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Cavalli Chief Sees Luxury-Goods Slowdown as Debt Crisis Deepens

Roberto Cavalli Chief Executive Officer Gianluca Brozzetti
Roberto Cavalli Chief Executive Officer Gianluca Brozzetti. Photographer: Vittorio Zunino Celotto/Getty Images

Sept. 27 (Bloomberg) -- Luxury-goods companies should brace for weaker growth in 2012 as Europe’s sovereign debt crisis leads to a slowdown in spending, according to Gianluca Brozzetti, chief executive officer for designer Roberto Cavalli.

“To say it won’t have an effect is madness,” Brozzetti said in an interview in Milan. The debt crisis “will definitely have an impact on consumption” of luxury goods, particularly in Europe, the executive said.

Since Ermenegildo Zegna, CEO of the suitmaker that bears his name, warned in June of a possible slowdown in 2012, most of his luxury peers have remained optimistic. LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, and rival PPR SA said this month that demand isn’t abating anywhere. Yet as global stocks enter their first bear market in two years on concern about possible Greek insolvency and the effect that would have on Europe’s economy, the mood may change.

“The luxury sector is not immune,” CA Cheuvreux analysts including Pierre Lamelin, wrote in a note this month. They estimate that so-called organic sales growth across the industry will slow to 9 percent in 2012 from 15 percent in 2011.

Cavalli, the Florence, Italy-based maker of 1,485-euro ($2,000) leopard-print dresses, still plans to open as many as 12 stores next year, though “financially speaking, a contingency will be put aside,” Brozzetti said. “Psychologically, it will lead people to be cautious,” he said in reference to the debt crisis.

Bear Market

The spending habits of luxury shoppers may be affected by recent plunges in stock prices, the chairman of U.S. retailer Neiman Marcus Group Inc. said yesterday. For now, spending on luxury items by U.S. shoppers is “very strong,” Burt Tansky said in an interview at the World Retail Congress in Berlin.

Luxury stocks slumped last week after the International Monetary Fund cut its forecast for full-year global economic growth and the U.S. Federal Reserve warned of “significant” downside risks to the world’s largest economy. The Bloomberg European Fashion Index, which includes LVMH and PPR, slid 5.8 percent on the week, mirroring declines in the broader market.

Luxury companies still have cause for optimism after the industry grew by 20 percent in the first half of 2011, according to Antoine Belge, an analyst at HSBC.

Brunello Cucinelli, founder of the namesake cashmere brand, said last week that the sovereign debt crisis is unlikely to derail his plan for an initial public offering in the spring.

‘More Resilient’

Aeffe SpA, whose brands include Alberta Ferretti and Moschino, has “positive expectations” for the first part of 2012, after increased orders of its spring pre-collection, which will hit stores in December, Chairman Massimo Ferretti said.

“The luxury industry is perhaps more resilient now than it was in 2008,” said Salvatore Ferragamo SpA CEO Michele Norsa. “The market is still very positive. Sure, there are some concerns, but we are getting used to being worried.”

Growth in Asia and Latin America, where European luxury-goods makers have been expanding their store networks, is reason for optimism. Not only are these countries accounting for an increasing proportion of sales, Asian and Latin American tourists are boosting demand in Europe and the U.S.

Luxury-goods sales in China are set to rise 18 percent a year to 180 billion yuan ($28.2 billion) between 2010 and 2015, consultant McKinsey & Co. has estimated. Cie. Financiere Richemont SA said this month it sees no signs that demand is weakening in the country, after posting a 46 percent increase in Asia-Pacific sales in the five months through August.

For now, companies like Gucci and Louis Vuitton consider they would have more to lose than gain from cutting budgets, Belge said.

“What would make those companies think really differently is if they think they’re here for three years or more, especially if the Asian consumer would be impacted,” he said.

To contact the reporter on this story: Andrew Roberts in Paris at

To contact the editor responsible for this story: Celeste Perri at

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