Armani ’09 Earnings Decline

Armani said it generated consolidated sales of 1.5 billion euros, or $2.09 billion.

MILAN — Giorgio Armani SpA reported a drop in 2009 earnings, with the recession affecting its core business and licensed products even as the company grew significantly in China.

This story first appeared in the July 13, 2010 issue of WWD.  Subscribe Today.

The firm reported earnings of 218 million euros, or $303 million, before interest, taxes, depreciation and amortization, down from 303.2 million euros, or $445.7 million, in 2008. Armani, which did not provide net income, said it generated consolidated sales of 1.5 billion euros, or $2.09 billion, a 6 percent drop from 1.62 billion euros, or $2.38 billion, in 2008. In China, however, sales jumped 32 percent.

Dollar figures were converted from euros at the average exchange rate for the periods to which they refer.

The company said it closed 2009 with a cash pile of 447 million euros, or $621.3 million, up 20 percent compared with the previous year.

Giorgio Armani, chairman and chief executive officer, said despite the difficult economy, the results “attest once again to the strength and the excellence of the brand, and confirm the soundness of its business model.”

Armani said the company is “focused on the development and growth of our core lines and markets as to be in a prime position to take advantage of the global market’s recovery. The first few months of 2010 have already shown a promising positive momentum.”

Deputy chairman John Hooks told WWD: “Things are getting better, and we are confident there are enormous opportunities to expand in 2010 and 2011 in developing countries, while continuing to grow our core markets — the U.S., Europe and Japan.”

Hooks said the company is fully “committed” to Japan, where it opened a Giorgio Armani store in Tokyo’s Roppongi district in the spring of 2009. “We still think there’s a chance to improve our market share there, in spite of the difficulties in the region,” adding that Japan showed “a high-single-figure decline” last year.

“Most of the decrease is due to our wholesale business, with department stores scaling back, while retail is flat,” he said. Hooks described Armani’s retail business in the American market as “challenged,” and said the company saw a “two-digit percentage” drop, mainly caused by the “panicked reaction of department stores” facing the recession. However, Hooks said he’s already seen “a fantastic improvement in America,” with sales up 35 percent this year.

Globally, Armani’s wholesale business accounts for 60 percent of the company’s total sales.

Last year, the group continued to invest in expanding and renovating its retail network through the opening of 182 new stores, of which 72 were freestanding. The group now totals 1,503 monobranded points of sale worldwide, of which 609 are freestanding.

In a statement, the company touted strong global retail sales last year. Among the most notable openings, in February last year, the designer inaugurated his Armani/Fifth Avenue flagship.

Hooks said the brand is doing well in both the Middle East and has a strong presence in Singapore.

He predicted that China would grow “even more” this year. “Last year, we explored second- and third-tier cities, while in 2010 we made retail statements in Shanghai and Beijing, and we are planning a major event later this year.”

The group also is “taking seriously” travel retail, said Hooks, as it unveiled Giorgio Armani’s first travel retail boutique at Hong Kong International Airport in May and two such venues in Paris’ Charles de Gaulle and Orly airports. “We will start in the U.S., too” he said.

Investments in 2008 totaled 170 million euros, or $249.9 million, but Hooks declined to provide a figure for last year, saying it was in line with 2008. “The company did not hold back and was not daunted by the downturn,” he said.

Retail revenues including licensed products reached 6 billion euros, or $8.3 billion, of which 4 billion euros, or $5.5 billion, derived from the group’s core business, and 2 billion euros, or $2.7 billion, from licensed products. These figures are in line with those of 2008, but this is the first time they have been highlighted, Hooks said. “Mr. Armani feels strongly about this, and he’s right, because people don’t often realize the size of our business. Most of our competitors are retail, but here is the full value of Armani products sold at retail prices.”

The executive said the company was able to “weather the storm” last year because it started to differentiate its brands in 2007 and 2008, “before the crisis hit.” The group repositioned the Collezioni and Armani Jeans lines, “making them more accessible. It’s a process and effort that department stores recognized. We did not scramble midcrisis and nothing really changed in our strategy,” said Hooks.

In September, Armani made senior management changes, which signaled an easing of the founding designer’s workload. But Armani, who turns 76 this month, said in October that retirement was not on his mind.