“The past couple of months have been challenging,” Deputy Chairman John Hooks said in a phone interview from New York. The sales environment is tough in the U.S. and Europe, he said, adding that only Asia, excluding Japan, is doing well. He declined to provide more detail.
Armani’s designs may not currently be appealing to customers who are willing to spend again after last year’s contraction in luxury spending, said Luca Solca, an analyst at Sanford C. Bernstein. Armani, whose products range from $32 Armani Exchange t-shirts to a $2,425 Giorgio Armani mono-lapel women’s jacket, hasn’t updated its collections as frequently as Burberry or innovated enough to justify its premium over fast- fashion retailers such as Hennes & Mauritz AB.
The slowdown at closely held Armani shows how “the cool factor shifts from one designer to another,” said Solca. “It’s no secret that Mr. Armani is getting older and his focus on the business may not be the same as it was 10 years ago.”
Giorgio Armani’s spring-summer 2010 men’s collection, which featured velvet cargo pants and short tailored jackets, received lukewarm reviews from critics. To win a more mainstream audience, brands like Dolce & Gabbana and Marc Jacobs have been toning down their collections, particularly in men’s wear, to compete directly with Armani, according to Solca.
Milan-based Armani had sales of about 1.52 billion euros ($2 billion) last year and generated earnings before interest, taxes, depreciation and amortization of 218 million euros, the company said July 12.
Burberry, known for its plaid-lined trenchcoats, and Hermes, the maker of Birkin bags that start at $7,000, both reported a 27 percent increase in sales in the period ended June 30. The early read on autumn-winter 2010 collections, which arrived in stores in June, is that momentum is continuing, Chief Financial Officer Stacey Cartwright said July 13.
Analysts expect LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, and PPR SA, the owner of the Gucci brand, to post revenue growth when they report earnings this week.
“Armani’s the odd one out,” Dennis Weber, an analyst at Evolution Securities in London said, drawing a comparison with LVMH and PPR, owner of the Gucci brand. “I’m expecting the big boys to have a pretty good second quarter. The underlying demand is there.”