Furla's Strategy Toward Consistent Growth

MILAN Furla may be marking its ninth decade in business but the mantra is to “look forward.”

This story first appeared in the February 23, 2017 issue of WWD. Subscribe Today.

That doesn’t mean the brand is ignoring its history, however. President Giovanna Furlanetto, daughter of founder Aldo Furlanetto, emphasized her “full respect for our past. We are building our future on a past of great quality not only in terms of business but also from the human point of view.

“Until the Seventies, this was a trading company, built on the respect and consideration for my father, through the relations he had set up with suppliers and clients. With the second generation, we built on ground that was suitable for growth.”

During an interview at Furla’s sleek and modern showroom and offices in central Milan, overlooking the Duomo Gothic cathedral, Furlanetto marveled at the transformation globally since the days her father set up shop in Bologna.

“The first flight over the Atlantic Ocean took place in 1927, the world was much slower, there were other parameters. It’s nice to remember and consider how things have changed. You would travel to the U.S. by ship back then.

“For many years, the company developed at a slow pace and through a healthy family and entrepreneurial management, until someone told me that small is not beautiful,” she said with a laugh. “And to keep up with the international challenges, we decided it was time to shift gears.”

Until around 2010, Furlanetto said the company developed by acquiring knowledge of one geographic market at a time, allowing “roots to go deep, planting flags in different areas of the world.”

This permitted Furla “to intercept the flow of travelers,” a flow that has become almost “hysterical,” said Furlanetto, noting that the Chinese, who a few years ago could make up 60 percent of customers in Furla’s store in Florence, “almost disappeared,” as did the Russians, hurt by the sanctions put into place by the West over the country’s invasion of the Ukraine. Building a retail chain in all strategic markets helped counteract these effects. “We have 10 stores in Russia now, and it’s easier to intercept the Chinese in Japan, Korea and even Australia,” she said.

To be sure, Furla’s travel retail channel is performing very well, said general director Alberto Camerlengo. “Season after season, it represents an important percentage of our sales and it gives visibility to the brand.” In the first six months of 2016, sales in the travel retail channel rose 38 percent with 223 points of sale in 52 countries.

Last year was “exceptional” for the company, said Camerlengo, who declined to provide year-end results as they still needed to be approved by the board. In the first six months of 2016, as reported, Furla’s revenues rose 28 percent to 194 million euros, or $217.3 million, compared with 151 million euros, or $167.6 million, in 2015.

Dollar figures were converted at average exchange rates for the periods to which they refer.

The company, underscored Furlanetto, has made important investments in New York, with a new flagship on Fifth Avenue; in Rome’s Piazza di Spagna, by the Spanish Steps; Shanghai, and London, on Brompton Road. As of the end of last June, the company had 425 stores, compared with 415 at the end of 2015, and 1,200 points of sale, in more than 100 countries. The company has been investing in the renovation of its stores, modeled after the Piazza Duomo unit in Milan.

She emphasized that expansion in Asia-Pacific still needs to be completed, pointing to the potential of the region. “We are very successful there from Australia to Indonesia, in Hong Kong, China and Southeast Asia. We moved early and we are reaping the rewards.” However, ever understated, Furlanetto said she prefers to think of a “cautiously aggressive” expansion. “We press the accelerator only when we are confident in our break even and without excesses; we don’t want to go overboard.”

Camerlengo said the company is growing in all markets and that there are “great expectations” for the Asia-Pacific region, excluding Japan, and forecast that will become the number-one market in 2017. Japan is currently Furla’s main market, followed by Italy, the rest of Europe, Asia-Pacific and the U.S.

In the first six months of 2016, Japan represented 26 percent of the company’s sales, growing 30 percent. Sales in the U.S. also rose 30 percent, and Europe was up 26 percent. Furla continues to grow in the U.S. and January 2017 performed “even better,” said Camerlengo. Revenues in Italy gained almost 34 percent and sales in Asia-Pacific increased 22 percent, reaching almost 20 percent of the total.

Camerlengo said that the growth is “uniform,” which leads to hope for future developments. Investments in human resources are also a priority. “Furla is made by people, the success comes through them, and we believe in a multicultural environment,” said Camerlengo, ticking off 15 different nationalities in Furla’s offices and 29 counting the retail network. “We are finally attractive for managerial profiles so it’s a great satisfaction. Sales outside Italy account for 80 percent of revenues, and it’s fundamental to intercept the taste and preference of consumers.”

He spoke of an incentives program that rewards all employees, from the receptionist on up, which is calculated based on the profitability of the company. “We initiated this five years ago, but never really made it public,” said Camerlengo. “It’s synergistic, the team works in a more cohesive way.”

In 2017, Furla started a new employee welfare program that varies depending on the countries where its workers are located. In Italy, there are contributions to kindergarten or medical expenses. In the country, it’s 500 euros, or $531 at current exchange rate, per employee plus the bonus, he explained, citing additional holidays for employees in Hong Kong, for example, as additional benefits.

“This also helps to attract and keep talent,” said Camerlengo. “We developed our values and behavior codes, writing them black on white. The process lasted one year with interviews around the world, and we realized there were well-rooted values that had not been revealed openly. These values create an incredible sense of belonging.”

As of Dec. 31, the company had 1,669 employees globally, with women making up a large percentage of the workforce. In Italy, for example, men are only 30 percent of the total.

Last May, after years of speculation, Furla said it had set in motion plans to go public, inking an agreement with TIP Tamburi Investment Partners SpA. The Marzotto, Loro Piana and Ferragamo families are among the investors in TIP, which also has stakes in Hugo Boss and Ferrari. In 2013, TIP invested in Remo Ruffini’s holding company, Ruffini Partecipazioni, indirectly buying a stake in Moncler, which went public at the end of 2013.

Giovanni Tamburi, president and chief executive officer of TIP and one of Italy’s highest-profile investors, said the plan was to first invest 15 million euros, or $16 million, to issue a convertible loan for the capital increase, which will be automatically swapped into Furla shares at the future listing. TIP is committed to underwrite an additional 15 million euros on the day of the listing at the same economic conditions offered to the market. A further quota of shares will be allotted to TIP and sources estimate another 15 million to 30 million euros, or $16 million to $32 million, will be paid then.

The agreement, said Furlanetto, was “important” and helped to expand the board. “The company needed this, facing the challenges ahead, and we wanted to have people that had a different vision of the company, based on their outside experiences.”

She described TIP as “the ideal partner,” and, while confirming the IPO project, she said there was “no rush. The results are so exciting that the company has no need of support to grow financially, we have been developing with our own resources. We must now complete the preparation of the company and fine-tune our management for that step and we want to solidify our production structure. Also, there is no clarity on the markets, so the listing may be pushed back.”

Tamburi had tentatively set the IPO for 2018, depending on market conditions.

The agreement with TIP was inked shortly before longtime Furla ceo Eraldo Poletto left to assume the same role at Salvatore Ferragamo. Furlanetto did not name a successor but gave further responsibilities to Camerlengo, who worked with Poletto for several years.

Furla is controlled by a holding company, headed by Furlanetto and her sons, that has a 67 percent stake in the accessories firm. Furlanetto has passed on the majority of the holding to her son Giuseppe Costato to “give him responsibility,” but she underscored that he does not have an operational role and is simply a member of the board.

“There are no changes, Furla will continue to have a managerial structure,” she said, emphasizing the role of a “solid and autonomous” board.

Furlanetto’s daughter and her brother Carlo’s four children are shareholders, but also hold no operational roles at Furla.

Furla has been logging solid for years, with revenues growing 126 percent since 2010. In 2015, despite a challenging market for accessories, the Italian firm recorded a 30 percent increase in revenues to 339 million euros, or $376.3 million at average exchange rate. Growth was registered across all areas and all channels, with an increase of 23 percent in like-for-like sales.

Furla’s performance in 2015 was also boosted by the expansion of the brand into new categories — a men’s line, women’s footwear and an eyewear license with De Rigo. Furla has also signed licensing agreements with Ratti and Morellato for textile accessories and watches, respectively. The company has been growing the size of its stores to help display the increasing product range, such as men’s accessories and footwear.

As Furla continues to strategically expand, Furlanetto is clear about what has enabled the company to survive for 90 years when many of its peers have not. “We are a unique, Made in Italy reality, owned by a family that supports the company’s management and we remain in a market niche,” she said.