Clothing. 59% of net sales

Transcription

1 4.3. Armani Presentation Giorgio Armani S.p.A net consolidated sales: 2.2 billion euros Clothing 59% of net sales Perfumes & Cosmetics 26% of net sales Eyewear 7% of net sales Watches & Jewellery 6% of net sales Other 2% of net sales Headquarters: Milan, Italy 2010 Key Figures Net consolidated Sales Sales of Luxury clothing 2.2 billion euros 1.3 billion euros Giorgio Armani is an Italian fashion designer who founded the eponymous company in Armani initially specialised in tailored menswear but rapidly became a leading global operator in the luxury fashion market. Operating profit 218 million euros Net profit billion euros Total staff 5,208 A major strategy of the company has been to diversify its activity by leveraging its brand equity. In addition to its core activities, Armani is present in businesses such as cafes, restaurants, CD compilations, home furnishing, confectionary, flowers and hotels. Total number of stores 609 International presence Italy 18% Rest of Europe 33% Far East 15% North America 22% Rest of the world 12% Global High-End Fashion Companies- July

2 4.3. Armani Description of business SEGMENT % OF SALES DESCRIPTION CLOTHING 59% Design, manufacture, marketing and distribution of high-end fashion collections Brands: Giorgio Armani, Emporio Armani, Armani Privé, Armani Collezioni, Armani Jeans, Armani Junior, Armani Exchange PERFUMES & COSMETICS 26% EYEWEAR 7% WATCHES & JEWELLERY 6% Design, manufacture (both internalised and outsourced) and distribution of Armani branded accessories, fragrances, watches, eyewear, confectionery, flowers, kitchen systems etc. Other Armani products and services include furnishing and decoration of hotels and residences in selected locations worldwide. OTHER 2% Global High-End Fashion Companies- July

3 4.3. Armani Corporate strategy Expanding distribution network The global economic downturn of 2009 negatively impacted the global fashion market, but Armani decided to pursue its medium-term growth strategy. The group aims at reinforcing its global presence while simultaneously further diversifying its business. Although most of Armani s new store openings in 2009 took place in high-growth emerging markets such as Asia and the Middle-East, geographical expansion is not confined to high-potential emerging markets. The group opened a new concept store (the fifth of its kind) on New York s Fifth avenue as well as new boutiques in major cities of Western Europe, its largest regional market. Armani also pays special attention to the potential of travel retail, and has developed a strategy of store openings in the world s most frequented airports. Strengthening presence in external sectors A pillar of Armani s growth strategy is to leverage its brand to expand to new businesses which are mostly unrelated to the luxury fashion market, using the capacities of third parties through license agreements. Over the last years, the group has launched Armanibranded restaurants, coffee houses and confectionary stores, and also started marketing flowers, home furniture, furnishing and electronic devices (the group launched its first Armani-designed cell phone in cooperation with Samsung an Microsoft in 2007). Armani aims at reinforcing its international presence on the fast-growing interior decorating business (furniture, kitchen, furnishing etc.) through the Armani/Casa brand, which is already present in 46 countries. The most recent initiative was the opening of an Armani Hotel in the Burj Khalifa tower in Dubai, the first of ten Armani Hotels to be opened until Despite the group s ambitious expansion strategy, unrelated business activities (which belong to other business segments) only accounted about 2% of 2009 net sales. Global High-End Fashion Companies- July

4 4.3. Armani Recent events December 2008 May 2009 October 2009 April 2010 May 2010 July 2010 September 2010 The Armani Group signs a joint partnership with Dada, subsidiary of Italian kitchen manufacturer Molteni Group, for the development, production and distribution of an Armani/Dada branded kitchen system. The partnership illustrates Armani s strategy of expanding to the promising home environment market using its strong brand. The company continues its expansion strategy to new industries by partnering with Italian furnishing fabrics specialist Rubelli Group. The first line will be available as of September 2009 in Armani/Casa and Rubelli stores and outlets. In association with Samsung Electronics and Microsoft, Armani launches the Giorgio Armani Samsung Smartphone. It is the second model marketed by the three companies, after their first cooperation in The first Armani Hotel opens in Dubai Burj Khalifa, the world s tallest building. The hotel features 160 rooms and suites, eight restaurants and various Armani stores. The building furthermore hosts 144 private luxury residences. Both the hotel and the residences were entirely designed by Armani. The company announces it will open 6 new Emporio Armani stores in duty-free and travel retail marketplaces by the end of the first semester of Locations will include airports in Sydney (Australia), Shanghai (China), Milan (Italy), Macao (China), Miami (USA) and Nice (France). The company plans additional openings for the second semester of 2010, pursuing its strategy of retail presence in the world s most important airports. Armani inaugurates its presence in Mongolia, with the opening of the first Emporio Armani store in Ulaanbaatar. Armani announces the opening of new Giorgio Armani and Emporio Armani boutiques in Hamburg, Germany. Located in one of the city s most prestigious shopping streets, both stores are side by side but have different entrances. Source: Xerfi Global. Primary source: Armani corporate website and business press Global High-End Fashion Companies- July

5 4.3. Armani Key data Armani net consolidated sales units: billion euros, percentage Armani sales of luxury clothing units: million euros, percentage sales ( m) Annual % change Sales ( m) Annual % Change % 1,500 20% % 10% 1,400 1,300 15% 10% % 0% 1,200 1,100 5% % -10% 1, % -5% % % The Armani Group benefitted from steady double-digit growth in the pre-crisis period, but sales fell strongly in 2009 as its main markets -Europe, North America and Japan- witnessed a degradation of their economic environment. Consequently, sales declined by 11.5% during 2009, falling to 2.2 billion euros (left graph). Luxury clothing sales contributed to this decline, but sales in this business segment fell more moderately (-6.7%, right chart). Net consolidated sales represent total turnover including revenues from licensed products. Global High-End Fashion Companies- July

6 4.3. Armani Key data Armani sales by business segment unit: percentage share Armani sales growth by business segment unit: annual % change Eyewear 7% Watches & Jewellery 6% Other 2% Clothing Perfumes & Cosmetics -7% -8% Clothing 59% Watches & Jewellery -11% Perfumes & Cosmetics 26% Eyewear -23% Other-56% -60% -50% -40% -30% -20% -10% 0% Luxury clothing accounted for nearly 60% of Armani s net sales in 2009 (left chart). Despite the group s strong diversification strategy of the last years, luxury apparel thus still represents its core activity. Perfumes, cosmetics, eyewear, watches and jewellery together represented about 39% of net sales. Armani markets these products via license agreements with specialised manufacturers. Other segments accounted for only 2% of sales and include most of the group s new business initiatives, such as hoteling, catering and interior house decoration, among others. Between 2008 and 2009, clothing sales resisted best in absolute terms, with sales dropping by nearly 7% (right graph). In relative terms (compared to share in net sales), the various segments witnessed similar declines of sales. Global High-End Fashion Companies- July

7 4.3. Armani Key data Armani consolidated operating profit and margin units: million euros, percentage Armani 2009 revenues by brand unit: percentage Operating Profit Operating Margin 16% 15% 14% 13% 12% 11% 10% Armani Exchange 9% Armani Junior 2% Armani Jeans 12% Armani Collezioni 12% Other 1% Giorgio Armani 35% % Emporio Armani 29% As a response to financial constraints generated by the global economic crisis of 2009, Armani launched a series of costcutting measures to streamline its manufacturing division and increase inventory management efficiency. Although the group s profitability declined amidst the difficult context, this contributed to keeping the operating margin at nearly 10% in 2009 (left graph). Global High-End Fashion Companies- July

8 4.3. Armani Key data Armani sales by region unit: percentage share Armani sales growth by region unit: percentage change Rest of the World 12% Italy 18% Far East 2% Rest of the World -3% North America 22% Italy -6% Rest of Europe 33% North America -11% Far East 15% Rest of Europe -21% -25% -20% -15% -10% -5% 0% 5% Western Europe accounted for about 51% of Armani s 2009 net sales, with Italy representing over one third of the region s sales (left chat). Italy s share in net sales is disproportionally large compared to other countries, which is due to the strength of travel retail in the country. The Far East, which represents Eastern Asian countries, accounted for about 15% of sales, a similar share to the rest of the world, which is dominated by Middle-Eastern markets. Between 2008 and 2009, sales grew only in the Far Eastern region, while major developed countries (especially Western European countries, except Italy) witnessed pronounced drops. Global High-End Fashion Companies- July

9 4.3. Armani Key data Armani capital expenditures and capex ratio units: million euros, percentage Armani marketing and advertising expenses units: million euros, percentage Capex Capex ratio Marketing Expenses ( m) % Share of Net Sales % % % % 4.6% % 4.5% % 4.2% % % 3.8% % % Capital expenditures peaked at 177 million euros in 2008, mainly due to significant transactions such as the repayment of a 62 million euros share capital injection and the acquisition of a 25% stake (worth 60.4 million euros) of British Presidio Holdings Ltd (left graph). In 2009, capital expenditures significantly fell as Armani aimed at reducing corporate expenses. Despite cost-reducing measures, which mostly targeted the group s manufacturing division, marketing and advertising expenses remained close to their average and represented 4.2% of 2009 sales (right graph). Global High-End Fashion Companies- July

10 4.3. Armani Statistical tables Armani net sales units: million euros, annual percentage change Year Total sales ( m) Annual % change Fashion Sales ( m) Annual % change , % % , % 1, % , % 1, % , % 1, % , % 1, % Armani operating results units: million euros, annual percentage change Year Operating profit ( m) Operating margin (%) % % % % % Armani sales by business segment units: million euros, annual percentage change Business segment Sales ( m) Share Annual % change Clothing 1, % -6.7% Perfumes & Cosmetics % -7.9% Eyewear % -22.5% Watches & Jewellery % -11.5% Other % -55.7% Global High-End Fashion Companies- July

11 4.3. Armani Statistical tables Armani sales by geographic region units: million euros, percentage share, annual percentage change Region 2009 sales ( m) % share of net sales Annual % change Italy % -6.3% Rest of Europe % -21.1% Far East % 2.1% North America % -11.5% Rest of the World % -3.4% Armani capital expenditures and marketing expenses units: percentage of net consolidated sales Year Capital expenditures ( m) Capex ratio (%) Marketing expenses ( m) Marketing (% of net sales) % N/A N/A % % % % % % % % Global High-End Fashion Companies- July