MILAN — Dolce & Gabbana is growing up.

Eight years after Domenico Dolce and Stefano Gabbana unveiled their first fashion-forward styles, the operation has evolved into a diversified company with annual sales of $85 million and ambitious expansion plans.

The quantum leap occurred last fall when Dolce & Gabbana signed a production and licensing accord with Ittierre SpA to produce a new line of sportswear for young men and women called D&G — their first step into the diffusion market.

The sales target for the line is $267 million (450 billion lire at current exchange rates) over the six-year term of the deal.

But the firm has other irons in the fire as well, the hottest being a new collection called Dolce & Gabbana Basic, licensed to Dolce Saverio, the Sicily-based apparel firm owned by Domenico Dolce’s father.

“The name itself says what it is — the basics of Dolce & Gabbana — and it will be a collection that doesn’t exist now in any part of the world,” said Michela Crosa, the company’s 28-year-old commercial director, who has been with the designers since the start.

Basic, priced 30 to 50 percent below the signature line, will be initially distributed through Dolce & Gabbana’s Via Sant’Andrea shop here on a test basis starting January 10, and will also be sold by Bergdorf Goodman in New York, Crosa said.

The new lines reflect Dolce & Gabbana’s belief that their name is now widely known, and that it’s time to solidify that identity — both in terms of design and the business. “They still want to be trendy, directional, but whereas before the element of newness was emphasized at all costs, now we also want to establish what has become known as ‘ours,”‘ Crosa said.

“They want to establish and be known for their own style, and this is the logic they are following — not only in terms of design but in terms of production, investments, everything,” she added.

Their biggest bet — the new line with Ittierre — will make its debut with a showroom presentation during the men’s designer shows in Milan this month, while the women’s collection will be brought out during the women’s shows in the spring.

The Ittierre deal also calls for the opening of D&G boutiques in major cities around the world starting in 1995. Promotions for the line will include television spots and special events in an effort to attract a broad swath of the young consumer market.

Another step in Dolce & Gabbana’s strategy to consolidate its presence on the global fashion market is the opening of signature boutiques that can house the full range of Dolce & Gabbana products, Crosa said. The first boutique, a 1,500-square-foot store on Via della Spiga, will open in Milan at the beginning of February. Crosa is also seeking locations in New York and Paris.

Dolce & Gabbana already has a men’s store on Via della Spiga, as well as the franchise boutique on Via Sant’Andrea in Milan, owned by the firm’s Japanese distributor, Kashiyama. There are four other franchise shops, in Hong Kong, Singapore, Tokyo and Taipei.

“Dolce & Gabbana was born out of the designers’ desire to realize their designs, to transmit their fashion ideas to people — it was a passion,” said Crosa. “In the beginning it was just the two designers with a small staff of dedicated young people. Now this passion has been transformed into an entrepreneurial activity.” In addition to its signature men’s and women’s ready-to-wear lines, which are licensed to Dolce Saverio, Dolce & Gabbana also produce beach wear, lingerie, shoes and accessories, leather goods, perfume and even a bridal line, all through license agreements.

Although Dolce & Gabbana’s design inspiration is rooted in the Mediterranean, it is foreign markets that have welcomed their styles with open arms — some 63 percent of total revenue is derived from exports, Crosa said.

The U.S. represents Dolce & Gabbana’s most important market after Italy and accounts for 30 percent of total export sales.

“The U.S. has given us a good performance from the start,” said Crosa, “In fact, the U.S. market was perhaps the first to really discover Dolce & Gabbana. Contrary to the way it is in Italy, the Americans love to find new names, new looks,” she added.

Crosa said that despite hard times for fashion companies in general, Dolce & Gabbana has been logging steady growth, registering annual sales increases of between 25 and 35 percent.

For the most recent season (spring-summer ’94), Crosa claimed a 40 percent sales increase in the U.S. and a 30 percent increase overall. With the women’s line well consolidated — it represents some 60 percent of overall apparel sales — the men’s line is also coming along well since its launch in 1990, Crosa added.