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Giorgio Armani may no longer be considered the cutting edge of upscale fashion, but the man who has come to epitomize Italian style since the 1980s remains the label of choice for the discerning wealthy, and is the best-selling designer worldwide after Ralph Lauren. More importantly perhaps, Armani has turned his attention to conquering the business of fashion. The designs may not make headlines any more, but his corporate empire goes from strength to strength. Wealth has allowed Armani to take firm control of every aspect of his business, from manufacturing to distribution to retailing, while also successfully expanding the brand beyond apparel into designer furnishings and other goods.
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Giorgio Armani is among the fashion industry's most influential designers, and almost certainly its most financially astute, maintaining sole control of his empire. Unlike most other European designers, Armani still makes his revenues primarily from clothing (whereas others such as Prada or Louis Vuitton generate theirs mainly from accessories). However following rapid growth during the 1990s, business has been flat for the last few years, and critics have accused Armani of losing touch with the younger, up-and-coming market. Recently, the designer's biggest push has been into home furnishings, a segment of his business that is benefitting from the launch of hotels and apartments dressed in Armani Casa fabrics and furnishings. The biggest question mark hangs over the future of the empire. Armani celebrated his 80th birthday in 2014, but has yet to announce a clear succession plan. In 2016, he transferred ownership of the group to a newly created charitable foundation set up to fund social projects.
Giorgio Armani was arguably the first designer to make menswear fashionable for anything other than a comparatively wealthy minority, especially in the all-important US market. Just as BMW became the car of choice during the 1980s, the Armani suit became one of the essentials of the yuppie lifestyle. There were two secrets to Armani's success. One was the indisputable brilliance of the design. Armani effectively deconstructed the everyday business suit for men, removing padding and stiffening to make it sensual and body-hugging, instead of some sort of formal protective armour. Suddenly the business suit was sexy while also, like his womenswear, remaining understated and never flashy.
But even more intrinsic to the rise of Armani was the way the designs were marketed. Armani was the first modern designer to understand the value of celebrity endorsement, coupling his name with the uber-glamour of Hollywood. While other designers catered mainly to New York's high society, Armani went West, with the assistance of commercial manager Gabriella Forte, setting up an LA office to lend clothes to Hollywood stars. The brand got its first big screen outing in Richard Gere's breakthrough movie, American Gigolo, and quickly became the preferred label for the movie industry's new elite. Beautifully stylish and suitably expensive, it was the epitome of casual chic.
Crucially, despite his sudden ascendancy, Armani was careful not to overplay his hand by handing out licensing deals indiscriminately. Indeed a critical pillar of Armani's strategy since the late 1990s has been gradually to pull back those licensing deals which were granted during the 1980s, while also taking control of third-party manufacturers producing his goods. As a result, Armani himself has complete control over every aspect of all of the apparel which bears his name. Giorgio Armani SpA owns 13 factories producing almost the full core range of Armani products. Armani himself is the sole shareholder in the business, and the company has no bank borrowings, having been self-financing virtually since it first launched.
There are currently multiple brands within the Armani clothing portfolio. The flagship line is the main ready-to-wear Giorgio Armani range, supported by tailored diffusion line Armani Collezioni (around 20% less expensive). Beneath them sit casual and more affordable Emporio Armani, denim line Armani Jeans, everyday A/X Armani Exchange and Armani Junior for kids. However, Armani has announced plans to shutter Collezioni and Armani Jeans at the end of 2017. The latest addition to the portfolio is an ultra-premium couture fashion and accessories label, Armani Privé, introduced in 2005 and offering made-to-order outfits at prices ranging from $20,000 to $80,000.
However, the designer has also branched out into other areas beyond apparel. The most important of these diversifications is the range of Armani Casa home accessories and furnishings. Armani also dabbles in floristry (Armani Fiori) and confections (Armani Dolci), and has his own chain of Armani Restaurants and night clubs. The Armani/Silos exhibition space and gallery opened in Milan in 2015. He even has his own football team, Milan's Olimpia Milano.
Most of the key brands are wholly owned and manufactured by Armani group companies. However, manufacturing and distribution of the Collezioni range is handled by Trimil SpA, a joint venture with rival Italian design group Ermenegildo Zegna, but 51% controlled by Armani. A/X Armani Exchange was also until recently a joint venture, with investment company Como Holdings, controlled by Singaporean luxury entrepreneur Christina Ong. Giorgio Armani reacquired his partner's 50% stake in 2013. Emporio Armani's EA7 sportswear range, launched in 2010, is a joint venture with Reebok.
Other lucrative areas are Armani Occhiali eyewear, once again produced under licence by Luxottica who won back the contract in 2013 (from Safilo); Giorgio Armani Parfums and cosmetics (produced under license by L'Oreal); and a growing range of watches (Emporio Armani Orologi) and jewellery. The range was extended in 2004 with hosiery and bodywear, produced under license by Wolford. In 2007, Armani teamed up with Samsung to introduce a co-branded Armani/Samsung mobile phone, as well as an LCD TV to sit within his home furnishings range.
Increasingly Armani is also taking control of the outlets selling his goods. There is currently a global network of around 2,985 branded Armani shops in 60 countries. By renegotiating existing long-term licenses while keeping control of new outlets, this network is also being brought under group ownership. Currently, the Armani group directly controls around 490 outlets, including the three-storey Armani/Via Manzoni 31 superstore in Milan. The designer has his sights set firmly on China. Armani opened a small store in Beijing in 1998, but planted his flag more firmly in 2004 with two large stores in Shanghai. By the end of 2012 there were more than 300 stores across the country, in Beijing, Shanghai and other large cities.
In 2004 Armani announced an ambitious new venture, agreeing a partnership with Emaar Properties of Dubai to build a $1bn international luxury hotel chain, Armani Hotels & Resorts, with interiors conceived, designed and furnished by Armani. The first private residences opened within Dubai's Burj superscraper in 2009, and were followed by the Armani Hotel Dubai in 2010. They were followed in 2011 by the Armani Hotel in the designer's adopted city of Milan. Other projects were planned for London, Paris, New York, Tokyo and Shanghai, but no further openings have yet taken place.
The benefits of Armani's strategy have been demonstrated in the group's financial performance. The revenues of Giorgio Armani SpA leapt from around €400m in the mid-1990s to €1.6bn in 2008, before slipping back the following year as a result of the economic downturn. There has been steady growth again since 2010, with revenues breaking the €2bn for the first time in 2012 at €2.09bn. Operating profit for 2012 rose 20% to €339m, with net profits of €194m. The group has no debts and was sitting on €565m of cash at the end of the year.
For 2013, revenues rose 4.5% to €2.18bn. At constant exchange rates the equivalent increase would have been over 8%. Operating profit was €401m. Gross retail sales, including licensed products, were estimated at €7.75bn, or around $10.3bn. However net profit plunged to less than €24m as a result of a significantly higher tax charge. That followed an investigation by Italian regulators into taxes paid by overseas subsidiaries during the 2000s. EBITDA excluding the tax charge and other exceptional items rose 15% to €480m. In 2014, revenues grew by 16% to €2.53bn, with EBITDA of €507m. Preliminary figures for 2015 declared a further increase in revenues to a best-ever €2.65bn. EBITDA edged up by 1% to €513m, and the group had net cash of over €640m.
A wide-ranging restructuring programme depressed revenues in 2016, but cost-cutting and consolidation of the brand's distribution network boosted profitability. Armani reported a 5% decline in sales to €2.5bn, compared to the company's record high. However net profits rose 12% to €271m, and the company's cash pile grew by more than a third to €881m.
Armani employs around 5,500 people worldwide, mostly in Italy and the US. North America as a whole accounts for 22% of sales (figures for the US only are not disclosed) and Italy for around 14%, while the rest of Europe adds a further 30%. The fastest-growing territory is China, although Asia as a whole still contributes only 19% of the group total. Including revenues generated by the group's licensees, the top of the range Giorgio Armani brand is by far the most valuable, accounting for 30% of sales in 2012, ahead of Emporio Armani (26% of the total). Apparel accounts for around 60% of group turnover, followed by fragrances and cosmetics which contribute approximately 23% and watches & jewellery for around 11%. Sales of other products, including home furnishings, are comparatively minimal.
Giorgio Armani is president and chief executive and also the sole shareholder of parent company Giorgio Armani SpA. Forbes estimated his net worth at $6.3bn in 2016, ahead of Ralph Lauren ($5.5bn), and roughly equal to the combined wealth of Miuccia Prada and her husband Patrizio Bertelli ($2.3bn each) and her two siblings.
Armani's nieces Roberta and Silvana Armani also hold senior positions within the company, and sit on the board, but neither is considered a likely successor to Armani himself. His nephew Andrea Camerana, son of the designer's sister Rosanna, left his executive role in the company in 2014, but continues to sit on the board.
In 1957, the young Giorgio Armani dropped out of university, where he was studying medicine, to take a job as a window dresser and buyer at La Rinascente, one of Italy's biggest department stores. Having established a reputation as a clever stylist with a skill for organizing striking displays, Armani was hired by Nino Cerruti as a designer for his Hitman collection. After learning the ropes for six years, he went out on his own in 1970, initially as a freelance designer, before launching his own label in 1975 in partnership with longtime partner Sergio Galleoti. Armani handled design, while Galleoti took care of business affairs. The collection was an immediate success in Italy, and on the back of this, was launched in the US in 1978. In what was then an unprecedented deal for a virtually unknown designer, Barneys of New York secured exclusive US distribution of the collection for $10,000 a season.
The clothes were a big hit among New York's wealthier shoppers, but the real breakthrough came when Armani was commissioned to design Richard Gere's wardrobe for the movie American Gigolo, released in 1980. The film was extremely successful, effectively serving as a 90-minute advertisement for the brand. It established Armani as the essential aspirational fashion label, not just in the US but worldwide. In 1982, Giorgio Armani was featured on the front cover of Time magazine, only the second fashion designer ever to be so honoured (Dior had been the first, 40 years earlier). Hot on the heels of this accolade came the launch of the first Armani fragrance, produced under license by L'Oreal. Back home in Italy, Armani opened its first Emporio Armani retail store in Milan, selling jeans and sportswear, as well as the Armani Junior children's range. Underwear, swimwear and accessories followed in quick succession, as did further stores around the world.
In 1985 Armani's personal and business partner Galleoti died of cancer. Although devastated by the death, the designer threw himself into a further rapid expansion of the business. Another onscreen boost came from 1987 hit movie The Untouchables, for which Armani designed all costumes. In 1988, a licensing deal was agreed with Luxotticca to launch fashion eyewear (withdrawn 2002). At the same time, the group began acquiring minority stakes in several of the companies to which it had licensed manufacturing of its clothes. During the 1990s, these holdings were gradually increased to full ownership. In 2000, Armani was honoured with a retrospective exhibition at the Guggenheim museum in New York, the first living designer ever to be featured there. The retrospective exhibition has since toured the world. Also that year, the company took back inhouse all manufacturing of its main Giorgio Armani line. More recently, in 2002 the group acquired Italian knitwear manufacturer Deanna, followed by shoe company I Guardi.
In 2004 Armani sparked rampant press speculation over the future of his company. With his 70th birthday approaching, the designer was asked by an Italian newspaper who would ultimately take management control of his company. Armani hinted that he might be tempted to sell the company to a "multinational perfumes company". This was widely interpreted to mean L'Oreal. Armani later backtracked, saying that succession planning was "not for today, not for tomorrow, but perhaps for after tomorrow". However he also hinted at the benefits of a tie-up with LVMH. Later he promised to announce a succession plan by 2008. During 2006, the group was said to have began discussions with investment banks regarding the feasibility of an IPO on the Italian Stock Exchange, although it subsequently played down the resulting press speculation, saying that no offering was imminent. In Spring 2008, Armani indicated that he was considering the sale of part of the group's equity to an investment partner, but ruled out a deal with a private equity fund interested only in profits.
Last full revision 11th March 2016
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