Italy's Bottega Veneta plans to invest as much in new shops in Western Europe as in emerging countries in the coming years even though sales are growing quicker in new markets, its chief executive said.
Bottega Veneta, known for its woven leather totes starting at around €5,000 ($6,700 U.S.), is PPR's second-largest luxury brand behind Gucci in terms of sales and its most profitable.
The retailer opened 26 shops in 2012 and runs 196 boutiques worldwide. It plans to increase the size of its retail network by 10-15 per cent annually, chief executive Marco Bizzarri said.
"I am convinced that consumers from emerging markets will buy there (in emerging markets) if they see that the brand is well positioned in Europe," Mr. Bizzarri said in an interview at the brand's shop in Paris' luxury enclave, Avenue Montaigne.
"We invest as much in Europe as in emerging markets," he added, saying tourists usually make up half if not more of all luxury goods buyers in the region.
Watch and jewellery brands owned by luxury groups Compagnie Financière Richemont SA, Swatch SA and LVMH Moët Hennessy Louis Vuitton SA have all recently opened shops in European capitals, particularly in cities that Chinese tourists, the biggest buyers of luxury goods, like to visit, such as London, Milan and Paris.
Bottega Veneta's sales, more than 85 per cent of which come from leather goods, rose 52 per cent at constant currencies in China last year, 37 per cent in Europe, the Middle East and Africa and 27 per cent in the United States.
PPR published annual results on Friday that showed Bottega Veneta's recurring operating profit rose 47 per cent, on comparable revenue 30.4 per cent higher, at €945-million, giving the brand a margin of 31.8 per cent.
When PPR acquired Bottega Veneta in 2001, it was on the verge of bankruptcy, making around €35-million in sales. Later, designer Thomas Maier revamped the brand, ditched its logo and moved it upmarket in terms of quality and price.
CEO Mr. Bizzarri, 50, headed PPR's sister brand Stella McCartney between 2005 and 2009.
The brand will open its largest boutique this year in Milan. At 1,000 square meters it will dwarf most of its boutiques, which average 140 square meters.
It aims to open three or four more such flagship stores in fashion capitals elsewhere but other new shops will remain small to preserve intimacy for buyers, the CEO said.
At the end of last year, the leather goods maker had 76 shops in emerging markets, many in the Asia-Pacific region, 39 in Western Europe and 26 in North America.
Analysts said its strategy makes sense.
"Chinese consumers find it reassuring if the brands they like are also strong in Europe," Exane BNP Paribas analyst Luca Solca said. "Success in Europe also means to the Chinese they are buying 'the real thing.'"
Last month, luxury retail magnate Bernard Arnault said at the results' presentation for his group, LVM, that he believed the front window of a Louis Vuitton shop had more impact on brand awareness than any Internet or television ad.