Luxury goods giant Gucci Group is gearing up to launch in India next year and is confident smaller designer brands will meet profit targets as its three-year growth plan bears fruit, CEO Robert Polet told Reuters.
Niche brands Bottega Veneta and Balenciaga are growing rapidly -- by more than 100 percent in Balenciaga's case in the first quarter. Both reached profitability two years ahead of schedule.
We are ahead with the Gucci brand, which is growing much faster than we set out to do. Bottega Veneta has performed better almost two years earlier than planned. The same is true for Balenciaga, Polet told Reuters in an interview.
We are well on track but it is very important that we remain disciplined and focused on implementing the plans as we formulated them.
Polet added he was confident smaller brands Alexander McQueen and Stella McCartney would move into the black next year.
Gucci Group, which is half way through a three-year growth plan, plans to open stores in India early next year in a deal with the New York-based Murjani Group.
Because of the group's foreign exchange hedging policy and its ability to raise prices to protect margins Polet said he was not overly concerned about recent currency swings.
Gucci Group sales rose 11.9 percent in 2005 to 3.036 billion euros ($3.89 billion), or 17.1 percent of the sales of French parent company PPR
Like-for-like revenues at the core Gucci brand grew 18.4 percent to 1.807 billion euros. Sales in 2003, the year before Polet took over and set a goal to double the brand, were 1.522 billion euros, although comparing the figures is complicated by changes to Gucci's financial year and accounting standards.
We are well on track to grow our gross margin toward the 70 percent in the plan period, he said, referring to another objective set in his December 2004 plan.
Big challenges remain. Yves Saint Laurent, until last year the group's second largest fashion brand in terms of sales, remains deep in the red and PPR has declined to forecast when it might reach breakeven.
The group also recently announced a restructuring of its cosmetics arm, YSL Beaute, which seems certain to weigh on results this year, although the company has not commented.
Polet confirmed the hope that Bottega, some of whose bags retail at over 50,000 euros each, could eventually achieve annual sales of 500 million euros. Bottega's CEO has said sales of Bottega bags could reach 200 million euros already this year instead of in 2007 originally.
When he became CEO in 2004, Polet grouped Balenciaga along with other brands such as Alexander McQueen and Stella McCartney which, as he put it, had to prove they were viable.
Balenciaga has proven that, he said, adding he was very confident the other brands could also meet their targets to be profitable next year.
In the second half, Gucci will open three major stores with a new look as it celebrates its 85th birthday this year.
A first glimpse of the concept -- which Polet declined to comment on -- will be given at the end of October when Gucci opens its biggest store yet (11,000 square feet) in Hong Kong.
A few days later in November Gucci plans to open a seven-floor shopping temple in Tokyo's exclusive Ginza district and another shop later in Nagoya, the fourth biggest city in a country which is already the brand's biggest market.
Stores would follow in India at the beginning of 2007.
We strongly believe in the Indian market. We are really committed to it. We think it's time and I think we have the right partners, Polet said, declining to discuss the financial details of its partnership with Murjani.
He pointed to a recent ACNielsen opinion survey that found Gucci was the brand most Indians would buy if they could afford to, even though it is not yet in the country. This shows the power of the brand is huge, he said.