MILAN — Showing resilience in the face of a tough economy and propelled by growth across all brands and regions, Giorgio Armani SpA reported a 1.5 percent increase in sales last year, although the recession and heavy investment bit hard into profits.
This story first appeared in the May 8, 2009 issue of WWD. Subscribe Today.
The fashion company Thursday said a slowdown in demand in the fourth quarter pushed earnings before interest, taxes, depreciation and amortization (EBITDA) down 14.6 percent to 303.2 million euros, or $445.7 million, from the company’s “record” year in 2007. Sales rose to 1.62 billion euros, or $2.38 billion. At constant exchange, the sales increase stood at 2.4 percent. In particular, revenues in Greater China rose 30 percent, offsetting a 4 percent drop in Japan.
Including licensed products at wholesale value, sales grew 6.6 percent to 2.51 billion euros, or $3.69 billion. Dollar figures are converted from euros at average exchange rate for the periods to which they refer.
“There is no doubt that 2008 has been a difficult year for the fashion and luxury market,” said Giorgio Armani, president and chief executive officer. The designer touted the brand’s strength and the “solidity” of the group’s “successful business model.” Armani said he continued “to believe in our vision, our goals and our strategic choices, and this belief encourages us to maintain a long-term view in any initiative we undertake.”
In 2008, the group financed its expansion and growth with investments of 170 million euros, or $245 million, almost doubling the amount it invested the previous year. Armani continued to focus on its retail network with the opening of 50 stores, raising the total to 539 units globally. Last year, the company opened its first Giorgio Armani and Emporio Armani stores in India, in the nation’s first luxury center, the Emporio Mall in New Delhi. The stores are managed by a newly formed joint-venture company between Armani and leading real estate firm DLF Retail Brands Pvt. Ltd., with the designer owning a 51 percent stake.
In September, Armani opened his biggest Giorgio Armani store in the world in Milan’s Via Montenapoleone. Last year, Emporio Armani and Giorgio Armani boutiques opened in Beijing, and Emporio debuted its first flagship in Moscow.
Deputy managing director John Hooks told WWD that its own retail continues to be pivotal for the group “as it is the best way of having a direct contact with the market.” Hooks said Armani is planning a “significant” number of store openings in 2009. Following the opening of the Armani Fifth Avenue concept space in New York in February, the company will open Giorgio Armani flagship stores in Tokyo, Dubai, Doha and Singapore later this year. There are also plans to open Emporio Armani units in Berlin; Singapore; Perth, Australia, and several in the Middle East and China.
In 2008, Armani also doubled his stake to 50 percent in the joint venture Presidio Holdings Ltd. for the A|X Armani Exchange brand. The joint venture with Como Holdings Inc., called Presidio Holdings Ltd., was inked in 2005 to boost worldwide revenues of the A|X brand and quickly expand in new markets such as the Middle East, South America, China and Southeast Asia.
Despite these investments, the group continued to show a strong financial position, closing 2008 with a cash pile of 370 million euros, or $544 million, in line with the end of 2007.
For 2009, Hooks said there is no change of strategy. “.…We need to be ever more effective in competing in different segments of the market,” noted the executive, adding Armani’s “unique brand model” allows the company to further expand and to be competitive “with different types of companies and products.”
Hooks concluded that “to do so we need to properly differentiate between our brands and compete according to the requirements of each market segment. We continue to think that an appropriate development of each brand allows room for significant growth even in a prolonged downturn.”
By brand, the signature Giorgio Armani and more fashion-driven Emporio Armani labels generated the bulk of wholesale revenues including licensed products, accounting for 64 percent of that figure. Sales at the Giorgio Armani brand showed no change compared to 2007, totalling 875 million euros, or $1.28 billion, while Emporio Armani gained 13 percent to 730 million euros, or $1.07 billion.
The A|X Armani Exchange brand grew 15 percent to 232 million euros, or $341 million, and Armani Jeans rose 7 percent to 310 million euros, or $455.7 million. Growth was slower at the Armani Collezioni diffusion brand, where sales inched up 2 percent to 305 million euros, or $448.3 million.
Conversely, Armani Junior jumped 36 percent to 50 million euros, or $73.5 million. “This is one of the youngest group brands,” said Hooks, “with an expanding market that in 2008 was less hurt by the crisis and the contraction in consumer spending.”
The home line, Armani Casa, in 2008 grew 10 percent, reaching sales of 40 million euros, or $58.8 million.
Apparel, Armani’s biggest revenue generator, saw sales rise 8 percent and accounted for 56 percent of sales. The performance of other product categories was flat.
Geographically, wholesale revenues including licensed products rose 8 percent in Europe and 4 percent in Italy, while North America showed no change at current exchange, but grew 5 percent at constant exchange. Sales in the rest of the world rose 14 percent. Europe, including Italy, accounted for 54 percent of sales, followed by North America, with a 22 percent share. The Far East accounted for 13 percent of revenues, and the rest of the world for 11 percent.
Hooks said the Japanese market, where sales fell 4 percent, was hit hardest by the recession, while the downturn was “less vigorous” in China, where sales jumped 30 percent.