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New CEOs at Italian Brands

How will the new leaders steer luxury companies out of the doldrums caused by the coronavirus pandemic?

MILAN — Eyes are on the new leaders expected to steer companies out of the doldrums caused by the coronavirus pandemic. How will they fare and what will their strategies be?

Salvatore Ferragamo at the end of May turned to a company veteran, Michele Norsa, to help its turnaround. The company’s exposure to China and to tourism, and the closure of stores during the lockdown in all of its main markets, weighed on its top line in the first half, despite cost-containment measures put in place, although the month of July showed improvements globally. Preliminary sales showed a 46.6 percent drop to 377 million euros in the first six months ended June 30. Norsa is no stranger to the Florence-based company, first joining it in 2006 and helping it to expand globally, publicly listing it in 2011 in his role as chief executive officer, and exiting in 2016. This time, he is back as director of the board and executive deputy chairman.

Micaela Le Divelec Lemmi remains Ferragamo’s ceo.

Norsa’s arrival also opened up new scenarios, as he is a partner in FSI, which in 2018 took a 41.2 percent stake in Missoni. Analysts, including Equita, observed that Maurizio Tamagnini, ceo of FSI, has in the past pointed to the fund as a possible aggregator of luxury brands, and that Ferragamo would fit in with this idea of a fashion conglomerate.

Meanwhile, Valentino also looked to an executive with knowledge of the company, Jacopo Venturini, who joined the fashion house as ceo in June and made his first public appearance at the brand’s fall couture event in Rome a month later. He succeeded Stefano Sassi, who had been leading the company since 2006. Venturini was previously executive vice president, merchandising and global markets at Gucci, a role he left in October 2019, but this is the third time he has circled back to Valentino. He first joined the company in 2000 as women’s wear and men’s wear brand manager until 2004, leaving for Prada a year later and then going back to Valentino in 2008 as ready-to-wear collection director and retail image director, staying on until 2015, when he joined Gucci. His luxury sensibility and experience in merchandising are expected to serve Valentino well.

Nobody can argue that Brunello Cucinelli has molded his namesake company in his humanistic image, so it will be interesting to see how the two new ceo’s he appointed in May will lead. While confirming his role as executive chairman and creative director, Cucinelli passed the ceo baton to Luca Lisandroni and Riccardo Stefanelli. Based at the company’s headquarters in Solomeo, Stefanelli is the husband of Cucinelli’s eldest daughter, Camilla, and has 14 years of experience within the company. He is in charge of product and operations. Lisandroni, based in Milan, joined four years ago from Luxottica and his role extends to markets.

Former Giorgio Armani Group veteran Livio Proli in May joined Missoni as ceo, but this is a new role for the company, with the company’s general director Emilio Carbonera Giani exiting.

Missoni has been building its organization and store count, with new stores in Florida and New York, and it has been expanding its product offer, with watches bowing this fall under a new license with Timex Group. This followed the signing of a renewable five-year licensing agreement with Safilo Group for the production and distribution of prescription eyewear and sunglass collections for Missoni and M Missoni.

The company has also been revamping the M Missoni brand, internalizing its production, while the creative direction is now being overseen by Margherita Maccapani Missoni, Angela Missoni’s daughter, who presented her first collection last September.

At the end of January, former Balmain ceo Massimo Piombini joined Diesel in the same role, succeeding Marco Agnolin. He joined a company that had been going through a period of restructuring, reorganization and streamlining and repositioning of its retail and wholesale channels and that showed the first signs of a turnaround last year.

The brand represents 60 percent of parent company OTB’s business, and in 2019, it returned to growth, posting a 2.6 percent increase in sales. OTB, which also comprises Maison Margiela, Marni, Viktor & Rolf and Amiri, as well as production arms Staff International and Brave Kid, last year returned to the black, reporting net profits of 2 million euros, compared with a net loss from recurring activities in 2018 of 26 million euros. The group’s sales were up 6.4 percent to 1.53 billion euros.

As the eyewear industry has been evolving with its own share of seismic changes, including the merger of Luxottica and Essilor, in June, Marcolin Group appointed a new ceo and general manager, Fabrizio Curci, succeeding Massimo Renon, who decamped to Benetton Group.

Curci was previously ceo and general manager of Fiera Milano SpA, the organizer and host of international events and trade shows in Italy and worldwide since 1920. He has significant experience in the automotive industry, joining FCA — Fiat Chrysler Automobiles Group — in 2007, where he worked for 10 years, becoming head of the Alfa Romeo brand for the EMEA region and head of Alfa Romeo Global Launch.

After the dust settles on the pandemic crisis, observers wonder if a listing could be in the cards for Marcolin, which produces and distributes eyewear for the likes of Tom Ford, Moncler, Adidas Originals and Ermenegildo Zegna. While Curci does not hail from the eyewear industry, Fiera Milano, as well as FCA, are publicly listed companies.

Analyst Erwan Rambourg spells out his case in his latest book, "Future Luxe."

Analyst Erwan Rambourg spells out his case in his latest book, "Future Luxe."

By Miles Socha on August 31, 2020

Luxury analyst Erwan Rambourg likes to be the contrarian.

When Chinese authorities clamped down on corporate gifting as part of an anticorruption campaign back in 2012, putting a serious dent in consumption of high-end watches and liquors in the ensuing years, Rambourg came out with “The Bling Dynasty,” a book arguing that the fundamentals for continued luxury expansion in China remained intact.

His latest tome, “Future Luxe,” out from Vancouver-based Figure 1 Publishing on Sept. 22, takes a similar tack, looking beyond the colossal clobbering of luxury revenues and profits during the coronavirus pandemic to paint an unabashedly bright future for the sector.

“The point is that COVID-19 for luxury has been a phenomenal accelerator of trends and there are many silver linings to the crisis,” he said in an interview.

While Rambourg had to amend many sections of the book to reflect the impact of the health crisis, “there is not a long-term trend described in the book that I have added — or would have scrapped — because of the pandemic.”

Managing director and global head of consumer and retail equity research at HSBC, the analyst contends “we are witnessing an era of ‘premiumization of everything’ as life is fragile, and consumers around the world are becoming more inclined to reward themselves.”

This is even chipping away the “guilt” factor, which has been an impediment to premium consumption in the U.S.

“So-called ‘revenge buying,’ which started in mainland China very rapidly after COVID-19 came under control and as early as late March this year was a tangible reason not to temper enthusiasm about future prospects,” he explained. “This is not to say that brands will not have to change the way they produce, distribute and communicate, but the appetite for luxury, especially with the younger generation, is alive and kicking.”

Rambourg allows that the crisis raised a lot of question marks around luxury. Yet he tends to fundamentally disagree with many commentators.

“The future of luxury will be online? I don’t think so. The crisis will enable niche companies to emerge easily? I trust that, on the contrary, corporate Darwinism will accelerate and the big will become bigger. Travel-retail will become an obsolete channel? Not in my book,” he said.

In his view, many investors and naysayers “miss the point that the luxury sector is one of recruitment, not repeat purchases.”

“Most luxury products at Louis Vuitton, Moncler or Cartier are being bought by first-time purchasers,” he explained. “There remains a phenomenal reservoir of these first-time purchasers and it is likely one of the reasons why luxury sales tend to be stronger than expected in good times and more resilient than people would think in tough times.”

The book opens with a forward by François-Henri Pinault, chairman and chief executive officer of Kering, who writes that people buy luxury products “to assert themselves and to express their unique personalities….It’s also about choosing a style, an aesthetic, an attitude.”

Rambourg wrote most of his new book in 2019, and now believes the crisis will only accelerate existing trends underpinning continued luxury expansion.

In his view, luxury serves profound needs and desires. “Luxury is about belonging, culture and meaning,” he writes. “The main goal of this book is to explain how the luxury industry has great growth potential ahead despite the recent hiccups and offer some predictions on the changes that will accompany that growth.”

The 240-page tome unfurls plenty of data, but Rambourg keeps things lively by quoting literature, historical figures, modern luxury titans — and by sharing his wry sense of humor.

“I used to work in marketing functions at LVMH and Richemont and I have kept from those days the glass-half-full view of the world that most luxury managers tend to have,” he said. “At the end of the day, premium consumption is really linked to human nature and the willingness to fit into society.”

One of Rambourg’s most surprising arguments is that the next big luxury client is not from some new, emerging market, like the BRIC countries of yore.

“The biggest opportunity for luxury in my view is with female purchases, regardless of the country,” he said. “The future is female for luxury and that is for me the main ’emerging market’ to focus on.”

According to him, a “combination of economic as well as social factors should greatly support spending means of women, which in turn will imply greater sales for premium items today and over the next decade.”

Services sector activity rose in August while PMI data showed manufacturing also expanded

Activity across China's services sector grew sharply in August, in a sign of improved domestic demand as the country’s economic recovery continues to gather pace.

An official gauge tracking the country’s non-manufacturing sector beat expectations to hit 55.2 in August, compared with 54.2 in July, the country's National Bureau of Statistics said on Monday. A reading above 50 indicates expansion compared with the previous month.

Improved performance in the services sector suggests that China's broader economic recovery, which has been powered by state-supported industrial growth, is feeding through into businesses that were hit hard by the coronavirus outbreak and subsequent measures to contain its spread.

The country’s gross domestic product returned to growth in the second quarter as new cases of coronavirus slowed to a trickle, but concerns have lingered over continued weakness in retail spending, which fell in July for the seventh straight month.

Iris Pang, chief economist for greater China at ING, pointed to a boom in domestic tourism after the government eased restrictions, which she said could encourage more spending on services.

China’s Ministry of Culture and Tourism announced in mid-July that travel companies would be able to offer trips across provincial borders again, providing a boost to the tourism sector and unleashing pent-up demand at a time when international travel was still heavily restricted.

“There will be more jobs in the service sector because of this travel recovery, [and] with more jobs people will be more confident to spend,” she said. “I think this is sustainable.”

In a sign of precautionary saving by the country’s consumers, household deposits across China have soared this year, with People’s Bank of China data showing more than RMB90tn ($13.1tn) in June. The level eased slightly in July but still remains far higher than the end of last year when household deposits were below RMB82tn.

The official purchasing managers’ index (PMI) data showed the manufacturing sector also expanded in August, albeit at a slightly slower rate compared with last month. New export orders at factories remained in decline for the eighth consecutive month but the reading improved compared with July.

China’s export data has attracted close scrutiny as an indicator of a recovery in global trade and the level of demand overseas. Analysts at Nomura said the latest data suggested “headwinds from external demand remain intact”. 

“We caution that China’s export outlook may continue to face headwinds from recurrent waves of COVID-19 in overseas markets,” they noted.

Ms Pang said: “The internal cycle is running, now China is waiting for the external cycle to come back. Before that, China has to rely on its own internal cycle.”

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