German fashion brand Laurel gears up for Asia expansion

Privately-held luxury German fashion brand Laurel GmbH, formerly a subsidiary of Escada SE, plans to rapidly boost its presence in Asia, particularly in China, aiming to offset sluggish growth in its European markets.

The 33 year old company, majority owned by private equity group Endurance Capital AG, has more than 130 shops in 53 countries including South Korea, Tunisia and Ukraine, but Hong Kong and China remain key engines of growth, Managing Director Dirk Reichert told Reuters on Thursday.

"In Asia we are thinking about 30-40 stores in the next few years," Reichert said ahead of the opening of Laurel's flagship store in Hong Kong's central district.

While Laurel, which takes in about €45 million ($60m) in annual sales, has relied on its own coffers to fund expansion so far, but its future roll out will involve tapping outside sources, Reichert said.

"We are talking to banks, talking to strategic partners in fashion, which brings us especially to Asia. At least for the first portion of 10 shops we need to get financing," he said.

Private equity financing would be considered with a special emphasis on a partner in the fashion industry, Reichert said, while looking to the medium term, an initial public offering could also be on the cards.

"For the next 1-2 years there is no plan on that but I think this could be a plan in the next 3-5 years," said the Munich-based executive.

Laurel, like many global luxury brands looking to expand their footprint in Asia, was finding it difficult to secure the right location and keep pace with soaring rental costs, he said, adding that smaller premium brands were unable to compete on the same scale as larger chains.

Reichert said that to help unroll Laurel's plan to open 25 stores in China in the near term, it could look for strategic partners from Hong Kong or Singapore.

"About 10 per cent of our sales come from Hong Kong and China. Around 25 per cent from Germany, 25 per cent from Russia and Eastern Europe and the rest made up from around the world," he said.

The group's flagship Hong Kong store, a brightly lit ground floor location displaying ladies clothes in colourful hues, had dozens of customers waiting outside for it to open on Thursday.

Hong Kong remains a hot ticket for global companies looking to capitalise on the spending power of Chinese consumers. Visitors from mainland China are growing at a double digit rate as spending power grows and on the tax advantage of shopping in the city.

US clothing chain Gap Inc opened its first flagship store at the end of November, while fellow US retailer Abercrombie & Fitch Co is also due to establish a presence in coming months.