by PPR, and has extended the Samsonite one — due to expire last year — for a further 18 months.
Three years ago, Akeroyd said, women's rtw made up 90 percent of the McQueen business, whereas today it's 50 percent, followed by women's accessories at 30 percent and men's wear at 20 percent. He said the women's rtw business was still growing "in the double digits," and he was happy with the new product balance.
He said the handbag business also has doubled over the past year. Bags are designed by an in-house team, while the footwear design consultant is Georgina Goodman.
One upcoming challenge is fragrance. The McQueen license with YSL Beauté is winding down, and has not been renewed. Akeroyd said, "We are currently looking for a new fragrance partner." He declined further comment.
By sales channel, the McQueen business is split, with 70 percent coming from wholesale sales and the remainder from retail. Half of those wholesale sales come from McQ, McQueen's secondary line that launched in the fall of 2006. The denim-based collection for men and women is produced by the Italian company SINV Spa.
The future focus also will be on building up McQueen's retail presence, which is still relatively small. The brand has wholly owned stand-alone stores in London, New York and Milan, and is planning a fourth, in Los Angeles, in April. It has stand-alone, franchised stores in Las Vegas, Istanbul and Moscow.
Paris is next on the agenda: Akeroyd said he plans to open a stand-alone store there in 2009.
McQueen also is pushing into new markets. Later this year, the company plans to open four franchises in the Middle East. In January, Akeroyd opened an Alexander McQueen Japanese division in Tokyo, an affiliate of Gucci Japan, that will help the company spread into Asia.
Stella McCartney, meanwhile, is looking to build its retail presence through a variety of avenues. "Our next big step is more shops in big cities. It's our moment to grow," said Marco Bizzarri, the brand's ceo.McCartney already has units in London, New York and Los Angeles, and will open at the Palais Royal in Paris later this year. The brand also has recently revamped its Web site, and will move into e-commerce in the U.S. in March. Thanks to a distribution agreement with Lane Crawford, the brand will open stores in Beijing and Hong Kong in April. A further unit will open in Tokyo as part of an agreement with Unit & Guest.
The split of the McCartney business has about 70 percent of sales coming from women's rtw, followed by 20 percent, footwear, and 10 percent, handbags, which Bizzarri thinks is "ideal." The ceo added that the company will always seek collaborations with outside brands and companies.
"They're not financially driven projects. What they do offer us is a different positioning and competencies that we don't have internally," said Bizzarri, adding that there are no plans for any Stella McCartney diffusion lines.
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