Armani perseveres despite 50% profit drop

Luxury brand Armani needs to bite the bullet in order to emerge stronger next year. That is what founder Giorgio Armani believes, seeing turnover drop and profits go down by more than half after restructurings.

 

Reorganisation eats away at revenue

Next year, Armani will return back to growth, Giorgio Armani promises. The fashion designer, who has been the only owner of his Italian fashion house for over 40 years, remains hopeful, despite the third year of declining turnover in a row. In 2018, turnover – at fixed currency rates – receded by 8% down to 2.1 billion euros. Gross profit went down from 242.4 million euros in 2017 to 152 million euros last year, another drop of 37.3%. Net profits even fell by more than half.

 

Still, Armani thinks of these mostly as growing pains, as a result of the restructurings in 2017, when Giorgio Armani decided to fade out 'cheaper' brands such as Armani Jeans and Armani Collezioni in order to focus solely on the three main brands Giorgio Armani, Emporio Armani and Armani Exchange. Since April 2018, the starter labels have been integrated into the core labels, but as a result expenses increased and licensing revenue went down.

 

Net liquid assets did increase last year up to 1.3 billion euros, convincing Armani enough assets are available to firmly remarket the 'renewed' fashion house.  As such, Giorgio Armani, who recently fired his CEO and replaced him with two internal recruits, keeps investing. This year alone, Armani took up a luxurious real estate project in the apartment building above the label's flagship store in New York. The brand also held its first runway show in Tokyo, as well as providing the outfits for the Italian national football team.