Cavalli RTW Fall 2017

MILAN Roberto Cavalli has been reset and is “building muscle” for 2018 — by which time it will have a new designer.

In an exclusive interview to comment on the company’s performance in 2016, chief executive officer Gian Giacomo Ferraris said last year’s figures held no surprises and were “in line with expectations.”

The fashion group reported a net loss of 55.2 million euros, or $60.7 million, which was a result of restructuring costs and measures taken to rationalize the industrial and logistic structure as well as distribution, which generated non-recurring extraordinary charges. The loss compared with a net profit of 32.7 million euros, or $36.3 million, in 2015, which was lifted by the sale of the building housing the brand’s flagship in Rue Saint-Honoré in Paris.

In the 12 months ended Dec. 31, revenues were down 13.6 percent to 155.2 million euros, or $170.7 million, which compare with 179.7 million euros, or $199.4 million, in the previous year.

The company posted a negative earnings before interest, taxes, depreciation and amortization of 26.1 million euros, or $28.7 million.

The performance in 2016 was also impacted by a decrease in sales over the previous years, explained Ferraris, who joined the company last July, succeeding Renato Semerari. Ferraris immediately set in motion a reorganization of the firm, which is “already showing the first results. The good thing is that 2016 is behind us. We are seeing a 6 percent growth in like-for-like sales in our stores in the first months of the year up to April 11 and, although we know we still have a long way to go, the encouraging signs lead me to believe we will return to a break even in EBITDA in 2018,” the ceo said.

Ferraris emphasized the fact that the company relies on a net financial position of more than 20 million euros, or $22 million, and net assets worth more than 210 million euros, or $231 million.

He said he was pleased with the “stabilization of sales. This is the first year we realign sales with less costs.”

In October, Ferraris unveiled a plan to cut about 200 positions out of a global headcount of 672. “The number is smaller, the restructuring interested 117 employees in Italy, which as of March 31 totaled 263 compared with 380 at the end of August,” he explained.

With the goal of streamlining the company structure, Ferraris closed its Milan corporate and design offices and transferred all functions to Osmannoro, Florence. The pipeline at the manufacturing plant in Osmannoro ranges from stocking fabrics to design and the development of prototypes, samples and products. Production and logistics were rationalized and the printing plant in Tuscany was closed.

Ferraris is not new to such turnarounds. A former Jil Sander and Gucci executive, he succeeded Giancarlo di Risio at Versace in 2009 and launched an extensive reorganization plan at that fashion house aimed at returning the company to profitability in 2011, which he actually reached a year earlier.

At Cavalli, Ferraris is focusing on the signature line and ending a number of licenses with the goal of strengthening it, having more control and increasing margins. Starting with the spring 2018 season, the brand’s men’s collections, which was licensed to Gibò, will be brought in-house.

“Osmannoro has the know-how for the production of men’s wear,” Ferraris observed. “It is also a strong platform for silk products, shoes and accessories.”

The children’s line, as well as the innerwear and beachwear collections, will also be produced internally. The latter two were licensed to Isa Seta for both the Riccardo Cavalli and Just Cavalli lines, while the Junior collection was produced by an exclusive manufacturer.

“I have nothing against licenses, but these collections are part of our core business, and you can’t delegate this. You must avoid confusion and control its positioning,” Ferraris remarked.

The Just Cavalli license with Staff International, controlled by Renzo Rosso’s OTB, continues to stand.

Ferraris terminated a license with Morellato for the Just Cavalli watch line, which he believed was “not up to the brand’s parameters of distribution.” The Just Cavalli watch and jewelry collection is now licensed to Hong Kong-based Luxury Timepieces and Accessories Limited. Roberto Cavalli’s signature watch line is licensed to the Geneva-based Franck Muller.

Cavalli also holds eyewear and fragrance licenses with Marcolin and Coty. The Home collection is licensed to companies including Ricchetti for tiles, for example, and Caleffi, for linen. The company is retaining the Cavalli Cafés and Clubs, with one opening in Sardinia’s luxury resort Porto Cervo this summer, although it is not a main focus. “This is a fashion, luxury and lifestyle brand and I respect [designer] Roberto Cavalli’s legacy, but our priority is the signature line,” Ferraris said.

Licenses account for 30.9 percent of revenues. Retail sales represent 42.9 percent of the total, and wholesale, 26.2 percent. Ferraris said he planned to increase the latter by 10 percent by the end of the year.

He is also rationalizing the retail network. There are 57 Roberto Cavalli stores globally, including directed operated and franchised units. For example, the company closed its store at the International Finance Centre mall in Hong Kong and plans to shutter units in Vienna, Madrid and Venice. In June, it will open a second store in Beijing and plans to roll out men’s and accessories stores in Asia. Ferraris said he’s been building its management team, placing new ceo’s in Asia, the U.S. and Japan.

“We have the perfect management in place now; what we are missing is the designer,” Ferraris said. Market sources say the executive has identified the designer who will succeed Peter Dundas, who exited in October, but that an agreement needs to be finalized. He declined to reveal the name of the potential new designer.

With that person in place, Ferraris plans to also relaunch the brand’s web site.

The Cavalli brand has been going through a phase of changes. Italian private equity fund Clessidra bought 90 percent of the company at the end of April 2015, shortly after Dundas’ arrival. The founding designer retained a 10 percent stake but has eased out of the fashion industry and never attended a show for the brand.

Francesco Trapani, a former chairman of LVMH Moët Hennessy Louis Vuitton’s watches and jewelry division and Bulgari executive, had joined Clessidra in 2014, spearheading the acquisition of Cavalli. He has departed the fund following Italmobiliare’s acquisition of Clessidra last May.

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