By Isla Binnie

MILAN (Reuters) - Italian fashion house Salvatore Ferragamo is betting on the Internet to boost its appeal to younger customers alongside revamping its physical stores, its chief executive said on Sunday.

The brand known for its leather shoes worn by celebrities from Lady Gaga to Angelina Jolie aims to adapt to a new generation of fashion consumers who are less susceptible to old modes of advertising, Michele Norsa told Reuters.

"We are talking about young people who are probably not always reading magazines or newspapers and not even watching TV," Norsa said before the brand's show for its spring-summer 2014 collection at Milan fashion week.

"It's fundamental for us to talk to both the loyal, stable customers and to the new generation of consumers."

Norsa said the company would unveil an "innovative" digital offering in early October, complementing a renovation program for its physical stores.

Ferragamo reported a 26 percent rise in core earnings to 131 million euros ($176.97 million) in the first half of 2013, driven by rising sales in Asia and tourists shopping in European fashion hubs, primarily for its leather goods.

"What is inside the store must become a special experience," said Norsa, adding that the company was investing in capital expenditure and people to present its products better.

Retail sales growth has slowed from 24 percent in the first half of 2011 to 8 percent in the six months to June 2013, and the company hopes to improve productivity by renovating its existing stores.

"In the retail you have to adapt to the flows of travelers," Norsa said. "To do this you have to adapt to different nationalities and this is something you study, you work every day understanding where they go, what they look for, how they are shopping."

The re-opening of a refurbished Ferragamo store in Milan on Friday was attended by Indian actress and "Slumdog Millionaire" star Freida Pinto and U.S. film director Clint Eastwood's daughter Francesca, decked out in the brand's clothes.

Ferragamo makes its strongest sales from shoes, which accounted for 44 percent of first-half sales, and is seeing fastest sales growth from small leather goods that appeal to travelers.

But the company is also looking to branch out into other categories, Norsa said. He mentioned watches and women's bags - which produce higher margins than shoes as they do not need to be produced in many different sizes - as lines they could seek to develop.

"I see more opportunities in women's bags. I think this is always a category where the request and the potential of the market will be bigger."

Menswear is also an area of potential growth for the brand, especially in emerging markets, Norsa said.

($1 = 0.7402 euros)

(Reporting by Isla Binnie; Editing by James Dalgleish)