Sept. 28 (Bloomberg) -- Gucci Group NV, the world's third- largest luxury company, will make 60 percent of its investments in Asia in the next three years as it expands in some of the industry's fastest-growing markets, Chief Executive Officer Robert Polet said in an interview.

The company, owned by PPR SA of Paris, plans to open 10 Gucci stores in China in the next three years, Polet said yesterday at his office in Milan. There are seven Gucci stores in mainland China and one Boucheron shop in Shanghai.

``There are three countries that we think are going to show spectacular growth in the future and the first one is China,'' Polet, 50, said. Gucci will also enter India next year and is expanding in Russia, he added.

Gucci and rivals such as LVMH Moet Hennessy Louis Vuitton SA, the world's biggest luxury-goods maker, are benefiting as economic growth of 9 percent in China creates millionaires and generates demand across Asia. Gucci is driving profit for PPR, which also owns the Printemps department stores and the Conforama furniture chain, as French demand stagnates.

The group is still trying to turn around Yves Saint Laurent six years after buying the French label, one of nine in its portfolio. Gucci hired a new CEO as well as a new designer for YSL, which lost 69 million euros ($83 million) in 2004. Polet declined to say when the brand will make a profit, saying only that it will take time.

``Time is money,'' said Carlo Pambianco, founder of Pambianco Strategia di Impresa, a Milan fashion consulting company. ``Yves Saint Laurent is eating up a quarter of Gucci's profits. How long can they afford that?''

Bottega Veneta

Gucci's Asia-Pacific sales are growing 30 percent a year, Polet said. The region, excluding Japan, represents 20 percent of overall sales, he said.

The group's total sales rose 11 percent to 1.35 billion euros in the first half and operating profit rose 76 percent to 107.4 million euros.

Polet plans to open three stores in India by the end of next year, and is expanding in Russia by working with local partners and franchises.

``The Gucci brand is thriving in Russia, Bottega Veneta is performing well and Yves Saint Laurent has an excellent presence and is selling well,'' the Dutch-born Polet said.

Polet said in December that he would double Gucci-brand sales to 3 billion euros annually within seven years. The forecast implied 10 percent growth each year. Sales of Gucci- brand merchandise climbed 14 percent in the first half.

Team of 20

Gucci was founded in 1923 in Florence by Guccio Gucci, who developed the business by using images from horseback riding on the trim for the company's handbags and shoes. Gucci became known for the leather bags with red and green stripes designed after the girth straps that go around horses' bellies and its loafers with buckles that resembled horsebits. The company became famous for its bamboo-handled bags in the 1950s.

Polet took over Gucci in July 2004 after star designer Tom Ford and CEO Domenico De Sole left. Polet, a former Unilever executive, helped revive the group by giving more autonomy to the heads of the nine labels and boosting spending on advertising and promotion by almost 20 percent.

``We went from a leadership of two people to a leadership of 20,'' he said. ``We have created nine teams around each brand.''

Pambianco said the challenge for Polet is to find that many competent executives.

``Managers are a dime a dozen'' Pambianco said. ``What he needs are entrepreneurs to run those brands.''

Guccissima

The revival of symbols from Gucci's past are fueling growth. Top sellers this Summer included $1,050 handbags and $475 shoes from the ``Flora'' collection, created by designer Frida Giannini. The Flora is based on a scarf designed for Grace Kelly in 1996. For Fall, Gucci has introduced a collection of leather accessories featuring an embossed GG pattern called ``Guccissima'' that conveys the company's tradition in hand-worked leather.

Giannini, 32, will debut her first runway collection for Gucci tonight in Milan.

Polet is also pushing Gucci to expand in jewelry and menswear. Gucci is generating about $105 million in jewelry sales, making the group the ninth-largest branded jeweler in the world and the first fashion jewelry brand, Polet said. The branded-jewelry market is worth 80 billion euros, according to Claudia D'Arpizio, a fashion- industry consultant with Bain & Co. in Milan.

Polet has set 2007 as the date by which brands including Alexander McQueen and Stella McCartney must break even. These are being expanded with a less capital-intensive model, which calls for opening fewer stores and establishing partnerships instead. Puma AG hired designer Alexander McQueen to create a line of shoes, while Adidas-Salomon AG is selling a women's sportswear collection designed by Stella McCartney.

``If certain brands don't achieve the targets that are being set, you have to review, keep all your options open, and then decide what you are going to do,'' Polet said.

To contact the reporter on this story: Sara Gay Forden in Milan at sforden@bloomberg.net;

Last Updated: September 28, 2005 03:36 EDT