Think of Rome and you might picture the birthplace of western civilization, the Vatican or Federico Fellini’s La Dolce Vita. Luxury-goods maker LVMH Moet Hennessy Louis Vuitton SA (MC) wants you to dream of Fendi.
Restoration work funded by Fendi started this month on Rome’s Trevi Fountain where actress Anita Ekberg frolicked in Fellini’s 1960 film. The project is part of a push by owner LVMH to boost the Rome-based handbag maker’s profile and cut the company’s dependence on Louis Vuitton, its biggest brand.
“Owning Rome for us is extremely important,” Fendi Chief Executive Officer Pietro Beccari said in a June 19 interview in Paris. “It’s about tying us with a city that makes millions of people dream.” The company is spending more than 2 million euros ($2.7 million) on restoring Trevi.
By restoring the 18th century fountain designed by Nicola Salvi, Fendi joins the likes of shoemaker Tod’s SpA (TOD) in attaching itself to Italian cultural heritage to boost its appeal among wealthy shoppers. Tod’s is sponsoring the renovation of Rome’s Colosseum, while the owner of Diesel is financing the rebuilding of Venice’s Rialto Bridge.
“Consumers don’t want to just buy a product, they want to buy a set of values,” Beccari said.
LVMH is investing in Fendi, designed by Karl Lagerfeld and Silvia Venturini Fendi, as growth moderates at Vuitton and lower-priced rivals such as Michael Kors win customers. The push, which LVMH CEO Bernard Arnault said in January includes “redirecting” Fendi to focus on the most coveted products such as its Peekaboo bag, may narrow 2014 profitability at Paris-based LVMH’s fashion and leather-goods unit, he said.
“Fendi is considered to be the best-placed brand behind Vuitton to grow and turn from question mark to star,” said Exane BNP Paribas analyst Luca Solca.
LVMH fell 0.6 percent to 144.85 euros at 9:20 a.m. in Paris, trimming this year’s gain to 9.4 percent.
Known for fur, Fendi is LVMH’s second-largest fashion and leather-goods brand with annual sales of as much as 800 million euros ($1 billion), according to Solca. Vuitton sales exceeded 7 billion euros last year, the analyst estimates. LVMH doesn’t publish figures by brand.
Though LVMH’s first-quarter fashion and leather-goods sales rose 9 percent, the fastest rate in two years, Fendi has struggled to stand out in a crowded marketplace, according to Millward Brown. The bagmaker’s brand value fell 17 percent to $3 billion last year, the researcher estimated in a report last month, attributing the decline to underinvestment by LVMH.
Controlled by LVMH since 2001, Fendi has redesigned its logo to include the city where company founders Edoardo Fendi and Adele Casagrande opened a small bag shop in 1925. Fendi will present its spring-summer 2015 men’s collection in Milan today.
While the brand works on making its products and the environment they’re sold in more sophisticated, “going upscale per se is not an objective,” Beccari said. Rather, the company aims to have a product range that appeals to all ages of wealthy consumers. One such product is the Bag Bug, an $800 mink and fox fur pompom that clients can attach to any bag, he said.
“It’s one of the best-selling items we have right now,” Beccari said. “It keeps the brand in touch with the younger generation” who may be able to afford a $5,350 Peekaboo in the future, he said.
Vuitton, Kering SA-owned Gucci and other of the world’s largest luxury fashion and accessory brands are introducing more expensive products and limiting their distribution amid softening demand. The shift is designed to restore a veneer of exclusivity after years of churning out logoed handbags that were snapped up by shoppers around the world.
“I don’t know if Fendi belongs among the mega brands,” Beccari said. “I rather measure the work that we are doing and will do in terms of desirability. Desirability is basically the base of profitability one day.”
Technology is another route Fendi is pursuing as it seeks to increase its relevance. After using drones to film its 2014 fall/winter fashion show, the label introduced the myBaguette app this month, allowing consumers to design their own versions of its best-known handbag. Fendi may eventually make some of the designs, Beccari said. E-commerce will follow “sooner or later,” he said.
While Fendi plans to open some new stores, most of its retail investment will be on refurbishing existing boutiques and relocating others, Beccari said, declining to provide figures. Creative directors Fendi and Lagerfeld aren’t working on widening Fendi’s offer, which already includes everything from perfume to home furnishings, the CEO also said.
“We need to be stronger where we’re already strong,” he said. “North America is doing very well. Chinese are among our strongest clientele. We are optimistic.”
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