Giorgio Armani S.P.A. Business Information, Profile, and History

Company Perspectives:

Under Mr. Armani's leadership, Giorgio Armani SpA's mission is to continually create clothes and accessories that aspire to a kind of perfection that transcends fashion. Armani's clothing ignores the constant demand for novelty and possesses an elevated character, a quality that conveys a sense of permanence in a world infatuated with the temporary. Now, Giorgio Armani is poised for the future with a vision that crystallizes his approach to fashion as timeless, and yet always timely. Giorgio Armani is committed to the long-term view, reflected by his creation of new lines and divisions, and in his investment in new technology and infrastructures.

History of Giorgio Armani S.P.A.

Giorgio Armani S.p.A. is one of the world's leading fashion houses. Few designers are credited with changing fashion to the same extent as its namesake, Giorgio Armani, who is the firm's sole shareholder, managing director, and chairman of the board. The group is unique in remaining aloof from waves of consolidation in the luxury goods industry. Armani has invested instead in extending control over manufacturing and distribution of its products. The group has about 250 outlets in 34 countries and also markets its wares in exclusive department stores.

Origins

Giorgio Armani was born on July 11, 1934 and, along with his brother and sister, grew up in the industrial town of Piacenza in northern Italy, which was bombed repeatedly during World War II. His sister Rosanna told Newsweek's Christopher Dickey that Armani spent 40 days in the hospital when he was burned by a flare a classmate had found on the street.

The Armanis moved to Milan in 1949. Armani went to medical school for two years but dropped out in 1957 to take a job as a buyer for the La Rinascente department store, a job he held for about seven years. He then worked as a fashion designer for Hitman, Nino Cerruti's men's clothing company, before establishing himself as a freelance designer in 1970.

Armani formed his own company, Giorgio Armani S.p.A., on July 24, 1975, at the suggestion of his enthusiastic partner, Sergio Galeotti. One story, retold in Forbes, has the pair selling their used Volkswagen for startup capital. Another version, in a later edition of Forbes, puts the startup figure at $100,000.

The first products were ready-to-wear clothes for men and women. The company was successful from the beginning; first year sales were $1 million. In 1978, a licensing agreement with GFT (Gruppo Finanziario Tessile) allowed Armani to invest in a new headquarters building. The building, a 17th-century palazzo at 21 Via Borgonuovo, Milan, would house not only offices but a theater for fashion shows as well as Armani's personal residence. Armani would be credited for inventing the Italian fashion industry, particularly in Milan.

The next year, 1979, saw the establishment of the Giorgio Armani Corporation in the United States. Giorgio Armani would be counted among the world's leading fashion houses by the end of the decade.

Part of the success was due to Armani's bold design gambles, which developed a more casual chic by such touches as removing padding from the traditional men's suit jacket. Women's clothes were made more comfortable and less showy. Other designers and knock-off artists would copy the look, but the original retained a dedicated following.

Owning the 1980s

The collection, by this time, had already been expanded to include several new lines, such as Mani, Armani Junior, and underwear and swimsuits. Armani and Emporio Armani brands of jeans were launched in the early 1980s, a decade known for its designer jeans. Emporio Armani was a lower-priced version of the flagship line; Emporio Armani and Giorgio Armani boutiques were both soon opened in Milan.

Giorgio Armani was one of the first designers to exploit the marketing power of media stars. He began a long relationship with Hollywood when he designed Richard Gere's wardrobe for the 1980 film American Gigolo. A string of other movie credits would accumulate throughout the next two decades, including Batman (1989) and Pulp Fiction (Emporio Armani) and, appropriately, Ready to Wear (both 1994). Armani was also responsible for much of the pastel wardrobe for the stars of Miami Vice, the hit TV series of the late 1980s.

Armani sponsored or provided wardrobes for the musical tours of several pop musicians, including Paul Simon, Billy Joel, David Bowie, and Eric Clapton. In 1999, Emporio Armani Fragrances, which was promoting the new perfume "G," sponsored world tours for Ricky Martin and Lauryn Hill.

The early 1980s also saw an extension of the Giorgio Armani name to fragrances, licensed by L'Oréal (formerly H. Rubinstein). Eyewear was licensed to Luxottica S.p.A. in 1988.

Galeotti, Armani's partner and the one who had handled the day-to-day management, died of AIDS in 1985 and left Armani his 50 percent interest in the firm. Armani subsequently surprised some observers with his business sense. He immediately set out to expand the Emporio Armani line beyond jeans. In the next six years Emporio sales increased from $75 million to $209 million.

A variety of new enterprises proliferated in the last half of the 1980s. The first Armani Junior store opened in Milan in 1986. Giorgio Armani Japan, a joint venture with Japanese Itochu Corporation, was created in 1987. The first Emporio Armani Express restaurant opened in London as the 1980s drew to their inevitable cross-branding conclusion. Giorgio Armani also opened the restored Doney bistro in Florence in 1989. On another front, Emporio Armani magazine had begun publishing in January of the same year.

Armani turned down a 1989 takeover offer by the Jeanne Lanvin design house. Luxury conglomerates Gucci and LVMH would also offer to buy out Armani. While competitors Prada and Gucci expanded through expensive acquisitions of other luxury brands, Armani preferred to tighten its control on the production and marketing of its products. The company began buying shares in its manufacturers, including Antinea S.r.l. and Intai S.p.A., in 1989 and 1990. Antinea had gross sales of $25 million and made women's clothes for the Emporio Armani brand. Intai, maker of Armani ties, grossed $16 million a year.

New Ventures in the 1990s

The firm's revenues were $306 million in 1990; retail stores provided $160 million; royalties and fees accounted for $130 million; and Armani's own manufacturing operations added another $16 million. Net income after taxes was an impressive $54.2 million. Total retail sales, including those of licensed products, amounted to $1.6 billion. The company carried no debt. Although many high fashion boutiques were suffering as the 1980s economy began to sputter, Giorgio Armani Boutiques were still able to command stellar prices for their high-end threads.

A Forbes cover story in October 1991 noted Giorgio Armani's meticulous attention to detail throughout his fashion empire. Armani's small group of intensely loyal advisors--including his sister, Rosanna, head of the in-house advertising agency--held board meetings with the passion of an Italian family argument.

The first Armani Exchange (A/X) store opened in New York's Soho district in 1991. The Exchange sold $90 jeans and $75 T-shirts--costly enough for weekend clothes, but much less pricey than the Armani Boutique's dress clothes. The clothes and stores were licensed to the U.S. division of Simint S.p.A., a publicly traded company based in Modena, Italy, in which Armani held a 20 percent interest (later increased).

Bloomingdale's, Saks Fifth Avenue, Neiman Marcus, and other U.S. department store chains together opened another two dozen or so A/X sections within their stores in 1992. Despite initial projections of opening up to 150 free-standing A/X stores, the venture had begun to falter by 1994, when the chain had 41 outlets, resulting in a huge loss for Simint. The Economist blamed the large royalty, usually 10 percent, which went to the designer from each garment sold. Simint sold the A/X chain to Ong Beng Seng, a Singapore-based company, for L 20 billion ($12.5 million) in June 1994.

Armani later pursued the strategy of maintaining a very small number of these lower-priced outlets to maintain the brand's allure, as well as the profit margins he expected. In fact, Armani was unique among brands in limiting the maximum amount of business its licensees could each generate.

Alitalia hired Armani to design new outfits for its flight attendants and the interiors of its MD-11 airliners in the early 1990s. The firm also designed the uniforms for Italy's 1994 World Cup soccer team, and those for Britain's Newcastle United team in 1999.

In 1996, Armani opened two stores in Manhattan, one an Emporio Armani store, and the other, the four-story flagship of the chain. The first Collezioni Giorgio Armani stores opened in Milan, London, and Tokyo in 1997. The same year, the first Armani Jeans store opened in Rome and Armani watches were introduced.

July 1997 was marked by the murder in Miami of Armani's fiercest rival in Milan, the flamboyant Gianni Versace. The next month, Armani was reported to be considering either taking his company public or taking in a partner, and the Armani Group underwent a reorganization.

Police canceled an Emporio Armani fashion show in Paris on March 12, 1998, citing security concerns. To some, this affront seemed rather to be a sign of the longstanding rivalry between the French and Italian fashion industries.

The Armani Group continued to roll out new categories of products. An accessories division was created in 1999; the first accessories store would open in Milan two years later. Also in 1999, Armani entered e-commerce with armaniexchange.com, and bought two menswear factories from its longtime licensee GFT for L 55 billion. Consolidated revenue rose 12 percent in 1999, though net income fell 12 percent, largely due to taxes on a sale of shares held in Luxottica.

25th Anniversary in 2000

In 2000, Armani posted operating profits of L 374 billion (EUR 193 million) on consolidated net revenues of L 2 trillion (EUR 1.03 billion), which were up 20 percent for the year. Global retail sales exceeded L 7 trillion (EUR 3.6 billion).

During 2000, the company launched a joint venture with the Zegna Group, called Trimil, to produce and distribute the Armani Collezioni line of men's clothing. Giorgio Armani Cosmetics debuted. Armani Casa, a home fashion store, opened after years of planning. A series of Armani-related web sites were launched and plans for a new headquarters office were underway. (Armani was, though, unable to acquire the armani.com name, which was held by a Canadian artist named Anand Ramnath Mani.)

During the year, Armani was honored with an exhibit at New York's Guggenheim Museum for changing the way people dressed in the previous quarter century. At this stage in his career, Armani was finding inspiration in the marriage of Eastern minimalism and Western luxury.

The billionaire designer also honored himself in 2000 by opening a three-level, $73 million megastore in Milan called Armani/Via Manzoni 31. "I just wanted to give a present to myself on my twenty-fifth anniversary," he said at the opening. The store carried not just clothes, but flowers, books, food (sushi), and home furnishings.

The company was hit by the departure of several key executives, including Managing Director Giuseppe Brusone, who had been with Armani for 15 years. He was later appointed to the CEO spot at Donna Karan International, a unit of LVMH.

In 2001, Giorgio Armani announced plans for a joint venture with Vestimenta S.p.A., one of its earliest licensees, to produce and distribute its top line of men's and women's clothes. Armani was also acquiring control of its Hong Kong retail network from Joyce Boutique Holdings Ltd. Armani continued to resist the trend towards consolidation in the luxury goods industry.

Principal Subsidiaries: Antinea S.r.l.; Giorgio Armani Corporation (U.S.A.); Giorgio Armani Asia Pacific Limited (Hong Kong); Giorgio Armani Japan (85%); Intai S.p.A.; Simint S.p.A. (53.24%); Trimil (51%).

Principal Competitors: Gianni Versace, S.p.A.; Gruppo Ermenegildo Zegna; Gucci Group N.V.; I Pellettieri d'Italia S.p.A. (Prada).

Chronology

• Key Dates:
• 1970: Giorgio Armani establishes himself as a freelance designer.
• 1975: Armani and Sergio Galeotti establish Giorgio Armani, S.p.A.
• 1978: Armani enters licensing agreement with GFT.
• 1979: Giorgio Armani Corp. is established in the United States.
• 1980: American Gigolo brings Armani fashions to the big screen.
• 1985: Giorgio Armani becomes sole owner of firm after Galeotti's death.
• 1989: Armani begins acquiring control of its factories.
• 1991: A/X store opens in New York.
• 1997: Collezioni Giorgio Armani stores open in Milan, London, and Tokyo.
• 2000: Armani opens $73 million Milan megastore during 25th anniversary year.