Fashion

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Fashion Finance An explosive cocktail
Lesson 11
Corporate Finance
Castellanza, 17th November, 2010
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Fashion Finance An explosive cocktail
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• Summary
• 1 Two worlds that meet together
• 2 Why so explosive?
• 3 Emanuel Ungaros history
• 4 The Ferragamo strategy
• 5 Some figures
• 6 The decision to sell
• 7 Other examples success stories

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1 Two worlds that meet together
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larger size of the companies new geographic
markets necessity of management and organization
not only style interest of external
investors finance as a tool to grow.
Fashion Finance Two different worlds that
started to talk each other due to the changes in
business arena
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2 Why so explosive?
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fashion is a world of primadonna, stars
finance is a world of primadonna as well in
many cases people tend to invade the
competencies of the other success stories are
those in which the competencies and the roles of
the single individuals are respected and valued.
Why very often fashion finance are an
explosive cocktail?
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3 Emanuel Ungaros history
1958
Emanuel Ungaro at the age of 22 started his
career working alongside the designer Cristobal
Balenciaga in Paris.
1965
Opened Emanuel Ungaro SARL, avenue Mac-Mahon in
Paris.
Transformed it into Emanuel Ungaro SA and
opened the current house at 2, avenue Montaigne,
Paris.
1967
1968
Opening of the first ready-to-wear boutique,
Ungaro Parallele, on the ground floor of the
Fashion House. First contact with licenses.
Ungaro Parallele was opened in American
Department Stores (Neiman Marcus, I. Magnin,
Saks, Bloomingdales, Bonwit Teller) and in Japan
(Takashimaya). Start of agreements with the
licensor GFT. Creation of the Ungaro pour Hommes
line. Opening of the Emanuel Ungaro Homme store
at 2, avenue Montaigne. Opening of the first
Emanuel Ungaro store in New York.
70s
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3 Emanuel Ungaros history cont.
80s
Creation of the Ungaro Diffusion line in Europe.
Creation of the fragrance for women, Diva.
Opening of the Emanuel Ungaro showroom in Milan.
Creation of the Emanuel/Emanuel Ungaro Bridge
line.
1996
Salvatore Ferragamo Group acquired Emanuel
Ungaro SA.
From 1997 to 2003
Creation of Fever collection. Creation of the
Emanuel Ungaro Shoes and Handbag line, made by
Salvatore Ferragamo. Creation of an Emanuel
Ungaro Eyewear line, in partnership with
Luxottica. Creation of the Ungaro Sun (Swimwear)
line. Opening of the Emanuel Ungaro boutiques in
London Rome, Moscow, Beijing, Shenzen, Singapore,
Taipei and a new accessories boutique in Paris.
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4 The Ferragamo strategy
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• Emanuel Ungaro is one of the most famous Fashion
  House in the world. The Company designs and
  commercialises clothes and accessories and is
  specialised in Haute Couture and Ready To Wear.
  During the last forty years, the Emanuel Ungaro
  House expanded to include boutiques and license
  agreements worldwide. Emanuel Ungaro is
  registered at the Chambre Syndicale de la Haute
  Couture.
• In 1996 Salvatore Ferragamo Group, which is one
  of the most important and internationally famous
  Italian luxury company, acquired the whole share
  capital of the Company. Salvatore Ferragamo is
  also the licensee for the Emanuel Ungaro footwear
  and handbags collection.

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4 The Ferragamo strategy cont.
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• The arrival of Ferragamo as new shareholder led
  to a strategic shift in 1997, with a focus on
  internalising the activities of the Company to
  better control the operations and the brand image
  of Emanuel Ungaro.
• The main components of the Ferragamo strategy
  were the following
• Product reshuffle of product portfolio, keeping
  the top lines but eliminating the bridge and the
  diffusion lines and developing of accessories
  line (bags shoes).
• Production have a better control of sourcing
  and reduce the licensing activities (e.g Japanese
  lines).
• Distribution reduce the retail franchising
  activities and launch an aggressive retail
  strategy with the opening of several direct
  operated shops in key locations and the
  refurbishment of the existing boutiques.

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4 The Ferragamo strategy cont.
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• This effort implied closing significant sources
  of profit (licenses and franchises) and investing
  in high fixed costs.
• This strategy, that was not supported by an
  appropriate product range, together with the
  increased competition in the luxury industry
  since the late 1990s and the economic slowdown
  since 2001, has put Emanuel Ungaro in an
  difficult financial situation. In detail the main
  consequences of this strategy are
• Increase of the Company revenues due to the
  expansion of retail network, that substituted the
  loss of Company and brand revenues caused by the
  decrease of the licensing activity.
• Significant decrease of profitability due to the
  increase of rental and personnel costs not
  entirely offset by retail gross margin.
• The disappearance of the bridge line in the
  United States and the gradual exit from the Japan
  marketplace

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5 Some figures
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• The economic results of Emanuel Ungaro for the
  years ending December 31, 2001-2004 are
  summarised below

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6 The decision to sell
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Poor results led the Ferragamo Board of Directors
to decide to sell the Company. Not all the
Directors agreed Deloitte was engaged in
2004 Sale was concluded in 2006

• Acquirer Mr. Asim Abdullah (Global Asset
  Capital, Llc), a High Net Worth Individual who
  made a fortune with Internet

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7 Other examples success stories
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Valentino DG Armani Gucci LVMH

• New investors - external management