MILAN — Currency headwinds and substantial investments, including the acquisition of Marni, dented profitability at fashion group OTB SpA in 2013, although revenues were in line with the previous year and the foundation was set for further expansion.
This story first appeared in the April 18, 2014 issue of WWD. Subscribe Today.
In his first interview since joining the company in September as co-chief executive officer, Riccardo Stilli expressed confidence in the growth potential of the group, parent to brands Diesel, Viktor & Rolf and Maison Martin Margiela, as well as Marni. OTB also controls manufacturing arm Staff International, which produces collections for Just Cavalli, Vivienne Westwood, Marc Jacobs Men’s and Dsquared2. Stilli shares the role of co-ceo with Stefano Rosso, son of OTB founder Renzo Rosso.
“We have quite a few aces up our sleeve and great opportunities. We are still not heavily present in Asia; our markets are well-balanced, so that if there are problems in certain areas, we can shift our focus. We have a huge potential in the accessories and footwear category, which has not really been tapped yet,” said Stilli, who also highlighted the group’s strong organization, expertise and synergies.
That said, he conceded he was “reasonably concerned” about the global environment given the instabilities and tensions around the world, the strong euro and other currency fluctuations, as well as a slowdown in Chinese consumer spending that simply “can’t grow as in the past.”
Asked if the group was tweaking its prices to adjust to the currency headwinds, Stilli responded in the negative. “A price hike is not an answer; we evaluate each situation, but nobody in our industry would be so brash to do so,” he contended. Stilli also noted that Japan and the U.S. are the group’s main markets, accounting for 20 percent and more than 15 percent of sales, respectively. “Just look at what happened to the yen and the dollar. This surely does not help to boost results,” he said, adding that prospects in the U.S. are positive.
In 2013, OTB’s earnings before interest, taxes, depreciation and amortization totaled 140 million euros, or $148.8 million, down from 200 million euros, or $256 million, in 2012. “Almost half of this drop is due to the currency headwinds and to the investments made,” said Stilli. Dollar amounts are converted at average exchange for the periods to which they refer.
Revenues totaled 1.57 billion euros, or $2.07 billion, inching up from 1.50 billion euros, or $1.92 billion, in 2012. At constant exchange, sales would have risen 2 percent.
Diesel accounted for 70 percent of revenues, but Stilli underscored that the other brands in the stable are “increasingly gaining shares.” He also noted that Diesel is off to a good start with new artistic director Nicola Formichetti, who unveiled his first collection for the brand in Venice earlier this month. “The signs are very encouraging. Diesel needed a new life, and you can feel the new energy,” said Stilli.
The executive was pleased with the group’s performance in 2013, given the context, and underscored how OTB has no debt and can count on a cash pile of around 70 million euros, or $92.4 million, despite the investments made last year.
Stilli revealed that OTB paid “more than 100 million euros,” or $132 million, for Marni. Other investments were channeled into the group’s retail chain, including the opening of the first Viktor & Rolf freestanding store in Paris and “an impressive” Just Cavalli boutique in New York. Also, last year OTB spent between 5.5 and 6 percent of sales on marketing and communication.
Stilli several times referred to the “strength” of the OTB group, one of the few fashion conglomerates in Italy, and to the “engine” behind it — Renzo Rosso. “Last year was one of consolidation and increased focus, and steps taken in 2013 will continue and be effective throughout 2014,” said Stilli, praising the group’s integrated structure and know-how he found when he joined OTB last year, one he can further capitalize on to expand.
Stilli spent six years as chief financial officer and managing director of Prada Group, until 2005. More recently, he was cfo and then general director of Italy’s RCS Media Group, which owns newspapers including Corriere della Sera and La Gazzetta dello Sport. The executive played an important role in Prada’s first attempts at a stock market listing, before it eventually went public in Hong Kong in 2011. Over the years, Rosso has repeatedly said he is not looking at an initial public offering, and Stilli, addressing his arrival at OTB, remarked with a laugh, “I was not tapped for the bourse; the possibility has never been discussed and we are not thinking about it.”
When Rosso took control of Marni, he said he was looking at building a fashion conglomerate, admitting to having made a go for Valentino, which was eventually sold to Mayhoola for Investments. Asked about further potential acquisitions, Stilli said, “Our strength is that we are an industrial group that includes brands from contemporary to luxury. We continue to look at the market, but we don’t have any target today. If opportunities arise, why not?”