Sep 14, 2012
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Cavalli boss says don't panic, luxury market fine

Sep 14, 2012

LONDON/MILAN (Reuters) - A shock profit warning from British fashion brand Burberry (BRBY.L) doesn't cloud the luxury goods industry's bright future because demand from China will remain strong, the head of Italian fashion house Roberto Cavalli said on Thursday.

Shares in luxury goods companies tumbled on Tuesday after Burberry reported a sharp slowdown in sales growth, stoking fears a near three-year boom for the industry might be coming to an end as China's economic growth slows and the euro zone's debt crisis drags on.

"We should avoid panicking because of an announcement of an individual company," Gianluca Brozzetti told the Reuters Retail and Consumer Summit.

"They made some promises to investors and probably those promises were too aggressive. But it's one thing to say the performance of Burberry is not meeting its objectives... and it's another thing to say the luxury market has problems."

While industry sales growth in China had slowed from levels around 20-25 percent at the height of the boom, Brozzetti said that pace was unsustainable, and demand remained healthy.

"People are getting richer (in China) and, as soon as they get richer, they want to have their reward by buying a luxury product. That is not changing," he said.

Retail sales at Roberto Cavalli, owned by the family of the Florentine designer of the same name, were up 25 percent in the eight months through August, driven by new stores and including growth of 11 percent from shops open over a year, he said.

Sales were higher in all markets except Italy, which accounts for about 15-20 percent of the firm's total business and is languishing in a deep economic recession.

"People in Italy are scared. They are not spending money. If somebody is telling you things are going well in Italy, they're lying," Brozzetti said.

Brozzetti, recruited by Roberto Cavalli in 2009 following stints at Gucci PPR.PA and Louis Vuitton (LVMH.PA), said the company had attracted a number of suitors.

However, it wanted to strengthen the business before considering a sale or initial public offering.

The firm, whose flowing dresses and leather-fringed jeans have been worn by celebrities like actress Jennifer Lopez and model Cindy Crawford, was hit hard in 2009 by financial problems at the manufacturer of its younger-focused Just Cavalli line.

It signed a new licensing partner last year, but Brozzetti said it would take until 2013-14 to start seeing the full benefits of the relaunch.

The firm, which made net revenues of 178 million euros ($229 million) in 2011, is opening around 40 standalone stores this year, 18 of them in China and taking the total to about 170-175 by the end of 2012. It will open a similar number in 2013, Brozzetti said.

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