MILAN — Brendan Mullane’s sudden departure from Brioni as creative director earlier this week may have signaled larger turmoil at the Italian men’s wear brand.
The company is rationalizing its workforce at its manufacturing plant in Italy’s central town of Penne and industry sources indicate Brioni is seeing a drop in revenues, mainly at wholesale, due to an increase in prices that customers are reluctant to accept.
A Brioni spokesman confirmed the impending layoffs, saying that “in agreement with the unions a voluntary mobility procedure was put in place in the end of 2015. Further discussions are scheduled to take place in the next months with the specific aim to reach an accurate size of the production capacity at the factory.”
According to market sources, the company asked for at least 50 employees in December to agree to voluntary mobility, and 60 complied. One source said consultancy AlixPartners has identified that 200 jobs could eventually be at stake as part of a restructuring of the plant’s operations.
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“Fixed costs have spiked too much, the head count is too high also at the managerial level. A downsize could come through either a restructuring operation or a decrease in head count, and the latter seems more likely,” alleged a source, noting that the discussion could also lead to a job security agreement whereby employees work less hours to help maintain the same number of workers.
AlixPartners was also called in to analyze issues at Sergio Rossi before the Italian footwear brand was sold to European investment house Investindustrial last year. Kering controls Brioni and was Sergio Rossi’s former owner. One source underscored that there is “some confusion and the intentions are not quite clear” regarding Brioni.
Kering said it does not comment on market rumors.
Asked to explain the reasons behind the struggles, one industry observer pointed to three possible missteps. In 2012, Brioni tapped Mullane — who had worked at Givenchy, Hermès, Louis Vuitton, Burberry and Alexander McQueen — as creative director with the aim of adding more fashion to the brand, but this created confusion in the market. Known for its high-end tailored suits, Brioni has increasingly been developing categories such as outerwear and sportswear, footwear and accessories, also targeting a younger customer.
“Brendan did not have the time to turn the brand into a really cutting-edge one, but the product was no longer about being tailor-made,” said one analyst.
“Customers and buyers alike don’t recognize the positioning and prices are not competitive,” said another observer, pegging suits at an entry wholesale price of 2,000 euros, or $2,192 at current exchange.
Also, in an increasingly tough business environment, hiking wholesale prices made it “no longer interesting” for multibrand retailers to carry the label, especially in Europe, the first source said. A Milan-based analyst said revenues last year dropped by 20 million euros, or $22.2 million at average exchange rates, to 190 million euros, or $211 million, attributable to the struggles at wholesale, and claimed the firm was operating at a loss with negative earnings before interest and taxes. One source remarked on the diminished spending power of Russian consumers as being relevant in light of the brand’s successful history in that region.
Lastly, wrong investments in human resources were also to blame, alleged the source.
Kering, which was then called PPR, finalized the acquisition of Brioni in January 2012 at a moment of explosive growth in the men’s wear business. Brioni appealed to PPR because of its know-how in tailored men’s wear, exclusive positioning and international visibility.
PPR chairman and chief executive officer François-Henri Pinault stated a few months earlier that a push into accessories and expansion in the burgeoning Asian market were key avenues for growth at Brioni.
The Italian brand had initiated a search for a buyer in 2008 and a need for an injection of cash became a priority at the time of the sale, as it was weighed down by a debt resulting from the company’s buyout in 2006 of former ceo Umberto Angeloni for an estimated 80 million euros, or $104.8 million at average exchange rates for that year. In his 16 years at the company, Angeloni was instrumental in building Brioni. The executive is now chairman, ceo and majority shareholder of luxury Italian tailoring brand Raffaele Caruso SpA. At the time of the PPR acquisition, Brioni was controlled by the descendants of the company’s founders — Nazareno Fonticoli, the master tailor, and Gaetano Savini, the original fashion coordinator.
Based in Penne, Brioni has for years dressed fictional character James Bond in the film franchise, at times replaced by Tom Ford’s label. Its handmade men’s suits have been worn by the likes of John Wayne, Clark Gable, Barack Obama and Matt Damon.
Brioni had tapped Alessandro Dell’Acqua as creative director of the women’s line in 2010 to raise the women’s division’s profile, but that operation was shut down in 2011.
In fall 2014, Kering tapped Bottega Veneta executive Gianluca Flore as Brioni’s new ceo, succeeding Francesco Pesci who had been with Brioni for almost 15 years, and who is now ceo of Peuterey.