MILAN — In the words of OTB chief executive officer Ubaldo Minelli, 2018 was one of “voluntary resetting,” but there could me some M&A activity ahead.
While the Italian company is going through a reorganization, which includes Diesel USA filing for Chapter 11, Minelli said “specific measures [are] taken to create the right conditions for a sustainable development of our business. OTB has a clear vision of its long-term objectives, a strategy focused on achieving them, and an important investment plan to accelerate the growth of the brands currently in our portfolio. Our net equity and current financial position will allow us to continue to explore new opportunities.”
As reported, OTB has been eyeing an investment in the Roberto Cavalli company. Staff International, under the OTB umbrella, is Just Cavalli’s licensee, and its parent company presented an expression of interest with a recapitalization of 164 million euros, according to a court filing to request a restructuring plan with creditors presented by Cavalli.
In the fiscal year ended Dec. 31, OTB posted a net loss from recurring activities of 26 million euros, offset by the impact of discontinued operations totaling 32.5 million euros. No additional details about such operations were provided by the company. In 2017, net profit totaled 3 million euros.
Revenues decreased 5.2 percent to 1.44 billion euros, compared with 1.52 billion euros, impacted by the performance of the Diesel brand, the group’s main business. At constant exchange rates, sales were down 3.2 percent. While the group did not break down performance by brand, it said the designer segment and its manufacturing companies posted “an overall positive trend and a growing turnover.”
Earnings before interest, taxes, depreciation and amortization decreased by 11 million euros to 41.5 million euros at constant exchange rates, net of extraordinary transactions and the effect of discontinued operations.
OTB emphasized the strength of its net financial position, totaling 111 million euros, up 32 percent compared with 2017. “This is paired with a very solid consolidated net equity, which stands at 885 million euros,” said the company.
Based on these financial resources, a more efficient structure and a simplified and integrated organization, the group will invest 200 million euros in the next three years on an industrial development plan. This includes strengthening the distribution of all brands across all channels and markets, and boosting OTB’s retail network with the opening of 180 new stores. OTB plans to consolidate its industrial competences with investments in structures, processes, research and innovation. In particular, the company pointed to the expansion of the current perimeter of OTB through M&A operations.
Despite its continuous significant presence in Asia and in Japan in particular, Diesel recorded a contraction in Europe and North America. The company is relaunching in the U.S., through the voluntary procedure Chapter 11, and Diesel USA plans to redefine its distribution over the next three years. OTB cited the following measures: “Closing nonperforming and costly points of sales, opening new monobrand stores in locations in line with Diesel’s positioning, restyling over 60 percent of its existing stores, opening thematic pop-ups, growing its e-commerce business thanks to investments in technological innovation, plus a series of strategic partnerships with the most important North American wholesalers.”
Diesel USA is a subsidiary of Italian parent company Diesel SpA, and the only distributor of Diesel jeans in the U.S. since it launched in 1995.
In the bankruptcy filing, the company said it has $100 million in assets and about $50 million in debt. The 28 U.S. stores are spread across 11 states, consisting of 17 full-price locations and 11 factory outlet stores.
Poor decisions by previous leadership, landlords unwilling to negotiate leases and even cyber fraud have added to the mounting losses. As reported, the company said it lost roughly $1.2 million in cyber fraud over the last three years. That’s in addition to pricy leases, which set the company back more than $25 million each year. Some of those leases won’t expire until 2026. The company hopes to be profitable again sometime in 2021.
Diesel has integrated the Diesel Black Gold line, which was designed by Andreas Melbostad, into the Diesel line starting from the fall/winter 2019 line, WWD has learned. The company has been focusing on the Diesel Red Tag project, which was launched as a capsule project in March last year in Paris, designed by Shayne Oliver, cofounder of Hood By Air. For the second Diesel Red Tag collection, OTB founder Renzo Rosso tapped Y/Project creative director Glenn Martens. The Paris-based, Belgian designer approached Diesel’s heritage with his signature deconstructive attitude and the collection was presented in Milan last June during Men’s Fashion Week.
At the end of 2017, Diesel and Nicola Formichetti parted ways after a four-year collaboration.
The transitional phase is also hitting Diesel’s management, as Marco Agnolin left his role as chief executive officer of the brand at the end of March.
Agnolin joined Diesel in January 2018 after a seven-year stint at Bershka, which is controlled by the Spanish retail giant Inditex. Agnolin succeeded Alessandro Bogliolo, who left for Tiffany & Co. in October 2017. Agnolin’s successor is still to be named.
Among the upcoming projects developed during Agnolin’s tenure, there is the launch of the Red Tag x GR-Uniforma collection. Designed by Gosha Rubchinskiy, this will be unveiled with an art performance on May 9 in Venice, during the inauguration of the Biennale art showcase.