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What happened?
Just over a week after Giorgio Armani passed away, new details have emerged about his vision for the future of the company he built over 50 years.
Armani’s will reportedly instructs his heirs to offload a 15 per cent stake in the business within 18 months of his passing, with a much larger tranche — between 30 per cent and 54.9 per cent — to be sold to the same buyer three to five years later, according to Reuters and Bloomberg, which have both seen a copy of the will. Otherwise, an IPO will be pursued. According to the news agencies, the will states that priority should be given to French luxury conglomerate LVMH, French beauty giant L’Oréal Group, eyewear industry leader EssilorLuxottica, or other groups already linked to Armani through existing business partnerships.
LVMH chairman and CEO Bernard Arnault said in a statement on Friday afternoon: “Giorgio Armani honoured LVMH by naming us as a potential partner for the exceptional fashion house he built. I am a great admirer of his talent. Giorgio Armani, whom I had the pleasure of knowing personally, was a true genius; the only great couturier, along with Christian Dior, who built and led a global brand in terms of both style and industry. If we were to work together in the future, LVMH would be committed to further strengthening its presence and leadership around the world.”
In a statement shared with Reuters and AFP, L’Oréal Group, which has been running the Armani beauty licence since 1988, said it was “touched and honoured” that Armani had considered the group a potential stakeholder and would give the idea careful thought.
EssilorLuxottica, which owns the eyewear license for Giorgio Armani, Emporio Armani and Armani Exchange, said in a statement: “We are proud of the trust that Mr Armani has placed in our group and in our management. We will carefully evaluate, together with the board, this evolutionary prospect, which deserves thorough consideration in light of the deep ties that already unite the two groups.”
Vogue Business breaks down the key players and plans for the beloved, still-independent company.
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The Giorgio Armani executive committee reacted to the news with a statement on Friday: “The will specifies that all short- and medium-term strategic decisions will rest with [longtime collaborator] Mr Dell’Orco and the family, supported by the foundation; however, these decisions were guided by Mr Armani himself, both in terms of the brand’s mission and in possible actions with implications for the group’s medium- and long-term structure.”
The statement continues: “In this light, the will makes reference to a stock market listing as well as the opening to a minority partner of recognised standing and genuine interest in the brand. The responsibility for decisions and management of this process will remain with Mr Dell’Orco and the family, under the guidance of the foundation, but always within the principles and rules defined by Mr Armani.”
The executive committee also noted that regardless of the corporate structure adopted, the foundation shall never hold less than 30 per cent of the capital, as per the will. The foundation’s first duty will be to propose the name of a new CEO.
Why it matters
Armani upheld independence as a cardinal value throughout his career. The fact that the brand may, in the coming years, become part of a bigger group marks the end of an era.
We have had few details on Armani’s succession plan until now. What we knew was that Armani held 99.9 per cent of the shares in the company he built, the remaining 0.01 per cent belonging to the Giorgio Armani Foundation, which he created in 2016. The foundation will run the company, while Leo Dell’Orco and Armani’s niece, Silvana Armani, are among the figures expected to play a key role.
Now, Armani’s will has indicated three preferred partners. “He indicated partners that have a significant size and potential synergies,” says Mario Ortelli, managing director of Ortelli Co. “These three groups’ sales are north of €26 billion, which means Armani would represent less than 10 per cent of their revenues [in 2024, Armani group revenues were €2.3 billion, down 5 per cent year on year]. LVMH has a decentralised model with its houses, while L’Oréal and EssilorLuxottica aren’t focused on fashion, so they would give Armani a certain autonomy. We see he seeks to build a safety net while keeping a level of autonomy.”
It’s easier to maintain a legacy under the protection of a larger conglomerate that has firepower in terms of investment in retail, marketing and attracting and retaining talent. With LVMH, the biggest synergies would be in supply chain and retail; with L’Oréal and EssilorLuxottica, the synergies lie more in marketing and, to some extent, distribution.
“What we read today makes sense from the Armani viewpoint,” says Bernstein managing director Luca Solca. “LVMH is the largest and most qualified fashion and luxury conglomerate in the world — EssilorLuxottica and L’Oréal are the two most important licensees of Armani. You recently saw, for example, Estee Lauder buying Tom Ford to make sure its beauty business could continue to thrive. L’Oréal and EssilorLuxottica would have convergent interests with the Armani family.”
But many questions emerge as a result of this plot twist, says Ortelli. “Who is going to make the decision on the potential partners? It will depend on the allocation of the voting rights within the Foundation and on which threshold the bylaws of the Foundation have set to approve a decision. And which kind of majority?” says Ortelli.
Ortelli believes that LVMH, L’Oréal and EssilorLuxottica will not be the only players eyeing Armani. “Giorgio Armani created a world with a well-defined aesthetic and design icons. Armani is one of the fashion brands with the largest awareness in the world, with great white space in the category of accessories. Armani can match Prada and Gucci in terms of brand awareness, and yet Armani’s revenue is smaller than Prada’s and Gucci’s, so there’s potential. Giorgio Armani was meticulous in his work and, similarly, in his vision for his succession, he drew a path at a certain pace.”
For his part, Solca would be surprised if there was a bidding war: “Armani is an iconic brand. Hence, I expect LVMH could be interested, but not prepared to be over the top about this potential acquisition. After all, past experiences with fashion have proven problematic for LVMH: Donna Karan, for example. An IPO could make sense for Armani, but then a strong business leadership would need to be in place, with a sensible growth strategy.”
Erwan Rambourg, HSBC global head of consumer and retail research, sees LVMH as the least likely out of the three companies to go ahead. In an interview before Arnault made a statement, Rambourg said: “LVMH doesn’t usually take minority stakes. They either run brands with a 100 per cent stake or they don’t. Secondly, there’s a change in culture at LVMH where there’s a lot more discipline; they would rather have fewer but better assets. Armani is doing very well in beauty, in eyewear, but I don’t think it is the hot, up-and-coming brand in ready-to-wear and fashion. Thirdly, LVMH does its own eyewear, its own beauty when they can, so to have the two performing businesses licensed out to partners? I don’t see that happening.”
L’Oréal is the second least likely, according to Rambourg. “If they took a 15 per cent stake to ensure the longevity of the beauty licence business, why not? It wouldn’t be meaningful in terms of the balance sheet at the L Oréal level. They took a 10 per cent stake in Jacquemus, to ensure that they can leverage the licence they have with them.” Armani s beauty business is close to €2 billion, according to HSBC estimates.
Rambourg thinks EssilorLuxottica is the most likely. “Keeping it Italian can make a lot of sense, with EssilorLuxottica and Armani both being based in Milan and them being very friendly. The issue with that is that EssilorLuxottica has nothing to do with the core business of Armani.” That said, he points out that EssilorLuxottica surprised everyone last year by acquiring Supreme.
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