Estee Lauder Cuts Annual Forecasts as China Curbs Drag Demand

An Estee Lauder cosmetics counter is seen in Los Angeles, California, US, August 19, 2019. (Reuters)
An Estee Lauder cosmetics counter is seen in Los Angeles, California, US, August 19, 2019. (Reuters)
TT

Estee Lauder Cuts Annual Forecasts as China Curbs Drag Demand

An Estee Lauder cosmetics counter is seen in Los Angeles, California, US, August 19, 2019. (Reuters)
An Estee Lauder cosmetics counter is seen in Los Angeles, California, US, August 19, 2019. (Reuters)

Estee Lauder Cos Inc cut its full-year sales and profit forecasts on Wednesday, signaling a hit to sales from persistent COVID-19-related lockdowns and store closures in major market China.

The New York-based company's shares were down about 5% in premarket trade.

Sales growth of many US companies like Estee has been impacted in China that has been reeling under the zero-COVID policy to fight rising infections.

The subsequent restrictions have resulted in reduced traffic in stores and temporarily curtailed distribution capacity in the region.

Estee generated about 31% of its sales from Asia-Pacific region in the fiscal 2022, according to a regulatory filing.

The company expects full-year 2023 net sales to decrease between 6% and 8%, compared with the prior forecast of a 3% to 5% growth.

The company expects full-year 2023 adjusted profit per share to decrease between 19% and 21%, compared with the previous forecast of a 5% to 7% growth.



Zara Pulls Advert from Website Front Page after Gaza Boycott Calls

 A man walks with a Zara bag in central Madrid, Spain, December 11, 2023. (Reuters)
A man walks with a Zara bag in central Madrid, Spain, December 11, 2023. (Reuters)
TT

Zara Pulls Advert from Website Front Page after Gaza Boycott Calls

 A man walks with a Zara bag in central Madrid, Spain, December 11, 2023. (Reuters)
A man walks with a Zara bag in central Madrid, Spain, December 11, 2023. (Reuters)

Zara pulled an advertising campaign featuring mannequins with missing limbs and statues wrapped in white from the front page of its website and app on Monday after it prompted calls by some pro-Palestine activists for a boycott of the fashion retailer.

Inditex, which owns Zara, said the change was part of its normal procedure of refreshing content. It did not comment on the boycott calls, but said the "Atelier" collection was conceived in July and the photos were taken in September. The war between Israel and Hamas began after Oct. 7

Zara's Instagram account saw tens of thousands of comments posted about the photos, many with Palestinian flags, while "#BoycottZara" was trending on messaging platform X.

In one of the photos a model is pictured carrying a mannequin wrapped in white, in another a bust lies on the floor and another features a mannequin with no arms. Critics said they resembled photos of corpses in white shrouds in Gaza.

Zara said at the launch of the collection on Dec. 7 that it was inspired by men's tailoring from past centuries. The photos appear to show an artist studio with ladders, packing materials, wooden crates and cranes, and assistants wearing overalls.

The reaction highlights heightened sensitivity international brands are navigating as fighting across Gaza intensifies and calls for company boycotts rise. The CEO of Web Summit resigned in October after comments he made on the Israel-Hamas conflict.

The photos, which featured on Zara's online store home page on Monday morning, were no longer visible on the website or on its app by 1230 GMT.

A link on the UK website to Zara Atelier led to a page showcasing last year's collection.

The collection, of six jackets, is one of Zara's most expensive, priced from $229 for a grey wool blazer with chunky knit sleeves, to $799 for a studded leather jacket.

It's not the first time an advertising campaign has landed a fashion label in controversy.

French luxury group Kering last year set up a group level position to oversee brand safety after advertising images from its label Balenciaga featuring children sparked a backlash that dented sales.

Dolce & Gabbana was removed from ecommerce sites in China in 2018 after a campaign showing models struggling to eat typical Italian food with chopsticks -- decried as racist by local celebrities and social media.

Zara last year came under fire from some Palestinians and Israelis after the head of the retailer's local franchise in Israel hosted a campaign event for an ultranationalist politician.


Chanel's Manchester Fashion Show Draws Celebrities and Protesters

Models present creations at the Chanel Metiers d'Art runway show, in Manchester, Britain December 7, 2023. REUTERS/Suzanne Plunkett
Models present creations at the Chanel Metiers d'Art runway show, in Manchester, Britain December 7, 2023. REUTERS/Suzanne Plunkett
TT

Chanel's Manchester Fashion Show Draws Celebrities and Protesters

Models present creations at the Chanel Metiers d'Art runway show, in Manchester, Britain December 7, 2023. REUTERS/Suzanne Plunkett
Models present creations at the Chanel Metiers d'Art runway show, in Manchester, Britain December 7, 2023. REUTERS/Suzanne Plunkett

French luxury label Chanel took its annual Metiers d'Art runway show to a rainy northern England street late Thursday where an international fashion crowd viewed a special collection highlighting the brand's craftwork, Reuters reported.
Guests including actors Tilda Swinton, Hugh Grant and Kristen Stewart, model Alexa Chung and British rapper Aitch gathered on a stretch of Manchester's Thomas Street under a transparent canopy, where they snacked on mulled cider and mini cheese toasties as pro-Palestinian protesters chanted.
Music soon drowned out the protest chants and models with 1960s inspired hairdos marched down the pavement in girly renditions of the label's signature tweed ensembles in bright pink, orange and green, with low-heeled Mary Jane shoes.
The annual event showcases lace, embroidery and other crafts produced at Chanel's complex of specialty workshops on the northern outskirts of Paris.
Manchester's link to fashion dates to the 18th century when it was the center of Britain's textiles industry. The city is known for its contributions to British pop culture, sports and fashion.


How to Fix the Carbon Crisis in Fast Fashion

Workers organize used clothing for packaging at a warehouse near Barcelona on Aug. 1. REUTERS
Workers organize used clothing for packaging at a warehouse near Barcelona on Aug. 1. REUTERS
TT

How to Fix the Carbon Crisis in Fast Fashion

Workers organize used clothing for packaging at a warehouse near Barcelona on Aug. 1. REUTERS
Workers organize used clothing for packaging at a warehouse near Barcelona on Aug. 1. REUTERS

With all eyes on climate talks in Dubai, the world of fashion is working out how it can fulfill an ambitious pledge to slash the emissions it makes clothing the world with speed and style.
And the outlook isn't rosy, says Reuters.
Big brands have promised big cuts to their carbon footprint - but it is manufacturing that causes most of the environmental damage and somebody has to foot the bill for the radical change.
"The scale of the decarbonization challenge completely dwarfs the funds available," said Vidhura Ralapanawe, executive vice president at the fashion company Epic Group.
Hong Kong-based manufacturer Epic - which makes clothes in Bangladesh, Jordan and Ethiopia - has been at the forefront of global efforts to clean up the environmental footprint of the 2 trillion-dollar fashion industry.
"We are working with local and global organizations to move the whole industry forward, while trying to bring together brands, retailers, manufacturers, mills, and service providers."
The key to progress, he said, is a positive partnership between brands and manufacturers.
"Given the investment and risks manufacturers are taking, they need support in terms of long-term partnership as well as business terms that are sensitive to pricing," added Ralapanawe.
Fashion is one of the world's most damaging industries.
Behind 2% to 8% of all greenhouse gas emissions, it sucks up scarce water and creates vast amounts of pollution and waste.
The industry in 2018 set the goal of halving emissions by 2030 and reaching net zero by 2050. But progress has been slow.
Britain's monthly fashion habit alone creates the same carbon footprint as 900 round-the-world flights, according to the Oxfam charity. A 35-mile car trip creates the same environmental damage as making one cotton shirt, it added.
The stats have only got worse as the global appetite for fast fashion grows, with ever more consumers chasing the latest catwalk-to-high street trends.
Industry also knows that as of next year, it must comply with European Union legislation forcing companies to report and address emissions in their supply chains, with manufacturing to blame for about 80% of all apparel sector emissions.
But as global fashion brands pledge to drive down emissions and power towards the 2050 net-zero goal, textile and garment manufacturers are demanding that brands share the financial burden of investing in low-carbon technology and processes.
Last month, Transformers Foundation - a New York-based think tank that speaks for denim makers and brands - released a report urging more collective action to achieve a climate transition.
Kim van der Weerd, intelligence director at Transformers Foundation, said the apparel sector rarely asks 'who pays' for the big transition, assuming that it is the suppliers whose facilities must change who will foot the bill.
"That is both impractical and inequitable," she told the Thomson Reuters Foundation, given that suppliers have far less money than the big brands.
Experts said decoupling the key sticking point - who must act and who can pay - could help break the impasse, putting suppliers in charge of what changes to make and ensuring that brands duly invest in that overhaul.
PAYING FOR AMBITIONS
Textile makers want a range of funding options from the brands they feed to finance a new, cleaner production line.
Mohiuddin Rubel, a director at Bangladesh's apparel makers' trade body - the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) - said fashion brands can support suppliers by offering grants, low-interest loans and direct investments.
That will help suppliers move to more renewable energy and energy-efficient technology, as well as retain workers, he said.
Some initiatives are already underway.
The Apparel Impact Institute (AII), a US think tank promoting sustainable investments, formed the Fashion Climate Fund last year that mobilized $250 million with the aim of unlocking $2 billion of finance and cutting 150 million tons of carbon from fashion over the next three decades.
Kurt Kipka, chief impact officer at the Institute, said the fund could help speed cuts as the sector is ripe with opportunity for rapid reform.
Among suggested easy, quick wins: recovering heat from the water used in production or improving boiler efficiency.
Apparel makers said making climate finance available, accessible and affordable for suppliers is essential for a low-carbon future for fashion. But the sums involved are sizeable.
If the industry wants to achieve net zero by 2050, it will need more than $1 trillion of investment, said an AII report.
NO COOKIE-CUTTER
Besides a shortfall in funding, the industry faces another big hurdle to rapid decarbonization - the sheer diversity of priorities and problems faced by its myriad suppliers.
In densely-populated Bangladesh, suppliers find it difficult to generate enough rooftop solar power as most factory buildings expand vertically rather than horizontally, limiting roof space, cloth makers told a climate conference held in Dhaka in October.
In Pakistan, factories are unable to cut deals with third parties that would supply renewable power to help them cut emissions, and must instead make the reductions in-house, said the Transformers Foundation report.
In other words, one size will not fit all.
"If our approach is to take the collective goal of the Paris Agreement and to divvy it up equally amongst companies without taking feasibility into consideration, we will fail," said van der Weerd of the denim industry think tank.
Epic Group's Ralapanawe said the needs of a giant may not be the same as those of a heavily-leveraged small supplier, and a mix of financial tools will be needed to meet both.
Kurt Kipka, chief impact officer at the Apparel Impact Institute, said helping suppliers lighten their footprint demanded flexibility from funders.
"It’s imperative that we meet industry and partners where they are - based on the different needs of leading facilities and facilities only starting in the decarbonization journey," he said.


Prada CEO Says it Aims to Double Business in China in Medium Term

A mannequin is pictured in a giant ornament in a Christmas  display window at the Prada store on on 5th Avenue in Manhattan in New York City, US, December 5, 2023. REUTERS/Mike Segar
A mannequin is pictured in a giant ornament in a Christmas display window at the Prada store on on 5th Avenue in Manhattan in New York City, US, December 5, 2023. REUTERS/Mike Segar
TT

Prada CEO Says it Aims to Double Business in China in Medium Term

A mannequin is pictured in a giant ornament in a Christmas  display window at the Prada store on on 5th Avenue in Manhattan in New York City, US, December 5, 2023. REUTERS/Mike Segar
A mannequin is pictured in a giant ornament in a Christmas display window at the Prada store on on 5th Avenue in Manhattan in New York City, US, December 5, 2023. REUTERS/Mike Segar

Prada has ambitions to double its business in China over the medium term, Gianfranco D'Attis, chief executive of the Italian luxury fashion house's flagship brand, said on Wednesday.
"That means increasing our investments," D'Attis said in a group interview in Shanghai.
Prada will have bigger stores, more local products and more events in China, he added.
D'Attis, a former Dior executive who took the helm of the Prada brand in January, also said that it hoped to develop a hospitality concept as part of its worldwide distribution strategy, including in China, possibly in 2024-2025, Reuters reported.
The group, whose brands also include classic English shoemaker Church's, reported a 10% rise in third quarter revenues in November, saying that a strong performance in Asia and Europe helped to compensate for weakness in the Americas.


EU Approves Ban on Destruction of Unsold Clothing

The law bans the destruction of unsold textiles and footwear, and will apply two years after the law enters into force. Medium-size companies will have a six-year exemption, while smaller companies are wholly exempt from the ban - AFP
The law bans the destruction of unsold textiles and footwear, and will apply two years after the law enters into force. Medium-size companies will have a six-year exemption, while smaller companies are wholly exempt from the ban - AFP
TT

EU Approves Ban on Destruction of Unsold Clothing

The law bans the destruction of unsold textiles and footwear, and will apply two years after the law enters into force. Medium-size companies will have a six-year exemption, while smaller companies are wholly exempt from the ban - AFP
The law bans the destruction of unsold textiles and footwear, and will apply two years after the law enters into force. Medium-size companies will have a six-year exemption, while smaller companies are wholly exempt from the ban - AFP

The European Parliament and EU member states announced on Tuesday new rules to crack down on fast fashion and reduce waste, including a ban on destroying unsold clothes.

The new rules, first proposed by the European Commission last year, impose tougher rules on products to ensure they last longer and are easier to repair and recycle.

The law bans the destruction of unsold textiles and footwear, and will apply two years after the law enters into force. Medium-size companies will have a six-year exemption, while smaller companies are wholly exempt from the ban, AFP reported.

The commission, the EU's executive arm, will also have the power to extend the ban to other unsold products beyond clothing and footwear.

"It is time to end the model of 'take, make, dispose' that is so harmful to our planet, our health and our economy," said MEP Alessandra Moretti who spearheaded the legislation through parliament.

"New products will be designed in a way that benefits all, respects our planet and protects the environment," she added.

The law will also set specific requirements for key consumer goods in order to boost the durability of the products. Priority will be given to "highly impactful products" including clothing, furniture, mattresses as well as electronic goods.

Goods must also be sold with a "digital product passport", which could be a QR code, that will help consumers make informed choices about their purchases.

Under the new rules, large companies will also have to report annually how much of their production they have discarded as well as their reasons why, which the EU hopes will encourage such firms to give up such actions.


France's SMCP Strikes Deal with Reliance to Expand Into India

FILE PHOTO: People walk outside a Reliance complex which houses Jio World Plaza mall in Mumbai, India, March 10, 2022. REUTERS/Francis Mascarenhas/File Photo
FILE PHOTO: People walk outside a Reliance complex which houses Jio World Plaza mall in Mumbai, India, March 10, 2022. REUTERS/Francis Mascarenhas/File Photo
TT

France's SMCP Strikes Deal with Reliance to Expand Into India

FILE PHOTO: People walk outside a Reliance complex which houses Jio World Plaza mall in Mumbai, India, March 10, 2022. REUTERS/Francis Mascarenhas/File Photo
FILE PHOTO: People walk outside a Reliance complex which houses Jio World Plaza mall in Mumbai, India, March 10, 2022. REUTERS/Francis Mascarenhas/File Photo

Fashion group SMCP, owner of French fashion labels Sandro and Maje, said on Thursday it signed a deal with Reliance to expand into India and will join other high-end European brands opening stores in the Jio World Plaza mall in Mumbai.
"There aren't a lot of accessible luxury fashion labels in India so we think it's time to be pioneering," said SMCP CEO Isabelle Guichot, citing India's wealth and growing population of younger generations among reasons for entering the country.
After years of testing the Indian market with outlets in luxury hotels, high-end European labels are seeking to expand their retail presence there to tap its strong economic growth and a rapid rise in the number of local millionaires, Reuters reported.
SMCP did not disclose the financial terms of its partnership with Reliance Brands, which will become the exclusive distributor in India of Sandro and Maje. Reliance plans to open around 10 stores selling the SMCP brands in the next three to five years, said Guichot, starting with the mall in Mumbai developed by Indian tycoon Mukesh Ambani.
Reliance Brands, a subsidiary of Ambani's Reliance Retail Ventures, has partnership deals with dozens of high-end European and American labels, including Bottega Veneta, Burberry, Valentino and Tiffany.


Türkiye's Clothing Makers Face Rising Costs from Push to Help Textile Sector

Commuters, seen throughout a glass, arrive to Kadikoy ferry terminal in Istanbul, Türkiye, Thursday, Nov. 16, 2023. (AP Photo/Francisco Seco)
Commuters, seen throughout a glass, arrive to Kadikoy ferry terminal in Istanbul, Türkiye, Thursday, Nov. 16, 2023. (AP Photo/Francisco Seco)
TT

Türkiye's Clothing Makers Face Rising Costs from Push to Help Textile Sector

Commuters, seen throughout a glass, arrive to Kadikoy ferry terminal in Istanbul, Türkiye, Thursday, Nov. 16, 2023. (AP Photo/Francisco Seco)
Commuters, seen throughout a glass, arrive to Kadikoy ferry terminal in Istanbul, Türkiye, Thursday, Nov. 16, 2023. (AP Photo/Francisco Seco)

Turkish clothing manufacturers, the third-largest suppliers of apparel to Europe, face higher production costs and risk falling further behind their Asian rivals after the government hiked taxes on textile imports, sector leaders say.
Ankara raised tariffs by 30-100% on hundreds of incoming textile products last week, aiming to support local yarn and fabric manufacturers that appealed for support against a wave of cheaper imports.
Apparel officials say the new taxes are squeezing the industry, which is among Türkiye's biggest employers, supplying heavyweight European brands such as H&M, Mango, Adidas, Puma and Inditex.
Job cuts could come, sector representatives say, as import costs rise and Turkish producers shed market share to rivals like Bangladesh and Vietnam.
Exporters can technically apply for exemptions from the tax, but industry sources say the exemption regime is costly and time-consuming, and in practice does not work for many companies.
The sector was already fighting soaring inflation, waning demand and lower profit margins due to what exporters see as an over-valued lira, as well as the effects of Türkiye's years-long experiment with cutting interest rates as inflation rose, a policy recently revisited.
The price of a Turkish-made t-shirt is now 40% higher for a European shopper than one from Bangladesh, said Seref Fayat, chairman of Türkiye's TOBB Clothing and the Apparel Industry Assembly. A couple of years ago the gap was 15-20%, another source said.
"Fashion brands can bear higher prices up to 20%, but anything more leads to market losses", Fayat said.
Timur Bozdemir, president of DF Manhattan Inc, which manufactures women's garments for the European and US markets, said the new tariff will raise the cost of a $10 t-shirt by no more than 50 cents.
He does not expect to lose customers, but said the changes reinforced the need for Türkiye's apparel industry to shift from mass production to value-added.
"If we insist on competing with Bangladesh or Vietnam for a $3 t-shirt, no doubt we will lose," he said.
COMPETITIVE EDGE
Türkiye exported $10.4 billion in textiles and $21.2 billion in clothing last year, making it the world's fifth and sixth biggest global exporter respectively.
It is the second-largest textile and third-largest clothing supplier to the neighboring European Union, European Apparel and Textile Confederation (Euratex) data shows.
But its share of the European market slipped to 12.7% last year from 13.8% in 2021.
Western customers turned to Türkiye during the COVID-19 pandemic to cut freight costs amid supply disruptions.
When it ended, the combination of plunging shipping costs and rising domestic inflation dulled its competitive edge.
Textile and apparel exports fell more than 8% through October this year, while overall exports were flat, sector data shows.
The textile sector, facing a rise in cheaper imported fabrics and yarns which in part sparked the need for the tariffs, saw its number of registered employees falling 15% through August.
Its capacity utilization rate was 71% last month, compared to 77% in manufacturing overall, and sector officials say the rate is near 50% for many yarn manufacturers.
"I've almost stopped production and cut most of the jobs in my yarn facility - and I'm not the only one in this situation," said Fatih Bilici, who runs an Osmaniye-based yarn factory that supplies local and foreign markets.
His company cut daily production to 5 tons from 50 tons a few months ago. He said the tariffs are vital for an industry struggling to survive.
"It costs me $3.20/kg to manufacture, whereas my Uzbek rival sells it at $2.70. How can I can compete?".
The lira has shed 35% of its value to the dollar this year and 80% over five years. But exporters say the lira should depreciate yet more to better reflect inflation that is running above 61% and touched 85% last year.
TOBB's Fayat said the textile and apparel sector had cut 170,000 jobs so far this year. As monetary tightening cools an overheated economy, it is expected to hit 200,000 by year-end.


Britain's Burberry Hit by Slowdown in Luxury Spending

Foreign tourists speak to each other in front of logo of Burberry on a shop-window of closed Burberry retail store in the State Department Store GUM at the Red Square in Moscow, Russia, 13 November 2023. EPA/YURI KOCHETKOV
Foreign tourists speak to each other in front of logo of Burberry on a shop-window of closed Burberry retail store in the State Department Store GUM at the Red Square in Moscow, Russia, 13 November 2023. EPA/YURI KOCHETKOV
TT

Britain's Burberry Hit by Slowdown in Luxury Spending

Foreign tourists speak to each other in front of logo of Burberry on a shop-window of closed Burberry retail store in the State Department Store GUM at the Red Square in Moscow, Russia, 13 November 2023. EPA/YURI KOCHETKOV
Foreign tourists speak to each other in front of logo of Burberry on a shop-window of closed Burberry retail store in the State Department Store GUM at the Red Square in Moscow, Russia, 13 November 2023. EPA/YURI KOCHETKOV

Britain's Burberry said it was being hit by a global slowdown in luxury spending and it would struggle to meet its annual revenue forecast of low double-digit growth, with a knock-on impact on profit, if it continued.

The company, which launched the first collection by designer Daniel Lee in September, reported a sharp slowdown in comparable store sales growth in its second quarter to 1%, down from 18% in the first, as growth in China evaporated.

Rising inflation and economic uncertainty have curbed shoppers' appetite for luxury after years of blockbuster demand, prompting investors to trim forecasts, Reuters reported.

LVMH, the world's biggest luxury group with brands including Louis Vuitton, Dior, and Tiffany, reported a slowdown in quarterly sales in October, as did Kering with its Yves Saint Laurent, Balenciaga and Bottega Veneta brands.

Cartier-owner Richemont has also predicted an easing in growth.

Burberry said on Thursday that early indicators of demand for its Winter '23 collection were "encouraging", and it had achieved a good performance in the key categories of outerwear and leather goods in its first half.

Demand in China, however, fell away in the second quarter from a strong bounce back from the impact of COVID lockdowns. Burberry said spending by Chinese luxury consumers had shifted overseas from mainland China.

Tourist growth benefited European destinations, it said, with just over half of spending in the region coming from international visitors.

But a weak performance in the Americas worsened in the quarter, with comparable store sales down 10%.

Chief Executive Jonathan Akeroyd said: "While the macroeconomic environment has become more challenging recently, we are confident in our strategy to realize our potential as the modern British luxury brand, and we remain committed to achieving our medium and long-term targets."


LVMH's Berluti to Design Olympics Opening Ceremony Uniforms for French Teams

FILE PHOTO: The new logo of Paris 2024 Olympics is seen on a pin during a ceremony in Paris, France, October 21, 2019. REUTERS/Pascal Rossignol/File Photo
FILE PHOTO: The new logo of Paris 2024 Olympics is seen on a pin during a ceremony in Paris, France, October 21, 2019. REUTERS/Pascal Rossignol/File Photo
TT

LVMH's Berluti to Design Olympics Opening Ceremony Uniforms for French Teams

FILE PHOTO: The new logo of Paris 2024 Olympics is seen on a pin during a ceremony in Paris, France, October 21, 2019. REUTERS/Pascal Rossignol/File Photo
FILE PHOTO: The new logo of Paris 2024 Olympics is seen on a pin during a ceremony in Paris, France, October 21, 2019. REUTERS/Pascal Rossignol/File Photo

Luxury giant LVMH's Berluti brand will design the summer Olympics and Paralympics opening ceremony uniforms for the French teams, boosting the profile of the upscale menswear label known for buffed leather shoes and tailored suits.

"We aim to marry elegance and performance," said Berluti chief executive Antoine Arnault, one of the five children and heirs of LVMH Chairman and CEO Bernard Arnault.

Antoine is credited with negotiating LVMH's 150 million euros ($166 million) worth Olympics sponsorship deal initially announced in July, Reuters reported.

The Olympic games kick off on July 26, followed by the Paralympics on August 28 -- high profile ceremonies that are watched by millions of people across the world.

Paris, which has hosted two previous Olympics, will stage the summer Games after 100 years. The event is expected to draw huge spectator, TV and streaming audiences after the 2020 Games in Tokyo were marred by the pandemic.


Giorgio Armani Fashions His Own Legacy with Succession Plan 

The 80th Venice Film Festival - Armani fashion show "One Night Only" - Venice, Italy, September 2, 2023 - Designer Giorgio Armani attends his event "One Night Only", a special fashion show to celebrate cinema. (Reuters)
The 80th Venice Film Festival - Armani fashion show "One Night Only" - Venice, Italy, September 2, 2023 - Designer Giorgio Armani attends his event "One Night Only", a special fashion show to celebrate cinema. (Reuters)
TT

Giorgio Armani Fashions His Own Legacy with Succession Plan 

The 80th Venice Film Festival - Armani fashion show "One Night Only" - Venice, Italy, September 2, 2023 - Designer Giorgio Armani attends his event "One Night Only", a special fashion show to celebrate cinema. (Reuters)
The 80th Venice Film Festival - Armani fashion show "One Night Only" - Venice, Italy, September 2, 2023 - Designer Giorgio Armani attends his event "One Night Only", a special fashion show to celebrate cinema. (Reuters)

Giorgio Armani has always kept a tight grip on the firm he founded, and the Italian fashion king's attention to detail extends to clear rules on how it should be run after his death.

Armani, 89, remains CEO and effectively sole shareholder of the business he set up with his late partner in the 1970s, which had a 2.35 billion euros ($2.5 billion) turnover last year.

With no children to pass it on to, there has been speculation about the long-term future of Armani's empire and whether, in an industry dominated by luxury conglomerates, it will be able to maintain the independence he treasures.

But a hitherto obscure document from 2016, held by a notary in Milan and reviewed by Reuters, sets out the future governing principles for those who inherit the group, while another details issues including protecting jobs at the firm.

The first document explains how his heirs should approach a potential stock market listing - though not until five years after his passing - and any potential M&A activity.

For the Armani look itself, the document commits them to the "search for an essential, modern, elegant and unostentatious style with attention to detail and visibility".

The document is the product of an extraordinary meeting that Armani called in 2016 to adopt new bylaws for the group which would come into force upon his death.

SUCCESSION PLAN

Armani's heirs are expected to include his sister, three other family members working in the business, long-term collaborator Pantaleo Dell'Orco and a charitable foundation.

The bylaws divide the company's share capital into six categories with different voting rights and powers, and were amended in September to create some without voting rights.

The Armani group, which as well as the CEO also represents the family members mentioned in the document, declined to comment on the document or its contents.

It is not clear from the document how the different blocs of shares will be distributed, but corporate governance experts say the guidelines should ensure a relatively smooth transition by giving the board a central role.

"It is an organization that reduces the margins for disagreement between the heirs," Guido Corbetta, professor of Corporate Strategy at Milan's Bocconi University, told Reuters.

Armani has a younger sister, Rosanna, two nieces, Silvana and Roberta, as well as a nephew, Andrea Camerana. Dell'Orco is also considered part of the family.

All are currently board members and, apart from Rosanna, all work for the Armani group.

Silvana and Dell'Orco are heads of design, working closely for decades with Armani, who dubbed them his "lieutenants of style".

The 2016 bylaws set the process for how the board will appoint future women's and men's style directors in a company known for its classic tailoring.

Roberta is Head of Entertainment & VIP Relations, while Camerana is sustainability managing director.

Other fashion groups including LVMH, Europe's most valuable luxury company, also have succession issues, with the five children of LVMH CEO and Chairman Bernard Arnault all having key management roles at brands in the empire.

LASTING LEGACY

Armani also created a foundation in 2016 which currently has a tiny symbolic stake but is earmarked to play a pivotal role in protecting the business he set up with Sergio Galeotti before going it alone when his partner died in 1985.

Its purpose is to reinvest capital for charitable causes and to maintain Armani's lasting influence over the group.

The foundation's bylaws, which were also seen by Reuters, call for it to manage the shareholding with the aim of creating value, maintaining employment levels and the pursuit of company values. The Armani group has almost 9,000 employees.

The arrangement has echoes of one adopted by Rolex founder Hans Wilsdorf who left the brand to a foundation in 1960 that still owns the luxury watchmaker.

Armani has always defended his firm's independence and ruled out a merger, especially with the French groups that swallowed up Italian brands such as Gucci, now owned by Kering.

The group bylaws include a "cautious approach to acquisitions aimed solely at developing skills that do not exist internally from a market, product or channel point of view".

They also provides for the distribution of 50% of net profits to shareholders.

Any eventual stock market listing requires the favourable vote of the majority of directors "after the fifth year following the entry into force of this statute".

The Armani group declined to comment on a potential listing in the mid-term.

"The founding principles show Armani's desire to transmit and prolong his idea of a company, of business, there is a desire for eternity," Bocconi professor Corbetta said.

Despite his meticulous planning, whether Armani's aims outlast him will ultimately be beyond his control.

"They (the rules) could restrict the company a little and become incompatible with drastic changes in the market," Corbetta said.