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CASTRETTE DI VILLORBA, Italy — “This is a historical change, and it’s a business model for the future,” said Alessandro Benetton, chairman of the family owned Benetton Group, referring to his decision to create and differentiate three new areas at the company — managing brands, manufacturing and real estate. His soft-spoken manner aside, the developments represent a significant strategic evolution for the Italian fashion retailer.
This story first appeared in the December 23, 2013 issue of WWD. Subscribe Today.
All three entities are directly controlled by Edizione Srl, the holding company of the Benetton family. This step, announced last month, is part of a three-year plan to restructure Benetton operations with a focus on its brands in an effort to improve profitability.
Benetton also revealed that he plans to dismiss several brands in an effort to further develop the potential of the core United Colors of Benetton and the group’s bridge label, Sisley, aimed at customers 18 to 30 years old.
“I see no other option but to dismiss brands such as Playlife, Killer Loop, Jeans’ West and others so that management can totally focus on the success of United Colors of Benetton and Sisley, our two leading brands,” Benetton said. “As you can imagine, this is not an easy decision for me, given how close I am to some of these same brands.”
Benetton said he arrived at the decision in part due to his experience as a board member of Moncler. “[They] confirmed the validity of what I have been thinking for a while about our company,” Benetton explained. “You simply cannot focus on too many brands and expect to be as effective. In Moncler’s case, over the years this led to the dismissal of the smaller brands.”
Sitting in one of the airy meeting rooms here, near Treviso and home to the Benetton Studios and the sprawling logistics hub, the young executive told WWD this decision “will bring a fashion product more quickly to the stores and it will be more competitive on the market. From the delisting [from the Milan Stock Exchange last year], my job was to prepare the company to streamline its mechanisms and operations to support and focus on the brand.”
Benetton has been instrumental in disrupting the company’s 48 years of family management. His goal was always to create a company led by management independent of the family. “I have been the detonator for discontinuity, making things happen and further separating shareholders and management,” he said.
Benetton has approached the family business with the eyes of an outsider, following his experience at Goldman Sachs as a mergers and acquisitions analyst and the creation of his private equity fund 21 Investimenti in 1992.
“It was almost a chance event that I was part of the family,” he said. “It was a good combination to provoke all this.”
He noted that, for example, since earlier this year the entire board is elected only for one-year terms (no longer three-year terms), to make sure it can best support a business that is undergoing much change. It is clearly a “step by step” work in progress, but he underscores that it is “evident that I have done a big part of my job. I have put in motion a change to have a management independent of the family.”
Benetton has also created a strong organization dedicated to the flagship brand, which he believes is an asset. The brand, he says, has “authority” and awareness.
Former creative director You Nguyen left the company in the summer and Benetton was very appreciative of his work in recovering the brand’s Italian heritage. “[He] helped us see how others perceived us, he did a great job and the team knows how to capitalize on this,” Benetton said, noting that there are no plans for a successor.
Benetton was upbeat about the new collections going forward, describing them as “more thematic, fresh and younger” and same-store sales are positive indicators.
“We are perceived as a truly Italian brand and there is a gap in the masstige segment that we can fill without chasing the fast-fashion model,” he said. “From a basic family brand, we see potential to cater to urban and sophisticated women aged 25 to 35.”
To this end, a new store concept will bow between the second half and the end of next year. Plans to further develop logistics and increase frequency of product delivery are in place as well as a shift from a sell-in model to a sell-out one.
The company relies on its own manufacturing plants in Serbia, Italy and Tunisia.
With 6,500 stores in 120 markets, the group is pulling out of between 20 to 30 nonstrategic markets. Around 25 percent of stores will be directly operated. Benetton is initiating an “important franchising program” with more “select partners that must become very competent executors,” Benetton said.
By the end of the year, the company will have halved its debt, which at the end of 2012 totaled 644 million euros, or $824.3 million at average exchange, also through the sale of nonstrategic real estate assets. In 2012, sales totaled 1.8 billion euros, or $2.3 billion. This will be “reasonably unchanged, and we are already generating cash,” he said, without elaborating.
“The year 2014 will be that of our final cleaning up,” Benetton added. “When you do radical things, the adjustment is faster. In May, we will reevaluate the situation.”