MILAN — One-third of the European fashion giants is Italian, although the French groups are still larger in size, and sales and profits continue to rise, with profitability declining slightly. The low borrowings/net equity ratio — 33.7 percent in 2017 — makes the Italian fashion companies extremely solid, with clothing and leather wear reflecting the best indicators. Among the leading groups, French giant LVMH Moët Hennessy Louis Vuitton, with 70 brands in five different segments, confirmed its position as the leader in terms of size, with sales of 42.6 billion euros.
These are some of the key takeaways from Mediobanca’s study of the fashion industry released on Wednesday. The Research Area of the Italian merchant bank examined the trends reflected by 163 Italian fashion companies with sales of more than 100 million euros in 2017, from Giorgio Armani to Valentino and Ermenegildo Zegna, and large European groups from Adidas to Inditex, which operates Zara, or Puig and Samsonite International.
In Italy, sales, employment and profits of the fashion industry continued to grow in 2017. Aggregate sales of 70.4 billion euros were up 28.9 percent compared with 2013 due largely to the “impressive performances,” reported the research, in 2015 (up 9.9 percent) and 2014 (up 7 percent). The growth rate in the last year was slower but still significant, up 4.5 percent.
The sector is becoming increasingly important for Italy: In 2017 it accounted for 1.3 percent of Italian gross domestic product, compared with 1.1 percent in 2013.
The most important category is clothing, which accounts for 40.5 percent of total revenues, followed by leather wear (20.9 percent) and eyewear (16.2 percent).
Jewelry stands out for the annual average growth rates of its sales in the 2013-17 period, up 13.3 percent, higher than the 11 percent posted by the distribution industry and the 6.3 percent registered by textiles.
Overall, the Italian fashion companies have seen their sales grow on average by 6.6 percent in the 2013-17 period, despite a slight reduction in margins, as earnings before interest and taxes declined to 8.9 percent in 2017 from 9.6 percent in 2013.
Non-domestic sales are gaining traction and in 2017 accounted for 63 percent of the total sales, up 22.9 percent compared with 2013. This is much higher than the 56.7 percent share for the other large Italian manufacturing companies.
The sectors most geared toward international markets are eyewear (89.8 percent), textiles (72.5 percent) and leather wear (66.1 percent).
As a consequence, employment levels in fashion rose, too, with the addition of 59,800 new employees in 2017, up 19.7 percent on 2013 and up 4 percent on 2016, and totaling almost 363,000.
The segments that have increased their headcount the most are distribution (up 26.8 percent), leather wear (up 26.7 percent) and clothing (up 22.4 percent).
Italian companies reported an increase in net profit as a percentage of sales, which reached 5.3 percent in 2017 from 4.2 percent in 2013, due to a reduction in the tax rate to 25.1 percent in 2017 from 41 percent in 2013.
In general, cumulative net profits earned by the Italian companies in the 2013-17 period totaled 15.8 billion euros, representing consistent growth through the five years under review. In 2017 record profits of 3.8 billion euros were posted, with net daily average profits per company of 63,000 euros, compared with 38,000 euros in 2013.
Of the 163 Italian fashion companies, 15 report sales in excess of 900 million euros and are included in the survey of large European fashion operators. In general terms, the top 15 companies leverage their competitive advantage over the other 148 companies, standing out by profitability and liquidity. The 148 followers delivered higher annual average growth rates in sales for the 2013-17 period (up 9.5 percent versus 3.5 percent for the top 15).
Furthermore, the top 15, which in 2013 “benefitted from an exceptionally high concentration of profits (in the sense that they generated 77.7 percent of the aggregate profits), have lost much of this advantage.” In short, “the solid companies are a bit less solid, and the riskier companies a bit less risky, meaning the overall picture is more even,” stated the report.
In the 2013-17 period, the 43 leading Italian fashion groups reported aggregate revenues of 226.2 billion euros (up 33 percent on 2013). Although Italy, with its top 15 companies, is the best represented country numerically (with more than one-third of the total), France has the largest share of the aggregate turnover with 30.3 percent, “helped by the strong contribution of Italian brands acquired by the French giants.”
Italy and Spain rank second and third, with 13.4 percent and 13 percent, respectively, although neither had even half as much as France.
Following LVMH are Spanish group Inditex with sales of 25.3 billion euros; Adidas, with 21.2 billion euros; Hennes & Mauritz AB, with 20.3 billion euros, and Gucci and Balenciaga parent Kering, with 15.5 billion euros. Prior to its merger with Essilor, Luxottica with sales of 9.2 billion euros, is the highest-ranking of the Italian operators, coming in seventh, while the Prada group, with 3.1 billion euros, ranked 14th.
The annual average growth in sales in the 2013-17 period favored the Italian companies — Valentino (up 22.2 percent) and Moncler (up 19.7 percent) came second and fourth in the ranking, respectively — which were dominated by Danish company Pandora (up 26.1 percent). French company SMCP, the owner of Maje, Sandro and Claudie Pierlot, was in third place (up 21.5 percent).
Europe achieved an annual average growth rate in sales of 7.4 percent in the 2013-17 period. Denmark was up 13.6 percent and Spain was up 10.1 percent, both standing out as the only countries to record double-digit growth rates, whereas the U.K. was up 5 percent and Italy was up 3.5 percent — below the European average.
Profitability declined, with the European EBIT margin at 15.3 percent in 2017, compared with 17 percent in 2013.
The international dimension marks the largest European fashion groups. In 2017, an average of 85.2 percent sales was generated outside the respective country of origin. The French, with 87.7 percent are ahead of the Germans (83.6 percent) and Spanish firms (82.3 percent).
Italy, with 78.3 percent, still has growth potential globally.
The U.K. companies were well below average, with 52.8 percent, influenced by the presence of groups such as Arcadia and New Look, which mostly operate on their own domestic markets.
In 2017, the 43 European operators created jobs for almost 990,000 people (190,000 more than in 2013).
The Italian groups increased their workforce by more than 30,000 employees, second only to the Spanish firms, which expanded their headcount to include a further 48,000 staff (attributable for the most part to the Inditex group, with 44,700 new recruits), but ahead of the French (20,300 more employees).