WWD.com/fashion-news/fashion-features/the-right-stuff-586157/
government-trade
government-trade

The Right Stuff

Rare is the multimillion-dollar design house that can claim that at least half its business is built on clothes. For many big firms, apparel is the accompaniment to a thriving accessories business, which is usually the cash cow.<BR><BR>But...

View Slideshow

Rare is the multimillion-dollar design house that can claim that at least half its business is built on clothes. For many big firms, apparel is the accompaniment to a thriving accessories business, which is usually the cash cow.

But there’s no tail wagging the dog for Giorgio Armani, whose clothing division accounts for 50 percent of the group’s wholesale revenues. Still, Armani, not one to miss an opportunity, has built solid businesses in eyewear and watches.

“Mr. Armani was one of the first designers to diversify his product offering — a wise choice based on the leverage of his brand,” said Carlo Pambianco, a Milan-based luxury analyst.

Recently, Armani has set his sights on footwear and handbags, and in 2000, the designer established a dedicated division. In order to tightly control production, Armani subsequently acquired small manufacturing companies specializing in leather goods. Pambianco praised the move, seeing it as necessary in today’s accessories-driven spending environment at retail and as a long-term investment. To help build the business, Armani tapped former Bergdorf Goodman and Gucci executive Dawn Mello as a consultant.

 John Hooks, Armani’s group commercial and marketing director, said this is “a difficult business to break into,” but that “the breakthrough was basically that we made the decision to buy [the manufacturing facilities] so that we could have a privileged position even though we didn’t have the critical mass.”

On the other hand, the watch and eyewear collections are produced under license. Emporio Armani watches are produced by Fossil and both the Giorgio and Emporio Armani eyewear lines are produced by Safilo, a license signed in 2003 following a 14-year agreement with Luxottica. Today, the accessories division, which includes shoes, bags, watches, jewelry and eyewear, accounts for 20 percent of the company’s wholesale revenues. That’s roughly $425 million at current exchange.

“Although I have always designed shoes and bags within my collections, it has really only been in the last three years that we have truly focused on this aspect within the company,” said Giorgio Armani. “We have approached this as if it were a new business and, as always, I am interested in developing the category steadily rather than seeking fast growth at the expense of credibility.”

Over the last four years, this segment increased 241 percent for small leather goods and 179 percent for shoes, according to the company. Bestsellers include the Froissé, or pleated, bags, in crocodile for fall 2004, and a black-and-white structured, boxy tote.

To increase visibility of this category, the firm has developed retail space for it. In Milan, Armani opened a store dedicated to accessories on Via Spiga. “We realize that, if you want to sell accessories, you have to give much more choice and show much more merchandise,” said Hooks.

— With contributions from Amanda Kaiser

View Slideshow