Bulgari opens two stores in China, where it has high hopes

Italian jewelry and luxury goods maker Bulgari SpA said it has high hopes for its business in China, aiming to make the country its second most important Asian market within five years, its chief executive said, Dow Jones Business News reports.

“We expect to grow fast” in China, Francesco Trapani reportedly said at a press conference to mark the opening of two stores in two of China’s biggest cities, Shanghai and Beijing. “We’d like to have here in five or six years a business that is the second largest in Asia.”

Japan is Bulgari’s biggest Asian market by far, making up half of the company’s roughly 40% revenue contribution from the region.

“Definitely Asia is, in perspective, the most important area…because China is not in the picture yet,” he reportedly told reporters after the conference. In the long term, China has the potential to become as important a market as Japan because the attitude toward luxury brands is “very, very positive.”

He reportedly declined to specify figures for the company’s projected growth and investment in China, but said an initial loss is to be expected for a business starting in a new market.

Trapani reportedly said the company is satisfied with the quality-cost ratio of its Europe-based operations but is open to shifting some production to China if the move doesn’t affect quality. However, he reportedly said there are no plans to do this at present.

He also reportedly stressed watches must remain Swiss-made as that is an important criterion in the sale of a high-priced timepiece.

The company’s aim for a slice of China’s fast-expanding luxury market comes after other major luxury goods retailers, including Gucci Group NV and LVMH Moet Hennessy Louis Vuitton, have already established a presence in the country.

Gucci’s chief executive, Domenico De Sole, has predicted sales to Asia, led by China, will triple to 30% of the group’s total in coming years.

Also, according to a new report by Pictet analyst Mario Montagnani, 50% of the demand for both accessible and exclusive luxury watches—two segments Bulgari caters to—comes from Asia.

The analyst also said after Hermes, Bulgari has the highest watch sales exposure to Asia of any big brand in the sector.

Watches are one of Bulgari’s most lucrative segments. Jewelry is the mainstay of the family-controlled group, but it also makes accessories and perfumes.

It has also diversified into the hotel business through a joint venture with Marriott International Inc. The venture, Bulgari Hotels & Resorts, is due to open its first hotel in Milan next year, and another is being planned on the Indonesian resort island of Bali.

Bulgari would even consider Shanghai as a possible venue although nothing concrete has been planned, Dow Jones reports. Trapani said the company has been approached by interested parties and is “analyzing” options.

The CEO said Bulgari is on track to meet its sales growth target “in the mid-single digits” this year, Dow Jones reports.

Trapani said in September that barring a new round of geopolitical or macroeconomic turmoil, Bulgari should meet a target of 5%-6% sales growth in 2003 and net profit may grow faster than that.

In the first nine months of this year, Bulgari recorded a 20% on-year rise in net profit, aided by inventory reductions and cost cutting. However, consolidated revenue slipped 1.3%.