Italian Luxury Clothiers Say Euro Crisis Won’t Stop 2012 Growth
Ermenegildo Zegna SpA and Raffaele Caruso (YRC) SpA are among Italian luxury goods makers that say they are optimistic for 2012 even as Europe’s sovereign-debt crisis weighs on demand in the region and growth slows in Asia.
Suitmaker Zegna anticipates high single-digit percentage revenue growth, led by customers from outside Europe, after record sales and profit in 2011, said the company’s eponymous chief executive officer. Caruso, which makes menswear for brands including Christian Dior SA (CDI), expects sales to rise 20 percent this year based on current orders, said CEO Umberto Angeloni.
“Asia will be the real growth propeller, followed by the U.S.,” Zegna said in a Jan. 14 interview before the Trivero- based company’s fall-winter 2012/2013 menswear show in Milan.
The luxury goods sector will expand 10 percent in 2012, or half last year’s rate, excluding currency moves and acquisitions, Thomas Mesmin, an analyst at CA Cheuvreux, estimates. Sales will rise 20 percent in Asia, excluding Japan, 6 percent in the U.S., 5 percent in Europe and 2.5 percent in Japan, he figures.
“Current sales growth is definitely not sustainable,” Mesmin wrote in a report last month. “Don’t stop the party, just turn down the volume.”
The economic turmoil in Europe is cause for “major caution,” even if growth in Asia and the Americas compensates for a slowdown, said Roberto Cavalli SpA CEO Gianluca Brozzetti. Standard & Poor’s decision last week to downgrade the sovereign credit ratings of nine of the euro area’s 17 members, including Italy, will hurt local demand for luxury goods on the continent, regardless of customers’ net worth, said Zegna.
‘Ready for Bumps’
“It’s very much psychological,” Zegna said. “We have to be ready for bumps” until European leaders find a solution.
In the interim, the euro’s decline is boosting the value of sales in countries that use other currencies, said Salvatore Ferragamo SpA (SFER) CEO Michele Norsa. The Florence-based company is “confident” for the year ahead after an “excellent” 2011, which included better-than-expected holiday sales, Norsa said yesterday before Ferragamo’s show.
Caruso, based in Soragna, reported a 32 percent increase in sales in 2011, Angeloni said at a presentation yesterday. Growth will continue after the company signed an agreement with China Garments Co. (000902) to manufacture menswear for luxury brand Sorgere, whose debut collection will be unveiled in March, he said. With jackets retailing from about 7,000 euros ($8,860), Sorgere will be the first Italian-made Chinese luxury brand, Angeloni said.
Zegna plans to boost sales by introducing more leather accessories and extending its personalization service with more devoted space in stores, CEO Zegna said. The suitmaker will also open as many as 30 boutiques this year, including 10 in China and outlets in Africa, he said.
Zegna had a “pretty good” December as it didn’t discount merchandise in its own stores and introduced pre-spring/summer collections early, he said. Offering “novelties” for visitors from Russia, China, Brazil and other emerging markets “would be the dogma for 2012,” the CEO said.
“We are trying our best to counterbalance a possible decline of European consumption with an increase of business derived from visitors,” Zegna said. About half of luxury-goods sales in Europe come from non-European citizens, Mesmin said.
Zegna’s sales climbed 14 percent to 1.1 billion euros in 2011, the CEO said, citing preliminary figures. He declined to provide a number for profit, saying only that it reached a record. Demand was strongest in China, Korea and Southeast Asia, followed by the U.S., where sales rose by at least 10 percent excluding currency moves, the CEO said.
“Our cash position has strengthened with these good results and it makes me very comfortable to make the necessary investments,” he said, ruling out acquisitions.
While GDP growth is slowing in China, demand for luxury goods is increasing in so-called second-, third- and fourth-tier cities, Zegna said. “I think this will continue but we do not expect a major slowdown in China,” he said. “We cannot expect to keep growing at 30 percent.”
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