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Valentino Swings to Profit in First Half

Revenues rose 24 percent, with growth across categories and regions.

MILAN — Crediting a rejuvenated product range and citing growth across all categories and geographies, Valentino returned to the black in the first half, posting net profits of 2.6 million euros, or $3.7 million, compared with a loss of 7.4 million euros, or $9.1 million, in the same period last year.

This story first appeared in the September 2, 2011 issue of WWD.  Subscribe Today.

In the six months ended June 30, revenues rose 24 percent to 152 million euros, or $220.4 million, compared with 123 million euros, or $151.3 million, last year.

Dollar figures are converted from euros at average exchange rates for the period.

In an interview at Valentino’s offices here, Stefano Sassi, chief executive officer of parent company Valentino Fashion Group, lauded the work done by Valentino creative directors Maria Grazia Chiuri and Pier Paolo Piccioli, who helped “identify a precise style with consistency,” in line with the brand’s values, but with a new freshness.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose to 8.5 million euros, or $12.3 million, compared with a loss of 1.6 million euros, or $1.9 million, in the first half last year. Noting that EBITDA for the whole of 2010 totaled 7.5 million euros, or $9.9 million, Sassi said the company is on “a good path for the year 2011.”

Operating income totaled 4.3 million euros, or $6.2 million, compared with a loss of 5.7 million euros, or $7 million, in the first six months last year.

“We are quite pleased — revenues will reach more than 300 million euros [$432.7 million at current exchange] in 2011, even more,” said Sassi. “This is a brand that deserves an even bigger development and a stronger presence, and there is the basis for this to happen. It’s a positive loop.”

Sassi underscored that the performance in the first half was achieved without cutting costs. “We actually increased our investments, from personnel to communication, as we wanted to convey the brand’s changes to our customers,” he said. From a first upswing in 2010, the company has been growing globally, strengthening its structure and developing its retail and wholesale channels and the Web business, building on the designs of Chiuri and Piccioli, who joined the company three years ago, he continued.

In the period, sales of ready-to-wear rose 32 percent. Men’s wear gained 33 percent and represents about 6 percent of sales.

The company is working on a new store concept that will be more in line with Chiuri and Piccioli’s designs and that will better accommodate and display additional product categories, such as accessories, which grew 21 percent in the first half. Accessories accounted for 35 percent of total revenues.

The new blueprint will bow in the last quarter in Beverly Hills, where the firm is refurbishing an existing store. Work in the Milan boutique has already been initiated and will be completed next year. Sassi said stores globally will be revamped throughout 2012 and 2013. “We need to update the stores in terms of image, with a more modern look,” he said.

Geographically, excluding Japan, which grew 2 percent, Asia showed the most significant jump, up 39 percent. In particular, Sassi highlighted China’s performance, where boutiques in Shanghai and Beijing opened in the first half. “For the third year in a row, China has grown 35 to 40 percent on a like-for-like basis, with both accessories and ready-to-wear,” he said.

A Red store opened in Hong Kong’s Times Square and up next is a men’s store in the city’s mall, The Landmark. Sassi said the plan is to further roll out Red and men’s stores in Asia. “The Red collection has grown very well, it is not a second line, it’s a different way to express Valentino, younger, more accessible and more ironic, yet with the same fairy tale, dreamy mood,” said the executive. “It has a strong personality, it’s a project on its own, with its own Web site and own communication.” Sales of Red jumped 40 percent in the first half.

Europe, the Middle East and Africa grew 25 percent.

Sales grew 31 percent in the U.S., where the company has been “developing strong relationships with American department stores and increasing brand visibility,” said Sassi. The executive said accessories, and shoes in particular, have been gaining in that market.

There are 111 Valentino boutiques, of which 67 are directly owned, and 50 Red banners, including corners and shop-in-shops, of which 50 are franchised.

While focusing on its core business, Sassi said Valentino is restructuring its license portfolio. In June, the firm inked a new eyewear license with Marchon, which replaces a previous one with Safilo and which will bow in 2012. In October, the company will launch a new fragrance, Valentina, the first fruit of Valentino’s fragrance license with Puig, which is discontinuing Valentino’s former fragrances. This is the fashion house’s first scent under Piccioli and Chiuri.

Regarding the future of the brand, which was acquired by European private equity firm Permira and part of the Marzotto family in 2007, Sassi said Permira is “happy that Valentino is growing,” a fact that can only be a draw for potential buyers. “Permira will eventually sell Valentino, but they are not anxious to sell it now, nor do they need to,” he said.

As reported, VFG opted in July to maintain only a 5 percent stake in the Proenza Schouler brand in a transaction with a group of 20 investors led by Andrew Rosen, founder and co-ceo of Theory.

As for the relationship with the couturier and founder of the company, Valentino Garavani, who is rumored to be thinking of turning the documentary “The Last Emperor” into a musical, Sassi described it as “positive. There is great respect and we do projects together. Valentino has made the history of fashion in Italy, and given the quality of the person, the company, together with Chiuri and Piccioli, is pleased that he is appreciative of our work.”