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Armani reorganizes brands as revenue, profit margins slip

MILAN, July 25 (Reuters) - Italian luxury goods group Armani said on Tuesday it was further reorganizing its brands into just three labels and streamlining its shop network to counter a difficult business environment.

The Milanese group said it would fold the haute couture line Giorgio Armani Privé and its homeware brand Armani/Casa into Giorgio Armani, its signature label.

The company announced in February that Emporio Armani was to absorb the Armani Collezioni and Armani Jeans brands.

A third label, the younger and more informal A 5/8X Armani Exchange, will now include part of the product area previously under Armani Jeans, it said.

The reorganization comes as Armani confirmed on Tuesday that sales fell 5 percent last year to 2.5 billion euros ($2.9 bln).

Founded by 83-year-old designer Giorgio Armani, it is Italy's second-biggest fashion group behind Prada which has also been battling with fast shrinking revenues.

Big brands such as Prada and Armani have had trouble adjusting to a growing digital world and consumers' increasing preference for niche labels and more accessibly priced luxury brands.

"Following the reorganization of the group's brand portfolio, the number of retail outlets of the three brands will evolve rationally on the basis of the new positioning," the company said in a statement.

It blamed the fall in 2016 sales on a "difficult year" for the luxury sector and the ongoing revamp of its distribution network.

The privately owned group said profit margins in 2016 contracted slightly compared to the past three years, but annual net profit rose 12.4 percent to 271 million euros thanks to cost cuts.

In January, Giorgio Armani said this year looked "complicated" like the previous year.

The designer said on Tuesday that difficulties in the luxury business were linked to China's slowing growth and security concerns in the aftermath of terror attacks in Europe.

"In addition to this there has also been a general change in purchasing behaviors and attitudes," he said in the statement. ($1 = 0.8584 euros) (Reporting by Valentina Za; Editing by Susan Fenton)