Giorgio Armani on Brand Streamlining
● The designer stands by his restructuring strategy, and touts increasing investments and available cash.
MILAN — Giorgio Armani is not one to leave anything to chance. When in 2017 he decided to streamline his portfolio of brands, the designer knew this would take a toll on his fashion group’s bottom line, but, as he reveals today, he “resolutely continues” with the planned strategy.
While profits and revenues were dented by the restructuring last year, Armani, who turned 85 on July 11 and this year added the title of general manager to his chairman and chief executive officer roles, said that he was “confident in the strategic direction we’ve taken being the most appropriate to consolidate the leading position of
the Armani Group and its brands in the luxury/lifestyle segment. Confirmation of this is apparent in the positive signals relating to sales of the 2019 spring/summer season in this first part of the year.”
In the 12 months ended Dec. 31, net profits totaled 152 million euros, falling
37.3 percent compared with 242.4 million euros in 2017.
Revenues totaled 2.1 billion euros compared with 2.33 billion euros, down
9.8 percent “in line with established budgets and consistent with the mediumto-long-term strategy of simplification and streamlining of the brand portfolio,” said the company.
In February 2017, Armani revealed he was planning to focus on the Giorgio Armani, Emporio Armani and Armani Exchange labels, effective with the spring 2018 season. In this context, the Armani Collezioni and Armani Jeans brands have been integrated and merged into the Emporio Armani and Armani Exchange lines, respectively. The goal is to strengthen the individual brands and maximize their potential in an increasingly competitive and changing market.
Armani noted that the group’s “significant liquidity level offers the possibility of making increasing investments” in the group’s brands.
Last year, Armani said that the reorganization was “expected to result in a gradual and temporary decrease in net revenues and proportionally in related margins, over the next two years, to definitively leave the way open for a new phase of development and growth in 2020, achieved on more focused and selective distribution bases, consistent with the mission of all three brands.”
The designer also pointed to a restructured organization headed by two deputy general managers, both loyal Armani executives: Giuseppe Marsocci, responsible for the markets and commercial activities, and Daniele Ballestrazzi, in charge of finance and operations. They
“will directly contribute to the successful implementation of the strategy we have embarked on,” said Armani.
As reported, Armani’s longtime executive Livio Proli left his role as managing director of the Milan-based company at the end of March, while remaining on the board of the fashion company and president of the Olimpia Milano basketball team owned by the designer.
Overall brand revenues, including those from licensing, amounted to 3.8 billion, down 3 percent compared with
3.92 billion euros in the previous year. At constant exchange rates the figure was unchanged. This was defined as “a better performance” than expected after setting in motion the new strategy.
Earnings before interest, taxes, depreciation and amortization totaled
314.3 million euros, down 28.2 percent from 438 million euros in 2017.
Geographically, Europe accounted for 46 percent of sales, followed by North America and Asia, each equally representing 22 percent. The rest of the world area accounted for 10 percent of revenues.
To support the next phase of the strategy, in 2018 the group’s investments rose 28 percent to a total of 106 million euros, compared with 82.5 million euros channeled in 2017.
The changes at the company did not dent Armani’s cash pile — on the contrary. At the end of 2018, the group’s net equity remained steady at 2.06 billion euros, in line with 2017, while available net cash rose 30.5 percent to 1.31 billion euros from 1 billion euros at the end of 2017.
To be sure, Armani noted that the group’s “significant liquidity level offers the possibility of making increasing investments” in the group’s brands, as well as allowing “absolute autonomy and independence as a company, so as to support the ongoing multiyear plan.” This has always been a key priority for Armani. In 2016, the designer revealed details about the future of his company, confirming he had established the longrumored Giorgio Armani Foundation which, while aiming to fund social projects, also ensures that his fashion group will live on.
Armani has sought to maintain his independence over the years, especially since the year 2000 when rumors about a possible sale to LVMH Moët Hennessy Louis Vuitton or then-Gucci Group and L’Oréal swirled around the house of Armani. While always vocal about his aversion to sell, take on a business partner or publicly list the company, rumors about Armani contemplating forming a foundation first emerged in 2012.
Last year, L’Oréal and the Armani group agreed to renew their beauty license until 2050. The French beauty giant since 1988 has developed Armani’s fragrances, skin care and makeup in close collaboration with the Italian designer. “These lines are showing
[some] of the strongest growth in the beauty category, generating revenues of over 1 billion euros in 2017,” L’Oréal said at the time.
The Giorgio Armani Fragrances and Beauty business, which is part of L’Oréal’s Luxury division, has been on a steep growth trajectory for five years. That momentum is expected to continue throughout this year due to a plethora of initiatives, including a further rollout of pop-ups and a heightened focus on China.
The brand started out 2018 with the launch of scents for its Sì and
Acqua di Giò franchises. As reported, Armani Beauty will be the main sponsor of the upcoming Venice International Film Festival, running Aug. 28 to Sept. 7.
This is not the first time the label will support the event, but the 76th edition of the festival will mark the brand’s debut as the main sponsor, implying that Armani Beauty will be the official makeup provider for all the guests walking the red carpet and will have a branded booth at Palazzo del Casinò, where the film screenings are held.
To emphasize the new course of the Emporio Armani brand, first launched in 1981, in September the designer held for the first time a coed show at
Linate’s Hangar, which has been featuring the Emporio Armani logo since 1996.
Called Emporio Armani Boarding, the show was followed by a concert headlined by Robbie Williams. With the goal to infuse a democratic spirit to the show, Armani opened the event to 2,300 people. For the occasion, the company created a special Emporio Armani Boarding capsule collection that included sweatshirts, T-shirts and accessories.
In June, the designer changed the set- up and the seating at the theater for the Emporio show, with a special lighting structure installed above the runway, closed by 20 Olympic athletes and nine Paralympians of the Italian team wearing the new EA7 Emporio Armani uniforms for the 2020 Tokyo Olympic and Paralympic Games, with graphics paying homage to Japan. Previously, Armani has dressed the Italian athletes at the London 2012 and Rio 2016
Summer Olympics and Paralympics, and the Sochi 2014 and Pyeongchang 2018 Winter Olympics and Paralympics.
In February, he also reopened the Emporio Armani Caffè & Ristorante, closed since May last year, after a complete makeover, revisiting the location, which was first unveiled in 2000.
Armani has been experimenting with different show formats and locations, going coed for his signature brand in February at his Silos exhibition space and in June, for the first time in 18 years, he showed his namesake men’s collection for spring 2020 at his storied headquarters at 11 Via Borgonuovo.
In May, the designer took his precollection to Tokyo, with a show to coincide with the reopening of his Armani/Ginza Tower. Japan is a significant market for Armani, with some 90 points of sale across the country, including 34 in Tokyo alone. The country and the brand also share a love for certain aesthetic elements. As his show venue, Armani chose an annex building of the Tokyo National Museum, Japan’s largest art museum.
A pioneer in the arena of designer food and hospitality, Armani is also reimagining his four-level, 16,000-square-foot flagship at 760 Madison Avenue in Manhattan as part of a larger residential project in a new 96,000-square-foot building composed of a two-story flagship and 19 luxury residences designed by Armani. The building, with interiors also conceived by him, is scheduled to break ground in 2020 and is expected to be finished by 2023. In addition to his flagship, the project will include his Armani/Casa concept, all with a large experiential component. Armani has been working on hospitality projects since 2004, when the first partnership agreement for hotels and resorts was signed with The Burj Khalifa in Dubai, which opened in 2010, followed by a hotel in Milan in 2011.