After a year of speculation about the future of the luxury goods company, there is a newfound interest in Valentino that has many analysts wondering what the three latest bidders — Marzotto, Frey and Lawrence Stroll and Silas Chou — are betting on. Observers have little doubt the brand has long-term potential — even if the expected price could be at least 25 percent less than the $300 million it fetched in early 1998.
But unfortunately, analysts also are unanimous about the most important priority for whomever ends up as the new owner: The house needs a face-lift.
“Valentino has an extraordinary growth potential and a formidable aesthetic heritage,” said Armando Branchini, vice president of InterCorporate, a luxury goods analyst here. “The new owners could upgrade the brand and make it into a ‘trendsetting’ company, or they could expand the brand, offer more products and widen the consumer base. In any case, they should reevaluate the image.”
Rita Clifton, chairman of Interbrand Corp. in London, said the Valentino brand’s “lack of versatility” could make its renewal difficult. She said the brand instantly conjures up images of flounced, ruffled — and often red — eveningwear, but not a great deal more. It also has the connotation of being for older customers, and its relevance seems to wax and wane with the popularity of ultrafeminine and glamorous styles.
“I feel as though it’s a bit tired,” she said. “He’s done some wonderful things. But it’s somehow lacking the excitement of some of the younger, more energetic fashion brands.”
Carlo Pambianco, owner of a luxury goods consulting firm here, compared Valentino with Yves Saint Laurent. “Valentino is a historical brand, and as its equivalent, Yves Saint Laurent in France, it has appeal, but needs to be relaunched,” he said.
It’s not an impossible task, analysts said, even given the current recession and the more difficult environment for luxury labels. If anything, consumers are more likely to seek out the tried-and-true during a recession than gamble on the hip and trendy, analysts said.
“Valentino is a very good brand, and in times like these, when consumer spending is slowing down, the market favors brands with a heritage,” one London-based analyst said. “Heritage is so critical in this sector. Just look at Gucci. At the beginning of the Nineties, it was in terrible shape, and now it’s the core of a major luxury group. Valentino can have similar success if it’s managed the right way.”
Industry experts attribute the responsibility for the company’s immobility to Holding di Partecipazioni, its current owner.
“Valentino is a brilliant brand and a fantastic name, but it has not been managed the right way,” said one analyst, who declined to be named.
Pambianco said HdP should have invested more in direct retailing. “Valentino is the only brand in the high-end range of the market that can’t compete through its own direct distribution. The company can’t send a message to the customer and convey its identity,” he said.
But HdP did make some smart moves. Branchini said that HdP successfully eliminated product overlaps and was on the right track with a “correct restructuring, but needed twice as much time and money.” Branchini added that HdP’s timing was “unlucky.”
“Until five or six years ago, the competition was between big brands and smaller players,” he said. “When HdP bought Valentino, many luxury goods companies started getting listed on the market, and a rate of growth profitability became mandatory. While results should be expected in the medium-long term, they were now expected quarter by quarter — which is a paradox — and competition between large high-end companies became fierce.”
HdP was a new entry in the fashion world, and its largest business remains publishing. The group’s fashion division includes GFT Net, Fila and Joseph Abboud as well as Valentino, while its publishing operations include Rizzoli and the daily newspaper Corriere della Sera. HdP’s shareholders’ syndicate, tired of the poor returns from the fashion operations, began pressuring HdP chief executive officer Maurizio Romiti last year to focus on the more profitable publishing business and get out of fashion.
Sources said a reason for the drawn-out nature of the Valentino sale is the high price Romiti initially sought for the house. Bulgari’s investment fund Opera expressed interest in Valentino, but backed out late last year. The recession and luxury goods slowdown may be responsible for a lowering of expectations on Romiti’s part.
“They must have lowered the price,” said one London-based analyst. “Market conditions have worsened over the past six months and the market no longer buys into the whole ‘luxury restructuring story’ anymore. There is a lot of skepticism out there because there is no longer any growth at these companies. I think HdP got scared because they realized that the longer they wait to sell Valentino, the less they might get for it.”
Another analyst added that the market values for luxury companies like LVMH Moet Hennessy Louis Vuitton and Bulgari have decreased about 25 percent since the summer. “These companies are the best in the industry and they are 25 percent cheaper than they were just a few months ago. Imagine how much cheaper Valentino is today.” – Luisa Zargani with contributions by Samantha Conti, London and Miles Socha, Paris.