By  on October 18, 2007

BERLIN — Although Esprit remains on the luxury acquisition trail, the lifestyle company said Roberto Cavalli isn't in its sights — and the Milan fashion house also vigorously denied speculation it is in talks with Esprit.

Heinz Krogner, Esprit chairman and group chief executive officer, confirmed the company's ongoing interest in buying a luxury brand. However, while he said Esprit easily can afford to invest 1 billion euros, or $1.42 billion at current exchange, in such a deal, he emphasized such an acquisition "is not necessary for us. We're growing substantially without acquisitions," he told WWD in a telephone interview from Esprit's business headquarters in Ratingen, Germany.

In the fiscal year ended June 30, Esprit Holdings Ltd., which is based in Hong Kong, reported a 26.9 percent increase in group sales to 29.6 billion Hong Kong dollars, or $3.8 billion, with net profits up 38.6 percent to 5.2 billion Hong Kong dollars, or $66.7 million. All dollar figures are converted from the Hong Kong dollar at an average rate for the period.

Esprit Holdings currently encompasses the vertical Esprit and edc lifestyle brands as well as Red Earth cosmetics.

Krogner's interest in moving into the luxury segment is not new. The ceo didn't deny having been in earlier talks with Escada, Puma and Jil Sander, but "in the past, private equity firms pushed up the prices. They seem to be pulling back a bit at the moment," he said.

As for reports Esprit was eyeing Cavalli, "that's a total fabrication," he countered. "We're not thinking about nor are we in any talks with Cavalli. There are a lot of brands all over the place...such as all the family companies in Italy that are having problems finding successors."

In considering Esprit's acquisition options, Krogner said the decision was made not to move into a lower price segment. "There'll always be someone cheaper. And [buying] a direct competitor also made no sense. But a luxury acquisition could be interesting for the Holding. For one thing, we'd have access to the best design talent.

"Of course, if we bought a [luxury] brand, it would remain in its position. But the team running the brand could provide a taste level, design excellence and train Esprit's people," he explained. "To have a more expensive sister would be good for Esprit and provide a learning curve."However, he's also convinced Esprit's aggressive business approach could equally benefit a luxury brand. "With our business model of 12 collections a year, our internationality and our short time to market, we could revolutionize the luxury segment. They have to increase the offering to make it interesting across the year. Their time to market is 12 months. Women only need nine," he joked.

The upper levels of the market "seem to be easier than ours. They live on dreams," though he acknowledged they "don't only dream but deliver great products, too. But I think the whole luxury offering is too far away."

What would that mean in practice? Krogner said talks with Prada regarding Jil Sander, were "going well, but then we pulled back. I had to organize my own succession at Esprit."

Indeed, Krogner said he would consider buying into the premium segment. "But I could also create my own brand, setting up in London, for example, and using the design talent there. This is not a final decision.

"We are looking upwards in order to give Esprit a better image and access to quality and design excellence. I want to force my people to think higher," he continued. "I believe that in the future, people won't consume more but better."

Esprit is considering the upper market segment, he reiterated, "not because of turnover, though of course I wouldn't want a nonfunctioning brand. It should be profitable. But this is not for the sake of growth. It's for the knowledge curve."

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