Giorgio Armani takes a bow after his Emporio Armani men's fall 2017 show

MILAN — Giorgio Armani marked the 40th anniversary of his fashion house in 2015 — and then spent last year and 2017 so far reorganizing it. And it’s costing him.

The Maestro’s moves are meant to help guarantee his company’s future, but while cost-cutting measures boosted the group’s bottom line in 2016, the rationalization of the international distribution network dented margins and revenues.

In the 12 months ended Dec. 31, net profits rose 12.4 percent to 271 million euros, compared with 241 million euros in 2015.

Earnings before interest, taxes, depreciation and amortization decreased 10 percent to 462 million euros, or 18.5 percent of sales, compared with 513 million euros in 2015, when they represented 19.4 percent of sales.

In 2016, revenues were down 5.2 percent to 2.51 billion euros compared with 2.65 billion euros in 2015.

Still, Armani remains convinced he’s making the right moves. While acknowledging this phase of contraction compared to the three previous years, the company said the “progressive and continuous rationalization and revamping of the distribution network […] will produce positive effects in the long-term.”

Armani, who not only owns his fashion house but is also its chairman, said “2016 proved to be a difficult year for the fashion and luxury sector. The causes may be attributed to external factors, notable among which are the slowdown in the growth rate of China’s economy, the sociopolitical tensions created in the aftermath of the terrorist attacks that struck Europe, and other factors of a political nature; in addition to this there has also been a general change in purchasing behaviors and attitudes.”

However, the designer expressed his usual unshakeable confidence in his brand and its future. He emphasized how the firm’s performance last year “demonstrate[s] the strength and resilience of the brand and confirm[s] its solidity. We are therefore continuing along the path of consolidation and rationalization, operating as always with a view to continuity and long-term perspective.”

The group also continues to rely on its cash pile. Last year liquidity rose 35 percent to 881 million euros, compared with 654 million euros at the end of 2015.

As reported, in February Armani unveiled a new brand strategy, revealing his decision to cease the Armani Collezioni and Armani Jeans brands and use only the Giorgio Armani, Emporio Armani and A|X Armani Exchange monikers. The new strategy will be effective with the spring 2018 season. Armani Collezioni and Armani Jeans will be blended in those three main lines. The company attributed the change to “a competitive market and a constantly changing scenario. The aim is to strengthen individual brands, redeploying its portfolio to maximize its potential with respect to its relevant targets.”

The streamlining also “will lead to a strategy of newly defined and targeted development of the retail network, based on expansion and rationalization of the number of retail outlets, according to the needs and potential of the different countries in which the Armani Group operates.”

The Giorgio Armani umbrella includes the signature line, the couture line Giorgio Armani Privé and the home and interior design collection Armani/Casa.

Emporio Armani “returns to its original identity,” said the company, characterizing the brand as “a wide choice of clothes and accessories for every purpose and occasion, ranging from sportswear to formal and occasionwear, thus serving a variety of different consumer targets,” with “experimentation and constant evolution” as key priorities.

By incorporating Armani Jeans, A|X Armani Exchange “establishes itself as the new streetwear label in the Armani style — young, informal, urban, versatile and modern — utilizing digital channels as its primary means of communication,” said the company.

The group has been gradually introducing the A|X Armani Exchange collection, which has a strong foothold in the U.S., into Europe, managed directly as part of the relaunch and repositioning plan initiated in 2014.

Back then, Armani unveiled ambitious plans to turn the A|X label into “the first global Italian fast-fashion brand targeting a young customer whose DNA is strongly Armani.” The designer unveiled the strategy as he revealed he had acquired the remaining 50 percent of A|X that he did not already own from a longtime venture with Como Holdings Inc. called Presidio Holdings Ltd., with Christina Ong and her husband, Ong Beng Seng, Armani’s longtime business partners and the licensees of the A|X Armani Exchange brand. A|X was launched in 1991, the same year it opened its first retail store in Manhattan’s SoHo. Of note: A|X Armani Exchange was a pioneer in online communication and retailing, launching its site in 1995 and adding online sales in 1997.

The reorganization of Armani’s brand portfolio means the number of stores of the three brands “will evolve rationally on the basis of the new positioning, continuing to guarantee extensive distribution in the various geographical areas in which the Armani Group operates,” said the company.

“Armani Jeans and Armani Collezioni stores will be transformed into either Emporio Armani or A|X Armani Exchange according to the relevant distribution environments,” it continued. “Following the brand consolidation process, the direct retail network will not undergo a significant change, since both Armani Jeans and Armani Collezioni lines will be consolidated into Emporio Armani, and are mostly distributed through the wholesale and multibrand channel.” While a figure was not provided for 2016, at the end of 2015 the group’s distribution network counted 2,983 points of sale.

With the aim of increasing each collection’s visibility on social media, as of mid-September there will be dedicated accounts for the individual labels on Facebook, Instagram and Twitter.

Last year, the breakdown by geographic regions remained “balanced,” said the company, and “fundamentally in line with 2015,” with Europe representing 40 percent of global revenues.

In 2016, the group focused on remodeling existing stores given its already substantial presence in the major cities. The company revamped the Emporio Armani store in Saint-Germain-des-Prés in Paris, first opened in 1998. With a café, the boutique is located in the heart of Boulevard Saint-Germain-des-Prés, and now has a brighter, airier look. To mark the reopening, the designer exceptionally showed his spring Emporio collection in Paris in October during Fashion Week and not in Milan. The 15,760-square-foot store and café spreads across four floors, showcasing clothing and accessories collections for men and women, EA7 activewear, the Armani Jeans line, watches, jewelry and eyewear. The Emporio Armani Caffè boasts six windows on Boulevard Saint-Germain, with views of the historic church and the landmark cafés Les Deux Magots and Café de Flore.

The company also opened a Giorgio Armani boutique in Venice. In September, a refurbished Emporio Armani store will open in Bond Street in London and the designer will show the brand’s women’s spring 2018 show in the British capital on Sept. 17, during the city’s fashion week.

Last year marked the first time the designer — who turned 84 on July 11 — revealed details about the future of his company, confirming he had established the long-rumored Giorgio Armani Foundation which, while aiming to fund social projects, also ensures that his $3 billion fashion group will live on.

“I decided to create the Giorgio Armani Foundation in order to implement projects of public and social interest,” said Armani at the time. “The foundation will also safeguard the governance assets of the Armani Group and ensure that these assets are kept stable over time, in respect of and consistent with some principles that are particularly important to me and that have always inspired my activities as a designer and an entrepreneur.

“These founding principles are based upon: autonomy and independence, an ethical approach to management with integrity and honesty, attention to innovation and excellence, an absolute priority to the continuous development of the Armani brand sustained by appropriate investments, prudent and balanced financial management, limited recourse to debt and a careful approach to acquisitions,” he added.

While vocal over the years about his aversion to sell, take on a business partner or publicly list the company, rumors about Armani contemplating forming a foundation emerged in 2012. The foundation reflects a key priority for Armani — independence, which he has sought to maintain over the years, especially since the year 2000 when rumors about a possible sale to LVMH Moët Hennessy Louis Vuitton or then-Gucci Group and L’Oréal swirled around the fashion house.

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