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NEW YORK — Since taking over the helm of Valentino SpA three months ago, Michele Norsa has moved quickly to make things happen.
Norsa, Valentino’s managing director and chief executive officer who also is president and ceo of its parent company Marzotto Apparel, tapped Graziano de Boni, president and ceo of Marzotto USA, for the additional post of president and ceo of Valentino USA a week and a half ago, replacing Georges Wichner, who is leaving after three years.
Norsa and de Boni are brimming with plans for Valentino, which Marzotto SpA purchased from Holding di Partecipazioni in May for $210 million, a sum that includes Valentino’s net debt of $179.2 million. Among the top priorities:
Renegotiating and signing new licenses.
Bringing in a younger customer by developing a sportswear collection while maintaining Valentino’s luxury focus.
Rebuilding Valentino’s men’s wear business.
Forging an Asian joint venture.
Investing in the haute couture and opening new flagship boutiques in the U.S., Asia and Europe.
Expanding its accessories business.
Continuing to work with Valentino Garavani and his partner Giancarlo Giammetti, whose contracts expire next year.
All these moves are expected to bring the company to profitability in 2004. Valentino had net losses of $24.9 million on sales of $115.7 million in 2001.
In an interview here, Norsa and de Boni outlined some of their plans for the company. Next month, Norsa expects to present his three-year plan for Valentino to shareholders and analysts.
“The acquisition was completed May 31, and we started planning this company June 3,” said Norsa, who was in New York on one of his monthly visits. Although Italians generally take the month of August off, Norsa seemed knee deep in business.
“I wanted this acquisition very much. I cannot complain about anything,” said Norsa. “It perfectly fits our brand portfolio. We are very strong in men’s. We have Hugo Boss and Marlboro Classics (a casualwear business in Europe that’s licensed from Philip Morris).” Men’s wear represents more than 75 percent of Marzotto’s apparel volume.
“We definitely needed a women’s brand; our business is focused in the diffusion area. We did not have anything that was positioned in luxury. It was very important to have a luxury brand,” said Norsa, noting that Marzotto negotiated with HdP for five months to buy Valentino. “We needed a strong brand in terms of brand awareness and the future.”
Norsa noted that the Valentino brand itself is very small compared to its brand recognition. “The brand awareness is huge,” he said. Valentino currently generates worldwide sales of $500 million at retail, including licensees.
Although Marzotto has never ventured into the top tier before, Norsa said, “Our commitment is to keep the brand on top of the luxury market. We want to keep investing in the haute couture and the flagship boutiques.”
The ready-to-wear collection remains the backbone of the Valentino business and is profitable, he added. “What we have to do is develop more licensees and new boutiques.”
Another growth area would be a women’s sportswear collection geared toward a younger audience. Norsa believes there’s tremendous potential “for aspirational customers who can’t afford the top Valentino line since the minimum price points are very high. We’ve very interested in developing an area of younger products,” said Norsa. While he wasn’t ready to divulge any plans yet, he said a sportswear line could be introduced at the end of 2003 or the beginning of 2004. He said the line could potentially be licensed, but Valentino would handle distribution.
The company already produces Valentino Roma, a second line of ready-to-wear, dresses, pants suits and skirt suits, currently being distributed in a limited way in the U.S.
Men’s wear is another growth area for Valentino, which had a stronger men’s business in the early Nineties.
“Men’s is definitely an area we want to develop,” said Norsa. In recent years, he said, “Change was needed but was not executed. We have to redevelop the men’s business. We think we have the know-how and the expertise. We understand that Valentino has a stronger appeal for women with the eveningwear business,” he said.
Norsa believes that Marzotto’s strength in production could be a help to Valentino men’s wear. Marzotto does 75 percent of its business in apparel and 25 percent in textiles.
“We have very strong expertise and know-how in pattern-making and product development. In terms of manufacturing, we have used our capacity but we can handle the logistics and product development.” Since Marzotto’s factories are filled to capacity, it would have to hire outside contractors, Norsa indicated.
Meanwhile, Norsa noted that the company is renegotiating most of its licensees. Valentino recently signed a license with Albisetti, an Italian company, for swimwear, underwear and lingerie, beginning in spring-summer 2003.
Currently Unilever Cosmetics has the Valentino fragrance license and produces four fragrances — Valentino Classic, Very Valentino for women and men, and Valentino Gold, which, as reported, will be launched in France, the Netherlands, Italy, Spain and the U.K. in November. In the U.S. there will be an exclusive launch that month in Nordstrom, with a rollout in the rest of the country taking place in December. Valentino Gold will be introduced in the rest of the world next year.
“They [Unilever] did a good job a few years ago. The business is stronger in Europe than the U.S.,” said Norsa. As reported, Unilever is said to be looking at selling off its prestige fragrance business, however, which includes Calvin Klein Cosmetics, Vera Wang, Nautica, Karl Lagerfeld and Nino Cerruti in addition to Valentino. This could mean the Valentino beauty license ends up in another company’s hands.
Turning to more pressing matters, Norsa said he is hopeful Valentino Garavani, 70, will continue to work for the company after his contract expires in March 2003.
“I hope Valentino will continue to work with us. The relationship with Valentino and Giancarlo Giammetti is excellent. Mr. Valentino is working with creativity and enthusiasm. I really hope we will be able to maintain the relationship. We are working on a new proposal for when his contract expires next March,” said Norsa.
Both Valentino and Giammetti currently serve as consultants to the company, he added.
But as far as who is ultimately responsible for the business, Norsa said, “The responsibility is mine. They’re heavily involved in the creativity and image of the brand, and we work close together.”
Norsa was diplomatic when asked if Valentino’s fringe benefits have been kept intact. As reported, Valentino and Giammetti were said to have been treated to lavish perks by the company’s previous owner HdP, including personal planes, free vacations, bodyguards and a $5 million yearly consulting contract. These fringe benefits reportedly were one of the reasons the negotiations between Marzotto and HdP over the sale of Valentino took so long. Neither Garavani nor Giammetti had any say in the sale of the company.
Norsa explained that Valentino has a very good creative team in Rome, and they have people overseeing the ready-to-wear line. “We’re looking for new talent to create continuity. For the present time, there’s no change.”
Opening more stores is another top priority for Valentino. Currently, there are 18 Valentino boutiques worldwide throughout the U.S., Europe and Asia. In the U.S., there are currently boutiques in New York, Los Angeles, Palm Beach, Miami Beach, Naples, Fla., and Honolulu, Hawaii. This fall, Valentino will open a 3,000-square-foot store in Las Vegas. Among the U.S. cities where it would like to open stores are Dallas, Houston and Chicago. In addition to its own boutiques, Valentino sells to such stores in the U.S. as Bergdorf Goodman, Neiman Marcus, Barneys New York and Saks Fifth Avenue, as well as to specialty stores such as Stanley Korshak, Ikram, Mary Jane Denzer, and Gito.
“We want to target the upper, upper neighborhoods. We’re not interested in malls,” said de Boni.
The company would also like to open stores in Asia in Singapore, Taiwan and Taipei. Currently, 30 percent of Valentino’s business is done in Italy; another 30 percent in the rest of Europe; 25 percent in North America, and 15 percent in Asia. Valentino is also exploring a joint venture with its Japanese licensee, Mitsui. “We’re looking forward to taking majority control of Japanese distribution,” said Norsa.
In Europe, Norsa said the market in Spain is becoming stronger, and the company is looking to open stores in Barcelona and Madrid. “It’s one of the biggest-growing markets,” he said. “We need to develop the potential of the Latin markets in Europe.” He said that the brand currently is performing better in southern Europe, such as Italy, France, Spain and Portugal, than it is in northern Europe.
In his quest to turn a profit in 2004, Norsa said he doesn’t expect to cut expenses.
“For the time being, what is very important is we are not cutting any of our advertising and public-relations expenses. Sales are doing quite well. This a very difficult year, and lots of companies are going down,” said Norsa.
At the Valentino boutiques, sales for the first half were up 13 percent, and same-store sales shot ahead 6 5 percent. “We’re doing the best in France, where we’ve had more than a 30 percent increase in same-store sales in the first half,” he said.
Over the past several years, many Italian houses have ended licensing arrangements and moved more of their products in-house. Valentino believes a balance is important. Norsa said that over the past 10 to 15 years, there have been two schools of thought when it comes to manufacturing and distribution. “Everybody moved from licensees to in-house and from multibrand distribution [department stores] to mono-brand [freestanding stores.] A balanced solution is the best one,” he said.
“You can’t have everything developed inside. You need high standards and top companies as licensees. Licensees’ contributions in terms of advertising can be huge,” he said.
“The future is balanced distribution and balanced between in-house and licensees. It must be more like a partnership,” said Norsa. “The selection of partners is very important, and you have to keep control of the product creatively.” The company must maintain control of design and image, he stressed. One requirement when signing a Valentino licensee is that it must have the ability to handle a global business.
While Valentino is not planning a licensing spree, two categories the company is interested in cultivating are watches and jewelry. Norsa sees a big opportunity for Valentino accessories, which are handled in-house but produced by contractors. The line currently consists of handbags, small leather goods, shoes and belts.
“I believe strongly that the most important line in terms of growth is Valentino Accessories,” said Norsa. Currently accessories represent 30 percent of Valentino’s sales in its own boutiques and 20 percent of total company sales. “I think it can be 30 percent of total sales,” he said.
Norsa believes Marzotto, a 170-year-old company based in Veneto, Italy, brings a lot to the table.
“We believe there are great synergies. We have an international presence in such cities as Hong Kong, Tokyo, New York and Paris. We have a strong organization and subsidiaries in Europe, and strengths in terms of logistics, production and support. We are able to give support and international credibility,” said Norsa.
Valentino continues to do all the manufacturing for its haute couture in Rome, where it employs between 55 and 60 seamstresses.
Norsa said he won’t be splitting the couture and ready-to-wear into two separate businesses, at least not for the time being. “The couture is really a big asset. It’s the top level, and the creativity and inspiration can filter down to all the different lines.”
De Boni said there is a lot of room at the top to grow. “The image has been well preserved and is not diluted.”
“They built an extraordinary name and brand awareness,” said Norsa. “Valentino has been on top of this market for almost 40 years, and has seen so many ups and downs. So many brands have disappeared.”
Asked where he sees the company ten years from now, Norsa said, “It’s difficult to look at the future. I know the business will be much bigger. We will reach younger consumers. It’s going to move from a night-time luxury to everyday luxury. It’s one of the goals to reach.”