MILAN — The mood in Italy today may be summed up by a Charles Dickens-inspired title: “Great Expectations.” The announcement over the weekend that Mario Monti is to head Italy’s new government, following Prime Minister Silvio Berlusconi’s resignation on Saturday evening, came at a moment of reassessment and changes in the country, which is weighed down by debt, unemployment and crimped consumer spending.
“There is a lot to prune and if we cut the enormous public spending by at least 100 billion euros [or $136 billion at current exchange] and the corruption that gravitates around it, the country will fly again,” said Santo Versace, chairman of the family-owned Versace firm, and a member of Parliament since 2008. At the end of September, Versace left Berlusconi’s party, PdL [Freedom Party] and has since joined center party Alleanza per l’Italia, headed by Francesco Rutelli. Versace was highly appreciative of Monti, “a serious and competent politician,” whom he hopes “will last another 10 years” in this role. Versace expects Monti to fight tax evasion through increased fiscal transparency and cut privileges, corruption and excessive public spending. “Politics must be changed and regenerated. There are too many politicians that are in it to make money. For many high-end entrepreneurs that are part of the [luxury goods] Altagamma association, for example, who work in a highly competitive environment, there are too many that rely on lobbies and agreements with politicians,” said Versace.
Vittorio Missoni, chairman of family-owned Missoni, said Monti is “undoubtedly a person of high stature. We needed an independent person and an expert that can tranquilize the whole system. This is what fashion needs, markets that are more stable so that consumer spending increases immediately. If they let him work, he will stimulate the economy.”
Last week, before the opening of his luxury hotel in Milan, Giorgio Armani was also positive about Monti, whom he described as “very elegant, inside and outside.” The designer said Italian companies are generally “very aggressive,” with a strong desire to expand globally and rely on their skilled artisans and workers. He declined to talk about Italian politicians, saying that he’s “never needed one.”
The political transition occurs as a wave of changes is hitting Italian fashion companies, mostly privately owned by aging entrepreneurs or expansive families and in the midst of a generational shift. Last week, after months of speculation, France’s retail-to-luxury giant PPR confirmed its acquisition of men’s wear firm Brioni from the descendants of the original founders of the brand — heirs who have not always seen eye-to-eye on the steps to take to further develop the sartorial brand. The news sparked yet another wave of mixed reactions by the Italian press, which lamented the fact that a foreign conglomerate, and French in particular, had taken control of another Italian brand. The press had the same response when LVMH Moët Hennessy Louis Vuitton announced in March it was going to acquire jewelry firm Bulgari through a cash-and-share swap.
“The dimension is essential, and these poles of excellence not only preserve but enhance our individual identities,” said Laudomia Pucci, whose firm, founded by her father Emilio Pucci, is controlled by LVMH, parent company of Fendi, among others. “These are golden opportunities and if we benefit from them, we’ll always be leaders because we have history,” said Pucci of iconic Italian brands.
During an Altagamma meeting in Milan in October, Andrea Guerra, chief executive officer of giant Italian eyewear maker Luxottica, concurred, saying that “the dimension means a lot, but companies should not rest on their laurels and risk more.” He also cautioned against considering the stock market an arrival point. “It’s a start, and the Bourse helps make brands be more open and more recognizable,” he said.
After years of immobility, the stock market became more appealing for a number of Italian firms earlier this year. In the summer, Prada and Salvatore Ferragamo listed on the Hong Kong and Milan stock exchanges, respectively. Moncler was also due to launch an initial public offering in the summer in Milan, until Paris-based investment firm Eurazeo took a 45 percent stake in the luxury company, which shelved plans to go public. Luxury cashmere brand Brunello Cucinelli plans to list in Milan in the spring. The namesake entrepreneur, who has two daughters, has often voiced his desire to go public to provide a future for the company, independently of his heirs’ decisions going forward, and to be attractive to highly professional managers.
“There is a strong change in Italy, mainly to be attributed to the lack of high-profile managers here and to a generational change,” said Stefano Corneliani, senior analyst at Intermonte SIM.
The Bourse requires “a more disciplined approach and a more rigid framework” compared to that of a family-owned company, it conveys a different standing and makes firms more attractive to managers.
Corneliani said the “culture of luxury business has not been developed here. The French are more compact, they group together more easily compared with Italians,” citing Lactalis, BNL and Edison as nonfashion firms under French control.
“And luxury demands a stronger, ulterior concentration, as big groups rely on big cash flows that are reinvested each year to accelerate the expansion of their brands,” Corneliani said. “The crisis accentuates the differences between strong and weak brands and a consequent consolidation of brands. This does not mean small and medium firms will disappear, but on the contrary they will be integrated and rationalized, but those brands that have a strong identity will see it enhanced.”
Corneliani said that in the next five or 10 years, “Asian brands will have their own dignity and we will see Indian and Chinese labels on Via Montenapoleone, because luxury is about telling a story and Chinese and Indians have centuries to recount.” He concluded by adding that there will be less private equity funds eyeing fashion brands and more investors from China and the Middle East.
Armando Branchini, general secretary of Altagamma, said that all these changes in Italy are taking place because “barring a Tsunami-like economical and financial crisis, high-end consumer spending is expected to grow for the next 8 to 10 years. Those that have resources to invest, decide to invest to capitalize on the growth of consumer spending globally.”
He also noted that Italian companies struggle with a high fiscal weight. “Italian companies have a partner — the State, which eats up a large chunk of their sales,” he said.
Matteo Marzotto, who co-owns the Vionnet brand, and is an heir of the Marzotto textile giant, said he’s “always been a great supporter of the Bourse. It’s a big tool to enhance a firm and it helps in a generational shift,” he said. “Italians are very individualistic, but it’s interesting to be part of a bigger group, looking for synergies with partners that bring value and knowledge. It’s more complex to grow now and one needs relevant investments and a knowledge of retail.”