HANGZHOU, China — Dolce & Gabbana just keeps rolling.
Releasing estimated financial data for the first quarter of 2005 as it opened a store here, the company said its earnings before interest, tax, depreciation and allowances climbed 12 percent to 135 million euros, or $174.1 million at current exchange, on a 15 percent increase in wholesale revenues to 1 billion euros, or $1.29 billion. EBIT rose 9 percent to 109 million euros, or $140.6 million, while consolidated revenues grew 20 percent to 700 million euros, or $903 million.
Meanwhile, the company has taken another major stride by opening its first store in mainland China at Hangzhou’s EuroStreet, a new luxury mall on the shores of the city’s famous West Lake.
The company chose Hangzhou, among China’s most affluent cities and a prime tourist destination, because of its thriving retail climate. It also was the first area in China to enact World Trade Organization rules allowing foreign enterprises to wholly own their retail operations. Dolce & Gabbana plans to use Hangzhou as a base to gradually expand in China, with openings in Shanghai and Beijing slated for 2006.
The 7,500-square-foot store, which opened earlier this month, occupies a three-story building and features the designers’ women’s, men’s and accessories collections. Women’s wear is on the ground floor and men’s on the second, with both areas being about 2,150 square feet. The 1,300-square-foot third floor is a VIP area featuring premium products and leads into an outdoor patio that will be used for events and exhibitions.
The design by Ferruccio Laviani is dominated by black glass, interspersed with windows, and with flourishes such as whimsical purple glass Murano chandeliers and silver chain curtains. The walls of the VIP area are lined with fur, reputedly pelts from southern China’s SARS-notorious civet cat.
The group now has 87 group-owned stores worldwide.
According to a spokesman, the company established the wholly owned Dolce & Gabbana Hangzhou Ltd. in January this year, making it “the first Italian fashion company to obtain the retail license to operate in China without local partners.” The flagship in Shanghai and the shop in the Beijing Palace Hotel planned for 2006 also will be wholly owned. Since 2000, the group has followed a policy of total verticalization and control of both production and distribution.
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Via e-mail, Stefano Gabbana told WWD: “We have always proceeded step-by-step in all the new markets we have scouted and this policy has definitely turned out to be a winning one, if we see the results we are obtaining.”
He said that, while the group has plans to expand further in China beyond the Shanghai and Beijing openings, it is premature to fix dates.
The EuroStreet mall is Hangzhou’s newest luxury property, and part of a larger development of the Hubin Road area, which also includes the new Hyatt Regency Hangzhou, Ethan Allen and Bentley dealerships, and several other hotels and malls still under construction. Dolce & Gabbana’s existing neighbors at EuroStreet include a French restaurant and Swarovski and Hailives stores. In the next several months, the 376,670-square-foot compound will add shops for Armani, Armani Casa, Ermenegildo Zegna, Omega, Alviero Martini, Hempel and Giadanio A. Paladini.
Located about 75 miles south of Shanghai, Hangzhou enjoys a symbiotic cultural and economic relationship with that city, but has a larger role as the capital of Zhejiang Province. Zhejiang, the most prosperous area of the emerging Yangtze River Delta, is home to 46.8 million people and, along with Hangzhou, contains the important port cities of Ningbo and Wenzhou. With a written history dating back 2,200 years, and famous for the scenic West Lake, or Xihu, hilly tea plantations and countless temples and museums, Hangzhou is one of China’s most popular tourist destinations, attracting some 30 million visitors a year.
Along with tourism, the city also boasts strong manufacturing and information technology industries, with GDP growing 15 percent to $23.26 billion. According to the Hangzhou Bureau of Statistics, the city’s population of 6.4 million has an average annual disposable income of $1,558, very high by Chinese standards. The combination of local wealth, the Zhejiang tourist influx and tourist spending has created a ripe retail environment in Hangzhou.
Hangzhou Tower, the city’s largest and most successful luxury mall, sees foot traffic of 30,000 to 50,000 shoppers a day, and last year reaped profits of 1.8 billion yuan, or about $225 million, according to its director, Tong Minqiang. Wang Lan, editor of Zhejiang lifestyle magazine Exquisite Life, said all of Hangzhou’s retail properties operate in the black and are quite successful.
Dolce & Gabbana’s Hangzhou flagship is part of the small chain of stores it operates throughout Asia. The company opened in Japan only three years ago, and launched a Hong Kong boutique in June 2004. Domenico Dolce observed, via e-mail, that “China is certainly a key market, where we plan to establish very important operations. But, apart from figures and business, this is a country where presence is important, a country you need to get to know. The Chinese are a bit like Italians: They are very hard workers, are very fast and have good taste. Tellingly, they boast a great culture of fashion, textiles and colors.”
The company spokesman added that Dolce & Gabbana will stress brand positioning in the immediate future, with a focus on men’s wear. In regard to China’s rampant piracy of branded goods, “we are well aware of the seriousness of this issue and…are proceeding with caution, taking all necessary precautions both from a production and legal safeguarding point of view in order to restrict the impact of this phenomenon.”
The Hangzhou opening was attended by several group executives, including the newly appointed Giacomo Santucci, previously head of the Gucci brand who now is Dolce & Gabbana’s commercial, licenses and retail director.