By  on March 4, 2008

Geox, Italy's largest footwear brand, has just given itself a tall order.

"We want our business to be 50 percent footwear and 50 percent apparel," said Geox founder and chief executive Mario Moretti Polegato.

The company's apparel collection is small — primarily coats, parkas and casual jackets — representing 7 percent, or about $80 million, of the company's total sales of $1.16 billion.

Yet Polegato said the range will widen and is confident that, like Gucci, Nike, Prada, Ferragamo, Kenneth Cole and other brands that have grown beyond their roots in footwear, Geox can be a big apparel player.

"We didn't find it very difficult to introduce the apparel on the market because when we did, Geox already was an established brand, with a developed chain and distribution. We made sure the best know-how was introduced to our company," which started apparel production three years ago. "We have a fully running apparel department with product managers, quality supervisors, designers and [research and development] that focuses exclusively on apparel."

Blossoming into a full-fledged fashion brand from a footing in footwear doesn't come easy, as many fashion executives have learned.

"Even today, people know Ferragamo for its shoes and luxury leather goods," said Vincent Ottomanelli, president of Ferragamo USA Inc. "There are still folks out there who don't realize we do ready-to-wear and outerwear."

It's not easy to get all the pistons firing, he noted, with Ferragamo men's wear outselling women's lately. The company is hoping to see progress in women's soon. It's also launching watches this summer, and possibly a public offering this year. Nike, too, struggled with women's apparel initially partly because men's looks formed the basis for women's items and, at one time, the firm was considered "a shoe company trying to make clothes," as an analyst once said.

"When you start reaching out into areas that you're not specialized in, greater risks arise. But if you are in a growth surge and want to open more retail stores, part of the game is to maximize productivity in each store," Ottomanelli explained, adding that developers merchandising malls look for tenants with rising productivity. That's attained by selling more of the same category, or selling additional categories to increase units per transactions and encourage customers to wardrobe themselves in the store, rather than just shopping for one type of item.Ottomanelli cites another advantage to broadening the mix. "If you want a spot on the red carpet to promote your brand, it's easier to get one when you have a collection."

Developing additional fashion categories requires the obvious: staffing up with creative talent, developing the supply chain and logistics and adding sales expertise in the stores. But also "a congruity" is required, said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates. "You must maintain the same general fashion sensibility and price-line architecture and quality that compliments the shoes. The apparel business is not an easy business. If you don't do it right, it could hurt your core shoe business." When done right, however, the rewards are multifold, from increased sales and greater marketing buzz to elevating the prestige of the brand name, Aronson said.

The plan at Geox entails developing its 40 patents to broaden the offering with a wider range of jackets and trousers with 'the breathable technology' originally developed for its casual footwear. Athletic footwear is on the agenda, as well. The brand has a moderately priced family appeal and is particularly popular among kids.

As the story goes, when Polegato was working with his family's long-standing wine business, called Villa Sandi, he attended a wine conference in Reno. One day he went jogging and felt his feet overheating. So he punched holes in his rubber bottom shoes for relief.

Some thought the desert heat got to his head. But the seemingly irrational act led to years of research in collaboration with private laboratories and universities, and ultimately Geox's patented technology. It combines a microporous membrane and a perforated rubber outer sole that allow excessive humidity and perspiration to exit the shoe while preventing water to enter.

The technology, according to Geox, enables air to flow into the shoe, while drawing moisture from the feet to keep them dry and cool. The invention became the foundation for forming Geox, which Polegato said has been experiencing double-digit growth since Day One. "We made rubber breathable," he said.

The technology is being adapted to apparel, which is instrumental to the company's accelerating retail rollout. New stores average 1,600 to 2,000 square feet, compared with 500 to 600 square feet in the old format.In the U.S., seen as the company's biggest market in two to three years, a unit at 15 East 34th Street in Manhattan housing Geox's first U.S. headquarters and showroom is expected to open late this year. This spring, openings are slated for Third Street in Santa Monica and Miami's Lincoln Road. Last year, the first Geox store in Los Angeles opened on Beverly Drive in Beverly Hills, as well as the first unit in Austin, Tex. The third Manhattan store opened at 862 Broadway in Union Square. The others are on Madison and Lexington Avenues.

The latest stores are sleek, minimal and futuristic, reflecting the brand's bent on technology. They're decorated with black walls, black leather sofas, white floors and plasma screens that tell the technology story. There is a total of 16 stores in the U.S.

The Montebelluna, Italy-based Geox has no production and outsources the manufacturing. Products are sold in 68 countries in almost 700 freestanding stores and 11,000 other retail doors, including Nordstrom, Bloomingdale's, Lord & Taylor and Dillard's. Geox is listed on the Milan Stock Exchange, though Polegato owns 71 percent of the company. He believes succeeding in apparel depends on the technology.

"Our strategy is very focused on R&D: We invest about 3 percent in research," Polegato said. "We have a laboratory in-house where 15 engineers work. We collaborate with universities in Europe and in Japan. We focus our research on body-heat movement.

"Not only feet need to breathe. The rest of the body does, too. We concentrated our research starting from the knowledge that heat rises and concentrates in the shoulders area. There, it usually condenses and creates an uncomfortable feeling of being humid and damp.

"The market has tried to offer similar products, but they are not as specific as ours," he continued. "For example: If you make apparel that has breathable material on the pockets, what is the advantage? It is useless. So far our business focuses on jackets, but we are considering expanding into different sectors in the future, including trousers with the breathable technology by the belt."

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