Paris Group plans expansion for Gianfranco Ferré

At Milan Fashion Week, the mood is upbeat, especially at Gianfranco Ferré, the fashion house saved from bankruptcy this month by Dubai-based retailers Paris Group.

The house, one of Milan’s most historic names, now embodies the shifting centre of gravity in the luxury world since the financial crisis.

China, India and now the Middle East are consuming not just individual luxury goods but luxury companies, with far-reaching implications for the $80bn a year industry.

The Dubai-based Sankari family behind Paris Group, a retailing and restaurant empire, follows other tycoons from fast-growing markets that have snapped up famed brands hit by plunging sales during the crisis.

Megha Mittal, of the Indian Mittal Steel dynasty, last year bought the German luxury brand Escada; Li & Fung of Hong Kong, is now owner of Hardy Amies, couturier to Britain’s royal family.

Ahmed Sankari, vice-president of Paris Group, says he plans a three-year turnround of the brand, investing close to €30m ($41m) “to return Gianfranco Ferré to its iconic status” and make it the signature luxury brand for the Paris Group.

“It will be the first line for the group,” he says. “We will exploit synergies everywhere we can.”

Paris Group is a conglomerate, with 25 restaurants and 250 directly-owned stores and licences for brands including Pierre Cardin, Versace, Cerruti and Boss across the Middle East and Russia.

Paris Group appears to have ridden the retailing slump that hit shopping haven Dubai over the past couple of years after the real estate market there crashed.

Bankers have been expecting more approaches for troubled European luxury houses from cash-rich Gulf-based retailers as demand returns among wealthy shoppers in the Gulf and emerging markets such as India, Russia and the Far East.

At Gianfranco Ferré, Mr Sankari’s “conservative” estimate is to allocate €20m to launching 50 stores in the next three years, mostly in China, the Middle East and Russia. It plans a high-profile opening in Beijing later this year.

The group, which will be run by Italian chief executive Michela Piva, is due to make an operating loss before interest, tax, depreciation and amortisation of €6.3m in 2011.

Paris Group forecasts that will rise to a profit of €8.2m by the end of the turnround in 2014 as it expects sales of its Gianfranco Ferré brand to rise, and it expands into men’s wear, and higher margin accessories and cosmetics.

It also foresees making cost cuts, although it will keep open a factory in Bologna as it seeks to tap into the demand among emerging market consumers for the prized “made in Italy” or “made in France” moniker.

Luxury industry experts caution that the new breed of luxury owners are still untested, and there were several casualties in the private equity industry, the last group of buyers who sought to cash in by buying small iconic luxury brands. Permira ended up writing off its buy-out of Valentino in 2008.

Mr Sankari argues that Paris Group’s expertise in opening stores gives it a head start in reviving the fortunes of Ferré. He also expects to announce in the coming weeks the acquisition by Paris Group of other large, well-known, high-end – and distressed – European brands in France and Italy.

Additional reporting by Simeon Kerr in Dubai