MILAN — Etro SpA reported another year of double-digit growth in 2006 as it expanded in key markets such as Italy and South Korea.
Sales for the 12 months ended Dec. 31 rose 15 percent to 265 million euros, or $334 million at average exchange for the period. Commercial manager Fabio Gnocchi said he anticipates continued double-digit growth in 2007, a year in which the company plans to open 22 stores around the world through franchise partners.
“The numbers we have…are allowing us to be rather optimistic,” Gnocchi said in an interview at corporate headquarters here. “If I could see another year of 15 percent growth, something I think can happen, I will be extremely happy.”
Although the company’s 2006 numbers reflect a slowdown from the 25 percent growth registered in 2005, Gnocchi said he is not concerned with sales trends.
“The growth seen in 2005 was extraordinary…[but] I would like to avoid such high peaks because then it is hard to maintain them,” he said. “I would prefer to have a constant double-digit growth that is closer to, say, 15 percent rather than see growth of 25 percent one year and 5 percent the year after.”
Women’s wear sales advanced 10 percent to 111 million euros, or about $140 million. Men’s wear revenue increased 22 percent to 73 million euros, or $92 million. In terms of the company’s more minor product categories, leather goods revenue gained 18 percent to 38 million euros, or $48 million, and fragrance sales rose 15 percent to 13 million euros, or $16 million.
Revenue growth spanned several regions, including the Middle East, Russia and Mexico. Sales grew 21 percent in Italy, the brand’s largest market. Another bright spot was South Korea, where revenue increased 28 percent.
Gnocchi noted that Etro managed to beat many of its competitors to the lucrative South Korean market by entering the country 15 years ago with a local partner. Now the company is seeking to reposition and expand in Japan, where sales growth is trailing that of other countries. Revenue in Japan gained about 3 to 4 percent last year, he said.
To propel growth in Japan, Etro is ending a relationship with its storied partner Sun Motoyama to directly manage its Japanese business. When the companies linked up some 20 years ago, Etro held 5 percent of their joint-venture vehicle. The fashion house has lifted its stake to 80 percent, injecting much-needed funds into the underdeveloped retail company. Gnocchi said Etro will probably reach 100 percent ownership of its Japanese business within the next year.
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Meanwhile, Etro is bolstering its management and advertising expenditure in Japan. Fabio Strada, a former executive at MaxMara and Giorgio Armani, took over as chief executive officer of Etro’s Japanese subsidiary in September. Etro has 27 stores in Japan.
Regarding retail expansion elsewhere, Etro forecasts 22 new stores this year spanning locations from Istanbul to Ulsan, Korea. As part of that total, Etro will open new dedicated shop-in-shops at Bergdorf Goodman and Saks Fifth Avenue, which already carry the brand. The women’s corners at both stores are to open in July. A timetable hasn’t been set for the men’s corner at Bergdorf.