Italian Luxury-Goods Makers to Follow Clients in Spending More

Ermenegildo Zegna SpA, Salvatore Ferragamo SpA and Roberto Cavalli SpA will increase investment in 2011, signaling greater confidence among Italian luxury-goods makers as demand continues to rise.

Zegna will lift capital expenditure by “more than 50 percent” from last year’s level as it invests in new stores and technology, the closely held company’s chief executive officer said. Ferragamo, whose shoes have been worn by Jennifer Lopez, will increase investment by “more than 20 percent” this year, CEO Michele Norsa said.

“We want to make sure we keep growing and be ahead of the pack,” Ermenegildo Zegna, CEO of the eponymous company, said backstage after the label’s fashion show, which featured straight-shouldered three-button suits and jackets in brown and gray as well as waxed cotton and leather peacoats. He declined to quantify this year’s investment or give an outlook, beyond saying 2011 would be “more aggressive” than 2010.

Companies including Cie. Financiere Richemont SA are building their retail networks as the number of millionaires rises in Asia and wealthy shoppers in the U.S. and Europe regain confidence. Luxury demand is forecast to climb 11 percent this year, according to HSBC, consolidating last year’s rebound from the industry’s worst year on record.

Ferragamo will open more stores in China, refurbish existing boutiques in mature markets such as Italy and the U.S. and invest in new technology, the CEO said. Cavalli, the Florence, Italy-based company known for its leopard-print designs, plans 15 new single-brand shops this year, around half of which will be fully owned, CEO Gianluca Brozzetti said.


Zegna’s show, which was titled “In the Mood for China,” also featured a “LIVE-D” screen, showing images of the Great Wall of China and The Forbidden City, against which models were superimposed before walking out onto the runway. The performance was directed by James Lima, a visual consultant on the film “Avatar,” and was streamed lived on Zegna’s e-commerce site.

“The Chinese are very technology-driven,” Zegna said. “These are the guys we will be going after with” initiatives like this. China accounts for 25 percent of sales and is Zegna’s biggest market, he said.

‘Concern About Europe’

“We have some concern about Europe,” Zegna said. “We are buoyant on Asia. We are quite comfortable on America. Overall, we are quite positive on where we are going and we are well-positioned to keep growing.”

In October, the CEO said he expected revenue and profit to rise this year as the company opens at least 20 new stores, half of which will be in China. Last year’s sales will exceed the 870.6 million euros ($1.16 billion) generated in 2008, while 2010 profit will trail the 62.3 million euros earned in 2008, Zegna said at the time.

Cavalli will open its first standalone shop in Japan in Tokyo in May and its first boutique in China in Beijing in September or October, Brozzetti said. The fashion company will also double the size of its store on London’s Sloane Street, shuttering the unit as early as next month for renovations and reopening it in the summer, the CEO said.

“We are going to invest more because we are generating more resources,” said Brozzetti.

‘Similar Trend’

Cavalli Group, which includes the Just Cavalli line, returned to profit in the first half of 2010, helped by lower production costs and new outlets, the company said in September. Excluding royalties, sales increased 4 percent.

The second half of 2010 showed “a similar trend,” Brozzetti said, citing an increase in direct sales and “a very encouraging result on the wholesale business.” He declined to provide figures.

Third-party orders for Cavalli’s spring-summer 2011 collection are “very positive” and “that is going to have an impact on the results of the first semester of 2011,” Brozzetti said. If wholesale orders for Cavalli’s fall-winter collection 2011, which the fashion house showed Jan. 15 in Milan, rise and retail keeps growing at the same pace, 2011 will be “promising,” he said.

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