Milan Fashion Week Kicks Off as Italy Faces Elections and Higher Costs, but Executives Praise Industry’s Resilience
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MILAN — The “R” word is looming, but executives at Italian fashion brands are ready to challenge the recession, leveraging the flexibility adopted during the past two years through the pandemic, raising the creativity bar and investing in the country’s craftsmanship and manufacturing pipeline.
Case in point: Last week, Prada Group revealed it had acquired a 43.7 percent stake in Superior SpA, a tannery based in Tuscany’s Santa Croce Sull’Arno, a deal that chief executive officer Patrizio Bertelli said represented “another important step” in the vertical integration of the company’s supply chain, investing to increase its “industrial know-how as well as control quality along all manufacturing stages.”
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It was only the last such deal for Prada, which last year teamed with the Ermenegildo Zegna Group to buy a stake in cashmere and precious yarns specialist Filati Biagioli Modesto SpA. Meanwhile, other Italian companies have been pursuing a similar strategy, including Brunello Cucinelli, which in March bought a 43 percent stake of Cariaggi Lanificio SpA, its longtime cashmere supplier.
OTB founder Renzo Rosso also believes that, as increasing costs of raw materials and energy impact small and medium-sized Italian firms and artisans in particular, one solution is to connect the pipeline directly to larger and more established companies, which can shoulder and support some of the costs, integrating the supply chain.
Fitch last week forecast a 0.7 percent contraction in Italy’s gross domestic product next year because of the higher cost of energy, and the country’s largest business association Confcommercio estimated the arrival of a “mild recession” at the end of the year, with 3 percent growth in GDP.
Rosso was among the key members of Italy’s Chamber of Fashion in talks with the Italian government to receive funds of up to 3 billion euros as part of an immediate intervention to support all the small and medium-sized enterprises affected by the COVID-19 pandemic. But no funds have been allotted yet, he said. “Actually, after the fall of the government, a tax on research and development was reinstated,” he lamented.
Prime Minister Mario Draghi’s resignation remains a sore spot for the industry’s executives, who praised his international credibility, prestige and steady leadership. New general elections are scheduled on Sunday, at the tail end of Milan Fashion Week, which kicks off in earnest Wednesday and closes on Monday with digital shows.
Polls are showing that the far right coalition led by the nationalist Brothers of Italy party and also involving the League party and Forza Italia is leading. Brothers of Italy leader Giorgia Meloni is looking as the likely choice to be the country’s first female prime minister, although it is a divisive one, given her radical and extremist views. On her Instagram handle, Donatella Versace on Tuesday posted a heart with the Italian flag, urging her followers to vote on “these very important elections” for the country “to protect the rights we have acquired, thinking of progress and eyeing the future. Never look back.”
No matter. Despite the uncertainties caused by local and global challenges, the war in Ukraine and the lockdowns in China, the Italian fashion industry is on track to see revenues jump 10.5 percent this year to 92 billion euros, according to preliminary projections from Camera Nazionale della Moda Italiana. It is the industry’s best performance in 20 years.
“The first half of the year was particularly brilliant and although we expect energy costs to weigh on the top and bottom lines, growth for the full year would still be remarkable,” said the association’s president Carlo Capasa.
Fendi chairman and CEO Serge Brunschwig was upbeat, following the celebrations of the Baguette bag’s 25th anniversary with a show in New York that he described as “spectacular” and the drop of the collection in stores from Nov. 3. Fendi is rolling out a number of flagships in key cities around the world, after New York last year and Madrid this summer, ranging from a boutique in Dusseldorf next month to a unit in Dubai Mall later this year, doubling the selling space. Stores in Tokyo and Seoul will follow in early 2023. New plants for leather goods and shoes, in Tuscany’s Bagno a Ripoli and in the Marche region, respectively, will soon be inaugurated.
Asked about the increasing cost of energy, Brunschwig said Fendi has “been working on initiatives to be responsible in our consumption, aligned with the [parent] LVMH Group, for example, within the retail network, with lights turned off from 10 p.m. to 7 a.m., temperature adjustment by 1 degree — for heat or air conditioning. Also, in keeping with our continuous commitment toward sustainability, Fendi’s factory in Tuscany has complied to obtain the prestigious LEED Platinum certification.”
The Rome-based company has not had supply or shipment issues “even though production capacity is a crucial topic today and especially in the future, as well as the ability to recruit and train the artisans of tomorrow. Sustainability also means supporting the community, which helps to preserve and transmit unique craftsmanship not only from generation to generation but also around the world. This circularity of work is a true productive force and a fundamental component of environmental responsibility.”
Citing the strong dollar, the executive said this has encouraged American tourists, as well as others, to travel to Europe over the summer. Fendi has also been performing extremely well in the Americas, Japan, the Middle East and South East Asia. As for China and its lockdowns, “we do our best to adapt to the situation in the best interest of the teams locally and clients’ expectations, as we have learned over the past two years,” Brunschwig noted.
Also pointing to an “exceptional first half of the year,” Moncler chairman and CEO Remo Ruffini is banking on the “solid foundations” of the brand, which he believes can rely on its “uniqueness and clear vision” and the company’s operational flexibility and financial solidity, although he is well aware of the “impressive current volatility” of the moment.
In the first half of the year, Moncler beat analysts’ expectations with a 46 percent surge in group revenues to 918.4 million euros at constant exchange, bolstered by a double-digit increases at Moncler and Stone Island, acquired at the end of 2020, and a “strong response” to the spring 2022 collections.
Ruffini touted South Korea’s strong business and the solid growth of Japan — historically an important market for Moncler. Following a 28 percent growth in the Americas in the first half, led by the U.S., Ruffini has plans to further penetrate the latter, which he believes offers “huge potential” and where the brand is underrepresented. “I am interested in learning more about the communities in different cities and reach out to them.”
On Saturday evening, Moncler will celebrate its 70th anniversary with a major event in Milan’s Piazza Duomo, as reported, with around 550 guests on the terraces surrounding the square, where 1,952 musicians and dancers will perform, and opening up to the city.
Diesel on Wednesday is also embracing inclusivity, inviting at the Allianz Cloud Arena its own employees, 1,600 students from fashion schools and 2,000 people, of whom 70 percent will be aged between 18 and 25, who signed up for free to attend the show on Diesel.com. The company said the tickets sold out in 90 minutes.
Aeffe is also eyeing further growth in the U.S., which in the first half of the year registered a 40 percent jump in sales.
The group that comprises Alberta Ferretti, Moschino, Philosophy di Lorenzo Serafini and Pollini will next year mark its 70th anniversary. Aeffe reported sales of 176.5 million euros in the period ending June 30, up 13.2 percent increase compared with the same period last year.
Last year, the company took full control of Moschino, and of the brand’s distribution in mainland China, involving around 20 stores, opening 18 direct retail doors in China.
Executive chairman Massimo Ferretti acknowledged a decrease in traffic in main cities in China of between 50 and 60 percent caused by the zero-tolerance COVID-19 lockdowns, but said that second- and third-tier cities are performing well. “We are following through with our projects in China as planned,” Ferretti said.
Like Rosso, he lamented the retroactive taxation on research and development investments, which he believes is harmful for the sector as it relies on and fuels innovative techniques and craftsmanship.
Last week, Moschino’s new Via Spiga boutique in Milan was officially inaugurated and Ferretti said coming up next is the revamp of the brand’s unit on Conduit Street in London.
Moschino, which will hold its spring show on Thursday, is also investing in its children’s collection through a strategic agreement with its longtime licensee and partner Altana for the production, marketing and distribution of the Moschino Baby, Kids and Teen collections via Moschino Kids Srl, a newly incorporated company in which Moschino and Altana hold 70 percent and 30 percent, respectively, starting from the fall 2023 season. The new structure will also allow Moschino to have more control in developing the children’s collections, pointing to the relevance of the category and aiming for further growth.
Ferretti said Aeffe is evaluating a slight increase in prices, deeming this “inevitable,” given the increase of the cost of energy and of raw materials. The company is giving products much longer shelf life as pre-collections will now be delivered in stores at the end of November, not in December as in the past.
For Alberta Ferretti, Aeffe is planning to open a shop in shop in Doha within Printemps in October, and the launch of a dedicated capsule.
A special capsule collection is also lined up for Philosophy di Lorenzo Serafini, which has teamed with Swarovksi. This will be unveiled on the runway at the brand’s show on Saturday, to be held at the Milan Bourse — where Aeffe is publicly listed. Following the brand’s successful summer pop-up at Café de l’Esplanade, Serafini is planning to repeat the experience in other countries around the world, starting with the Middle East in October.
Milan Fashion Week will see the debut shows of designers at storied brands, such as Filippo Grazioli at Missoni, although he introduced his first men’s collection in June; Rhuigi Villaseñor at Bally; Andrea Incontri at Benetton; Marco De Vincenzo at Etro, and Maximilian Davis at Salvatore Ferragamo.
Etro is going through a new phase under the lead of CEO Fabrizio Cardinali and De Vincenzo, after the acquisition by L Catterton last year. Cardinali is aiming to more than double Etro’s 2021 sales and reach 500 million euros in five years. He was encouraged by the brand’s performance in the first half, reporting a double-digit growth in revenues,” despite the loss of the Russian market and the restrictions in China, where Etro is growing triple digits. Cardinali is focused on expanding business in Asia, where China is “under penetrated,” and in America.
There are seven directly operated stores and three outlets in China, and the plan is to open 20 units with a new partner.
In February, Etro will launch a new website and a new store concept to reflect De Vincenzo’s creativity.
“The brand is healthy, but the company needs additional dynamism at the level of innovation, product and communication,” said Cardinali, who is aiming to reach out to a younger and new customer base.
Asked about the rising costs of energy, shipments and raw materials, Cardinali said that “right from the start, coinciding with the change in governance, we began a collaboration with suppliers in Italy, who embraced the project, and bought the raw materials. This move helped us cover the structural increases for 12 to 18 months.”
Despite the challenging macro environment, Ferragamo’s CEO and general manager Marco Gobbetti earlier this month expressed his satisfaction with the “excellent progress on our strategic priorities and on building the foundational elements to accelerate our growth,” as the company reported revenues totaling 630 million euros, up 20.3 percent compared with the first half of 2021. Gobbetti said that “barring significant crises,” he believed “the growth opportunity we have from the repositioning of the brand and the recruitment of a new customer will not be significantly affected by the macro [scene] because the market is so broad and the opportunity so big.”
This reinforces Gobbetti’s ambitious plan, laid out in May, that sees Ferragamo aiming to double revenues in four to five years and to double marketing and communication spending as a percentage of revenues beginning in 2023.
Benetton CEO Massimo Renon is tasked with a turnaround of the brand, which he expects to achieve also through Incontri’s appointment last July. The designer will present his first collection on Sunday at Benetton’s megastore in one of the city’s busiest shopping streets, Corso Buenos Aires. “It’s very important to be part of Milan Fashion Week, to engage with the press, emphasizing our fashion codes,” Renon said.
The executive has brought production and distribution in-house, and together with a global network of 3,500 stores, he believes Benetton’s democratic fashion will allow flexibility to invest in the markets, depending on macroeconomic and social issues. Benetton is entering China through Tmall in October and Renon is eyeing a development in South East Asia, is returning to Australia through the David Jones stores, and is aiming for growth in the Americas.
“Our quality yet democratic fashion is in sync with a moment when consumers are more attentive to spending and our sustainable credibility and reliability is helping to take advantage of new opportunities,” contended Renon. He said the performance in 2022 so far has been “very encouraging.” His goal is for the company is to surpass revenues of 1 billion euros in 2022. Last year sales amounted to 847 million euros, including the Sisley brand.
After the refit of the Paris, London and Milan flagships, Renon is looking to open 200 additional stores and is evaluating a fourth location in Milan.
