The stock exchange is back in fashion

Luxury fashion companies, including Dolce&Gabbana, Giorgio Armani, Otb-Only the brave group, Max Mara, and Golden goose, are considering going public amid global economic tensions and the pandemic crisis. The slowdown experienced by ipos has prompted many in the industry to explore listing as a viable option. Starting with Armani, a designer with a strong independent image, the amendment of the deferred effective statute allowed for the possibility of the company debuting on the stock exchange, under certain conditions. According to the document, the company’s shares can be listed on a regulated market five years after the effective date of the bylaws. If listed, experts predict that the fashion house could be valued at up to 5 billion euros (see MFF of November 10). Similarly, Dolce&Gabbana «could be worth approximately 6 billion euros on the stock market, that is approximately four times the turnover of 1.59 billion recorded at the end of March for fiscal year 2022/2023» (see MFF of November 13).

It began during the MFGS-Milan fashion global summit 2023 when Alfonso Dolce, ceo of the company founded by Domenico Dolce and Stefano Gabbana in 1985, stated that D&G is not excluding the possibility of a future listing on the Italian stock exchange, fueled by new investments in the beauty and real estate industries. Following the statements made by two major players in the Made in Italy industry, MFF requested that PwC provide an overview of other fashion and luxury companies that may be of interest. «To address these queries, we have revised our study of fashion companies with revenues exceeding 500 million euros», Emanuela Pettenò and Gabriella Melacca, respectively the consumer markets leader & deals markets leader and consumer markets driver manager for PwC Italy, stated. The experts’ analysis covers Italian B2C fashion companies operating in brand management and fashion retail, whether listed or unlisted, independent or part of international groups. However, B2B companies (e.g., manufacturing and processing subcontractors), fashion brand licensees (perfumes, cosmetics, eyewear), and Italian companies of Lvmh group, Bulgari, Fendi, and Loro Piana that do not release brand-specific data were excluded.

For each company in the selected sample, consisting of 12 publicly traded and 11 privately held, we analyzed revenue trends, ebitda and ebitda% for the years 2019-2022, while excluding any extraordinary transactions. The latest financial statements analyzed are for the fiscal year 2022, with a closing date of December 31, 2022, except for Ovs, which is January 31, 2023, and Ynap, Dolce&Gabbana, and Versace, which are March 31, 2023. Any missing information was supplemented with estimates based on public information. The listed companies sample consists mainly of luxury brands (9 out of 12), except for Ynap and Ovs, which are in retail, and Basicnet, which is casualwear. This is in contrast to the more diverse composition of the unlisted companies sample, with regards to both market positioning (4 out of 11 are “luxury”) and product type. Additionally, the footwear segment has four companies, and Calzedonia specializes in underwear/hosiery. «These factors could distort the overall comparison of listed and unlisted companies, especially in terms of ebitda%, which is higher in listed companies (averaging 24.8% compared to 18.3%). This is due to a larger representation of luxury brands in the sample», the authors clarified, adding that «certain unlisted companies utilize Italian PCs, resulting in underestimated margins compared to similar companies, particularly Dolce&Gabbana and Max Mara, due to direct retail components».

The listed companies in the sample have an average revenue of around 2.4 billion euros, with an average margin of 24.8%, slightly lower than fiscal year 2021. Gucci leads the ranking again this year in terms of both revenues (10.5 billion euros or +7.7% from fiscal year 2021) and ebitda% (42.1%), although with high single-digit growth (7.7%), compared to the double-digit growth of the other listed companies, with Ynap being the only exception. The top performers in growth are Moncler, Basicnet, Brunello Cucinelli, and Prada, with growth rates of 25-30%. Ynap’s performance, which resulted in a growth rate of +5.5%, was negatively impacted due to the comparison made with an extraordinary growth of +70% in 2021 that was supported by extra stock disposal dynamics in the last two years by retailers. Additionally, the current slowdown in the sector is also a contributing factor. Many listed companies have seen entrepreneur-founders playing a pivotal role in the management and shareholding, except for Kering group brands, Ynap, and Ovs. The unlisted companies analyzed in this sample have an average turnover of approximately 1.4 billion euros, with an average margin of 18.3%, remaining stable compared to 2021. Calzedonia once again leads this year in revenue, totaling 3 billion euros with a remarkable ebitda% of over 25%. Following Calzedonia in size are Giorgio Armani and Max Mara. The brands with the highest growth rate this year are Golden goose, with less than 30% in both revenue and ebitda%, followed by Dolce&Gabbana and Liu Jo in terms of revenue. «The companies in this sample have lower average marginality compared to the listed ones due to their diversified product and positioning. However, all of them have high double-digit ebitda%. With the exception of Valentino and Golden goose, all unlisted companies follow the family capitalism ownership structure», Pettenò and Melacca pointed out.

In the context of unlisted companies, Otb and Golden goose have publicly stated their path towards a ipo. «Looking at financial performance in the medium-term, Calzedonia and Max Mara are potential candidates, while Armani and Dolce&Gabbana may need more time to strengthen their strategic directions and boost margins to match their listed peers», the two experts added. In all cases except for Golden goose, it has been concluded that utilizing the stock exchange can effectively facilitate generational turnover for current owner-founders while retaining control of the company for themselves and their descendants. This allows for increased recognition in the international market and the ability to attract top managerial talent. For Golden goose, the listing can be both a celebration of the team’s success in managing the company’s growth through four private equity transactions and an exit strategy for investor Permira in a market with high costs and limited options for large leveraged transactions.

Focus on fund brands

«I would also consider it likely for companies owned by funds to enter the stock market», Luca Solca, senior research analyst of global luxury goods at Bernstein, explained to MFF, citing the entry of Birkenstock, owned by L Catterton, as an example. Solca also mentioned that the private equity fund Investindustrial’s interest in Ermenegildo Zegna served as a catalyst. «Private equity funds can inject a fresh dose of modernity into the sector and encourage entrepreneurs to take bold steps», he emphasized. However, Alessandro Binello, ceo of Quadrivio, the fund that oversees Gcds and Autry, acknowledged that they «will contemplate going public only after reaching the optimal size». Similarly, companies under Roberta Benaglia’s Style capital, including Giuseppe di Morabito, Msgm, and LuisaViaRoma’s e-commerce platform, may also consider an initial public offering. Returning to L Catterton, the Lvmh-owned fund, it seems that Etro is also being considered. Another possibility is Valentino, which was recently owned by Mayhoola For Investments and is now 30% controlled by Kering. However, if Kering were to take full ownership, Valentino would likely not be listed separately. (All rights reserved)