By Marie-Louise Gumuchian and Cristina Carlevaro

MILAN | Tue Sep 8, 2009 9:19am EDT

MILAN - Italy's only upmarket department store chain La Rinascente is concentrating on opening large shops in its home market, including a second flagship in Rome, before thinking of expanding abroad, its chief executive said.

Unlisted La Rinascente, founded in the 1860s, is giving drab interiors a makeover and closing loss-making stores. It has just opened a "design supermarket" in the basement of its central Milan store at a time when spenders globally are cutting back.

It had sales of 420 million euros ($602.3 million) in 2008 and so far this year, sales at the Milan store -- which represents 50 percent of turnover -- are flat, Vittorio Radice told in an interview on Monday.

"It's not that I am not interested (in outside Italy), I am always interested in everything but I know well what the limits are and what our priority is," said Radice, who took over as La Rinascente CEO in 2005 after transforming London's Selfridges.

"We need to strengthen ourselves in Italy, be strong at home to allow ourselves to look abroad," he said, adding La Rinascente was not present in cities like Bologna or Venice.

Rival chain Gruppo Coin, which has a smaller range of luxury brands, has annual sales of about 1.145 billion euros.

Rinascente has closed smaller stores, in favor of opening bigger shops more than double their size in cities like Palermo next year and Rome in 2012. The aim is to have two flagships in Milan and Rome and another dozen shops in Italy.

The Palermo store and Rome stores -- respectively 5,000 and 15,000 square meters -- will be similar to its central Milan shop which sells fashion -- including brands like Gucci and Louis Vuitton -- and has a foodstore and choice of restaurants.

"A big city like Rome is enormous and rich in tourists but it does not have a large department store,Epi Leather SPEEDY 30 M59222," Radice said, speaking in one of the cafes of the Milan store which overlooks the city's historic cathedral.

"(It doesn't have an equivalent) to Printemps, Bloomingdales, El Corte Ingles ," he added, referring to large stores in France, the United States and Spain.

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Radice said it was difficult to make forecasts for the important Christmas season but added that if the actual trend continued, 2009 would be a "decent year."

Thanks to the closure of two loss-making stores, Rinascente could end the year with "a better" operating result than last year, he said without giving details. He has previously said La Rinascente was not making a profit due to one-off costs of restructuring and refurbishing stores.

Radice said the Milan store had bought fewer products from suppliers this year but sold more items at full-price.

Italian luxury brands have been hit hard by the crisis like their global peers, as the rich tighten their purse strings. Radice said consumers preferred to spend on some category of products over others, such as food.

"People have 20 euros in their wallet to spend on a bottle of olive oil whereas the 400, 500, 600 euros needed for a bag is another step. They need to think about it," he said.

In terms of a change in consumption in the crisis, he said: "You need to convince the client that he is buying a dream, something that will last."

Radice said it was premature to talk about a return to a market listing for La Rinascente, which was previously on the bourse.

In July, Italian daily Il Sole 24 Ore had written of a potential merger scenario involving department store chain Gruppo Coin and another retailer Upim,Louis Vuitton Wallets Taiga Pocket Organizer M30518, which could involve La Rinascente.

Radice said he was not aware of this scenario.

($1=.6973 Euro)

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