NEW YORK — Diesel appears headed to Fifth Avenue.

The company has signed a letter of intent to lease 685 Fifth Avenue, at 54th Street, from the Gucci Group, according to a person familiar with the matter. Gucci is moving its flagship two blocks north to Trump Tower.

Sources said a lease has not yet been signed and it was unclear whether Diesel would rent the entire 33,000-square-foot store if the lease is executed, or a portion of the space.

“I can’t confirm or deny anything,” a Diesel spokeswoman said. “At this point, there’s nothing to announce.”

Gucci declined to comment.

Diesel has been raising its profile in the U.S., opening stores, introducing new retail prototypes and launching product categories such as fragrance, as well as developing its accessories business.

There are five Diesel stores in Manhattan: flagships on Lexington Avenue at 60th Street and Spring Street in SoHo, along with a Diesel Denim Gallery for limited edition designs on Greene Street; a 55DSL store, which targets 15- to- 25-year-olds with a street sensibility, on Lafayette Street, and a Kid store on West Broadway, all in SoHo.

Diesel also is planning a megastore concept, which will be unveiled in Milan in the first half of this year. The company chose a high-profile location overlooking the central Piazza San Babila, on the corner of shopping street Corso Vittorio Emanuele and a few steps from the city’s imposing cathedral. The megastore will have 16,200 square feet of space and will cost $8 million to $11 million to build.

Diesel founder and chief executive officer Renzo Rosso said in July that the company is eyeing prime locations in Hong Kong and Tokyo, underscoring the strong performance of the brand in the Japanese market. He said other cities were also candidates. “The importance of the Diesel brand in the world today warrants such spaces, which offer increased visibility,” Rosso said.

Styles for spring include Kepre black jeans, $170; Lowky 71J jeans, $240; Portel technofiber jacket, $290; black cloth lamé shorts, $210, and a black Yele shirt with hidden buttons and pleating detail, $350.

This story first appeared in the January 9, 2008 issue of WWD.  Subscribe Today.

Gucci Group, which owns the building at 685 Fifth Avenue, has apparently decided not to install one of its other brands in the space. Bottega Veneta already has a home on Fifth Avenue, Alexander McQueen and Stella McCartney are ensconced in Lower Manhattan and Yves Saint Laurent is not in an expansion mode. Gucci’s store at 725 Fifth Avenue will be the company’s largest in the world, a 45,000-square-foot, three-level emporium. The brand’s 54th Street store underwent a major renovation that was completed in 2000.

The previous tenant of the Trump Tower space, Asprey, couldn’t make money in the location and retail experts concluded that the store was too big for a brand that was relatively unknown in the U.S.

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