MILAN — Valentino does not need an initial public offering.
This was the message Stefano Sassi, chief executive officer of the luxury company, delivered clearly on Thursday as he commented on the brand’s growing sales performance last year.
“We thought about a listing a couple of years ago, because we were in a moment of super-accelerated growth and we asked ourselves [about the IPO]. That and just by talking to banks generated [media reports]. I said this last year and I repeat it now: It’s on hold and not a priority,” underscored Sassi. “The project does not exist, we are seeing very important growth and a potential that has yet to be fully expressed and we have the potential to reach very important results. We opened and closed [the IPO] parenthesis. Period. Our attention is all on growth.
“We’ve had a strong and intense ride for five, six years, and we now have a size that gives the brand visibility, credibility and the necessary strength to tackle the market. Now we have to move into higher volumes and the pace is different, there is a different evolution now that our client base has become relevant. The IPO could be an arrival point, but there is no need for resources to grow. The attention is focused on industrial activities, continuing in a process that has been surely successful and that can be even more relevant, focusing on growth, quality, quality of distribution, of the style statement and of the project and its modernity. All that has made us successful so far.”
Asked if the fluctuations in international stock markets were an issue in the decision, Sassi firmly denied it. “No, we were not discouraged by the Bourse. I can’t say it, perhaps the banks should say it, but, based on the characteristics of the company, when we decide to go, surely it would be a success. There are not many like Valentino in terms of positioning, dimension and with a certain kind of potential. It would be very appreciated. That said, it’s not a priority and the company does not even need it.”
With M&A activity picking up, and groups such as LVMH Moët Hennessy Louis Vuitton and Kering flush with cash, Valentino is often seen by analysts as a potential target but Sassi reiterated that the Qatar-based fund Mayhoola, which took control of the label in 2012, “has demonstrated with facts that it supports the brand with long-term projects and has shown ambition in the sector that would go beyond Valentino, and Balmain’s recent acquisition [in 2016] is proof of it.”
Sassi contended that Mayhoola is “considering how to continue to successfully be part of this sector and through further prospects.” He denied any kind of disinvestment in Valentino, which is a scenario that Mayhoola is not considering. On the contrary, the fund is evaluating “an even more important presence through Valentino or other interventions in this sector.”
Asked if there had been any fallout following last year’s decision by Saudi Arabia, the United Arab Emirates and Bahrain to sever ties with Qatar, accusing the government of supporting terrorism, Sassi responded: “Absolutely zero, it had no impact at all.”
He also said creative director Pierpaolo Piccioli is “very committed” to the brand. The next event for Valentino will be a cruise presentation in New York on May 22. “It’s a more relaxed way, a one-on-one opportunity,” he noted.
Last year, sales rose 5 percent to 1.16 billion euros, compared with 1.11 billion euros in 2016. At constant exchange rates, revenues gained 7 percent.
Earnings before interest, taxes, depreciation and amortization decreased 7.7 percent to 190 million euros from 206 million euros in 2016. “Communication expenses increased, as we see very strong competition from big groups, and we needed to have a more robust [visibility],” Sassi said about an additional investment of a “couple of percentage points.” Investments were also channeled into the group’s industrial structures with a long-term view in order to reduce production lead times.
“We did not have a structure for accessories, and now we have a 50 percent partnership in bags, we develop men’s wear directly, we control production of shoes, we have a joint venture for sneakers, and a stake in another shoe manufacturer. All this elevates our reliability,” the ceo said.
The growth last year was mostly organic, as the group opened only five stores in 2017, reaching a total of 180. The executive said men’s wear showed a strong performance, accounting for 15 percent of sales. “It has a higher visibility now and a good distribution, and it still has growth potential.”
Women’s accessories accounted for 50 percent of sales, and the younger Valentino Red line between 8 and 10 percent. Ready-to-wear represented between 25 and 30 percent of the total.
By geography, the European market accounted for 40 percent of sales, followed by Asia, representing 23 percent of the total, driven by China and Hong Kong, which “recovered after a weak 2016,” said Sassi, and mainly at retail.
The Middle East accounted for 5 percent of total sales. The executive touted the opening of a 6,480-square-foot flagship at Dubai Mall in April. “It’s a very important store in perhaps the only market where we still needed to have the right visibility. It’s going very well and we are pleased.”
The U.S. accounted for 20 percent of sales. “The U.S. was the weakest market, dented by the performance of department stores, but we are seeing a recovery in 2018,” Sassi observed, although at constant exchange rates.
Japan and South Korea represented 10 percent of total sales. Sassi pointed to “relevant investments in Japan,” with the unveiling of stores in Omotesando in 2016 and Ginza last year, the main opening in 2017.
Looking at this year, Sassi believes that, although “the exchange rate fluctuations will be even more evident in 2018,” the market is “interesting, healthy and growing. What we are thinking about now are the evolutions that are taking place with the new generations, a more informal world, and the digital effect that has changed communication,” he remarked.
Valentino will open 10 stores in Asia and Europe this year but the main objective is to grow organically, Sassi said. “We have ambitious goals, but we want to make sure the machine continues to communicate the values, that the public continues to appreciate and pay attention to the brand. The potential is everywhere, across the board.”
Sassi was upbeat about online prospects. Valentino in 2017 partnered with the Yoox Net-a-porter Group on a new omnichannel model called Next Era, bowing this year and allowing customers unprecedented online access to any product they want.
“It gives total visibility of stock to customers, YNAP has invested a lot in this and it’s not a banal theme in terms of technology. I believe we are the first brand [to be part of Next Era], and I see a substantial step forward with this. We are also revising our site from a graphic point of view. It will be stronger and more powerful by the end of the year.” Valentino also has “a very important online business” with other e-tailers such as Mytheresa.com, for example.
Earlier on Thursday morning, Compagnie Financière Richemont SA said the minimum 90 percent threshold for its public tender offer had been fulfilled, having secured 94.99 percent of Yoox Net-a-porter Group’s ordinary shares. In January, Richemont launched a voluntary tender offer for all ordinary shares of the Yoox Net-a-porter Group SpA at 38 euros a share, for a value of up to 2.77 billion euros.
Asked to comment on the deal, Sassi said he had “no worries” about it. “We are working well, and I believe it’s a platform and an investment that goes beyond the presence of Richemont and one that is of service [to the labels].”
As reported, Valentino has linked with Chinese giant Alibaba to give its Candystud collection some pop in Beijing. The collaboration will help promote the Valentino Garavani Candystud collection at a Valentino pop-up store in Beijing’s Sanlitun neighborhood and on a 3-D virtual store on Tmall Space, where the platform’s Luxury Pavilion hosts pop-up shops. “Online and physical run in parallel now — it’s an interesting experience,” Sassi said.