PARIS — Maurizio Borletti, chairman of Italy’s La Rinascente department stores, aims to propel France’s Printemps to the fore of European luxury retailing.
Borletti and a pool of investors said on Tuesday they are in exclusive negotiations to buy the department store chain from France’s PPR, the parent of Gucci Group, for 1.08 billion euros, or $1.36 billion.
The deal is subject to approval from European competition regulators and Printemps’ employee representatives.
“We will spend 280 million euros [$352.5 million] over the next five years to upgrade the locations,” said Borletti on Wednesday. “We want to ramp up the changes that Printemps already started in the last few years. We want to go fast.”
Speaking from his office in Milan, Borletti said he was attracted by Printemps’ massive patrimony, including its historic flagship that was established in 1865 on Paris’ busy Boulevard Haussmann.
But he said the chain — despite recent moves upscale‚ had room for improvement and could emerge as a shopping beacon along the lines of Harrods or Selfridges in London over the next few years.
“Our general strategy is close to what we’re implementing at La Rinascente, even if Printemps is one step ahead [of La Rinascente] in trading up toward luxury and luxury accessories,” explained Borletti.
Indeed, Printemps has been migrating upscale over the last few years after its formats and merchandising mix grew dusty and suffered from competition from the likes of Zara and Hennes & Mauritz.
The Boulevard Hausmann store repositioned itself with a so-called luxury floor, selling accessories from Bottega Veneta to Cartier, revamped its designer apparel floor and constructed new beauty, shoe and home design areas.
Meanwhile, more sophisticated merchandise was rolled out to 16 Printemps stores in the French provinces.
But weak consumer spending in France has plagued the store, and its sales slumped 4.1 percent last year to 752 million euros, or $944.5 million, bringing PPR under pressure to sell it to concentrate more fully on its high-margin luxury holdings and retail operations with international scope.
Borletti said to get the store running at full steam would require rejigging its brand mix and reevaluating the categories on which it should concentrate, perceptibly increasing the ratio of high-margin accessories in the overall mix.
The deal, which will form a new European department store giant, illustrates Borletti’s confidence in a sector on which many have turned bearish here, with some analysts saying department stores can no longer compete effectively with the flood of specialty chains and brands that continue to open their own stores.
Last year, Borletti and a group of investors partnered to buy Rinascente, which Borletti’s family founded in 1917.
In turn, he tapped Vittorio Radice, the merchant who made Selfridges hot, as La Rinascente’s new chief executive officer, and unveiled ambitious plans to double the chain’s sales in the next seven years to 605 million euros, or $756.2 million.
Radice has promised to implement a strategy similar to the one he deployed at Selfridges, especially ramping up high-margin accessories and introducing more luxury brands.
Borletti dismissed notions that the department store model is outmoded. “Department stores have existed for 150 years,” he said. “They have faced challenges before and have adapted. Today the strength of the department store is in a powerful mix of brands.
“It needs to work along the same principle as a cathedral, astounding and surprising the people who visit. That requires investing. To be really exceptional you need to invest.”
Borletti suggested that changes in Printemps could include the introduction of restaurants and spas as magnets to attract potential clients.
“Department stores can work,” he said. “Look at Harrods or Selfridges. They attract shoppers because they are exceptional. Today, the competition is rough. The quality of [single brand] luxury stores is very high. Look at the Louis Vuitton store on the Champs-Elysées.”
Borletti said Radice would not be involved directly in managing the Printemps stores, and that the current management — including Printemps president Laurence Danon — appeared favorable to change.
“We need to know them better and make sure the direction we want to go is compatible [with them],” Borletti said. “But we were the favorite [candidate to buy the chain] of the management and with the employees in general. Printemps was part of a big group and the management didn’t always have the resources it needed to achieve its ambitions,” he said.
“There will be some synergies with La Rinascente but the stores will operate separately, with different management structures.”
Borletti added he didn’t foresee immediately expanding beyond France. “Department stores, I believe, are very locally rooted.”
But he didn’t rule out eventually expanding the brand in emerging markets in the Far East.