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Ferragamo Plans to Enter as Many as Eight New Chinese Cities in 3-5 Years

Salvatore Ferragamo SpA (SFER), the Italian luxury-goods maker, plans to enter as many as eight new Chinese cities over the next three to five years as a steady flow of new shoppers emerges in the world’s fastest-growing major economy.

Ferragamo, whose lines include $540 calfskin shoes and $2,950 bags, now operates 58 stores in 33 cities in China and is betting on an increasing number of middle-class consumers to help boost its business, Chief Executive Officer Michele Norsa said in an interview in Shanghai today.

“Every year there will be millions of new people who will get access to luxury goods,” Norsa said. “This is really the potential for the luxury industry.”

The Italian luxury label competes with LVMH Moet Hennessy Louis Vuitton SA and Cie. Financiere Richemont SA for shoppers in Greater China, which Bain & Co. estimates to be the world’s third-largest market for luxury goods. Ferragamo was the top choice in the shoe category among shoppers in Beijing and Shanghai in 2011, the consulting firm said in a December report.

Demand for luxury goods in China has surged along with growth in the world’s second-biggest economy. The average disposable income of urban households increased 14 percent to about 21,810 yuan ($3,450) in 2011, data from the National Bureau of Statistics showed.

“We’re confident about what we see in China,” Norsa said. Ferragamo doesn’t expect much impact on consumption from a potential slowdown in the country’s economy this year, he said.

China Expansion

The company plans to enter “seven or eight” new Chinese cities in the next “three to five years,” Norsa said, including outlets scheduled to open in July in central China’s Wuhan and in Jinan in the east. He declined to give a new store target in China for this year.

China’s economic growth is poised to weaken to 8.5 percent this year from about 9.2 percent in 2011, according to the median estimate of economists in a Bloomberg News survey. In the fourth quarter of last year there appeared to be a “gradual softening in consumption” in China’s luxury industry, Bain said in December.

The manufacturing and heritage value of “Made in Italy” will become even stronger despite the European debt crisis, Norsa said.

“The impact of this crisis is not really touching the luxury industry,” he said.

Ferragamo’s shares have gained 23 percent since it went public in Milan in June, when it sold shares at 9 euros each. The stock closed yesterday at 11.05 euros.

The Florence-based company is “confident” for the year ahead after an “excellent” 2011, which included better-than- expected holiday sales, Norsa said earlier this month.

To contact Bloomberg News staff for this story: Michael Wei in Shanghai at mwei13@bloomberg.net; Susan Li in Hong Kong at sli31@bloomberg.net; Karolina Miziolek in Hong Kong at kmiziolek@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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