Furla SpA, the closely held Italian handbag maker, predicts its China sales will outpace the company’s this year as a rising middle class and government austerity drive benefit entry-level luxury goods.
Sales in China will expand by a double-digit percentage this year, compared with a “high single digit” for the entire company, Chief Executive Officer Eraldo Poletto said in a telephone interview from Furla’s headquarters in Bologna.
The company joins so-called affordable luxury brands such as Coach Inc. (COH:US) and Michael Kors Holdings Ltd. (KORS:US) in courting China’s middle class, who are a bright spot amid slowing growth in the luxury goods market. With bags priced from about 250 euros ($343) to 450 euros, a fraction of what Prada SpA charges, Furla is benefiting from the Chinese government’s curbs on extravagance that have dented demand at higher-end labels.
“We see ourselves as a door to the luxury world,” Poletto said Feb. 11. “The middle class in China is expanding and their wealth accelerating, that’s where our growth comes from.”
Chinese President Xi Jinping has led a campaign to stamp out lavish banquets, bribery and expensive gifts among bureaucrats. The crackdown has hurt sales at high-end retailers ranging from watchmakers to sellers of baijiu, a local white spirit popular as gifts.
Furla’s revenue rose 7.5 percent to 228 million euros in 2013, slowing from an 18 percent increase a year earlier.
The company has been hurt by a weaker currency in Japan, one of its top two markets alongside Italy. The yen weakened 21 percent against the euro last year, reducing the value of sales in Japan when repatriated to Italy.
“The environment in general is challenging,” Poletto said.
The company is monitoring the currency exchange closely as Japan is an important market accounting for more than a quarter of sales, Poletto said. He declined to say whether Furla will raise prices in Japan.
The revenue contribution from Asia excluding Japan will rise to more than 20 percent in three to five years, from 15 percent now, he said.
In February last year, Furla teamed up with Fung Group, a closely held company which controls menswear retailer Trinity Ltd. (891) and supplier Li & Fung Ltd. (494), to expand in China. The Italian company said in February last year it plans to open more than 100 shops in the world’s most populous nation in four years, according to a statement on the Fung Group partnership.
Furla is still scouting for a location for its flagship store in China, Poletto said. Its bags are sold in more than 1,300 outlets worldwide, according to its website.
The family-owned handbag manufacturer was founded in 1927 by Aldo Furlanetto, whose daughter Giovanna is now the company’s president.
While Furla isn’t in a hurry to raise funds for expansion, it remains open to an initial share sale in future, Poletto said. “It will take two to three years from the moment you decide to the moment you eventually get there.”
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