Zara's India plans (finally!)... and what happens to Gucci?

Online retail newsletter Retail Angle says that Tata's retail arm Trent Ltd has formed a 51:49 JV with the Spanish Inditex Group, which owns Zara.

As part of the memorandum of understanding (MoU), Inditex will hold 51% in the JV, while Trent Ltd will hold 49%. The first of the stores will be opened in 2010 in New Delhi, Mumbai and other major cities of India. The agreement was inked at the Inditex headquarters in Arteixo, Spain.

In other news, Armani has apparently shelved plans for India's first Armani Cafe in Bangalore. Says Retail Angle:

For over a year, Giorgio Armani India, a 51:49 joint venture with DLF, has been reported to be working on setting up a 10,000-sq ft Emporio Armani store accompanied by an elite cafe-cum-bar at The Collection Luxury Mall, a part of UB City on Vittal Mallya Road, promoted by UB Group and Prestige Developers. This was to be India's first Armani cafe, which normally operates as part of the large format fashion retail stores. Media reports now say that the plans for Armani store and cafe at UB City have been dropped, for the time being at least. The decision to slowdown new stores was taken as a result of deteriorating consumer sentiments, and given the fledgling nature of India's luxury market. In late 2008, Armani had opened its first stores at DLF-owned Emporio luxury mall in New Delhi and was expected to roll out stores in Bangalore and Mumbai in 2009.

And finally, the Economic Times recently reported that the Murjani Group may sell its stake in the Gucci India business. The newsletter continues:

The Mohan Murjani family's Indian arm, Brand Marketing India Ltd (BMIL), is preparing to divest the Indian operations of Gucci. They have appointed an investment banker to help them find a strategic partner for the Gucci business. The Mumbai-based BMIL operates with a number of domestic licensing rights for international brands like Gucci, Calvin Klein, French Connection, Jimmy Choo, Bottega Veneta and La Perla. In recent months, BMIL has given away the rights for Jimmy Choo and Bottega Veneta stores in New Delhi and that of the yet to-launched French luxury intimate wear La Perla. The move to divest Gucci comes at a time when speculation has been gaining ground about the liquidity position of the Murjani company.

Hermès feels the heat

The Luxe Chronicles has an interesting post on how the weakening dollar is affecting the luxury industry. In fact, no less than Hermès president Patrick Thomas has voiced his concerns about the repercussions for the sector.

Writes Helene:

It's estimated that the Euro could potentially reach $1.50 USD in 2008. This represents a double whammy for European luxury houses. French and Italian luxury houses are particularly vulnerable as both countries have stringent regulations which require substantial proportions of a product to be manufactured and assembled on their territory to qualify for the all-important "Made in France" or "Made in Italy" label that warrants the hefty pricetags. Many such as Hermès produce their goods entirely within their own borders at significantly increased costs as compared to competitors who often subcontract production in whole or in part overseas. To compound the problem, the weakness of the US Dollar and the Japanese Yen vis-a-vis the Euro translates into reduced spending power for American and Japanese clients.

The measure of the pressure facing European luxury houses can be surmised by a statement made recently by the usually discreet House of Hermès. Indeed, Hermès' President Patrick Thomas called upon the European Central Bank to adopt measures to curb the Euro's climb. In fact, the term being uttered from the lips of many French CEOs is 'delocalisation': A euphemism for moving production to cheaper overseas venues. In other words, "outsourcing".

Mr Thomas was quick to rule out this option where Hermès is concerned. The mere fact that Hermès has joined its voice to the chorus of French industrial leaders on the currency issue, however, is telling.