LONDON, United Kingdom — This Great Recession has proven difficult for many fashion companies positioned 'in the middle.' Between the ultra-luxe brands like Hermès and Louis Vuitton (whose performance has continued to impress, despite the downturn) and the mass-market miracles like American Apparel and Uniqlo (who are also outperforming the market), are aspirational luxury brands like Coach, who recently reported that their profits have dropped 29.3 percent.
It seems the biggest problem with brands like these are that they don't pass the value test at the cash register, leading Coach's CEO, Lew Frankfort, to admit that "the new normal is hard to adjust to" and that he doesn't believe that "conditions will ever return to what they were before the recession.” Is this the death knell for brands in the middle?
Not according to Paolo Fontanelli, CEO of Furla, the accessibly-priced Italian accessories brand that has recently gone on a retail binge in the UK, launched a menswear collection, and created a special initiative to leverage the talent of emerging shoe designers. I met with Paolo on his recent trip to London to find out why he remains so optimistic. The added bonus? Paolo brought along Michele Furlanetto, a company shareholder and member of the founding family, to make this a CEO Talk, times two.
BoF: It seems to me that Furla remains largely unknown outside of Italy, despite its long history and presence there. How would you describe the Furla brand to people who are learning about it for the first time?
The story of Furla is first and foremost, the story of the Furlanetto family. It is the story of a family wh0, for over 80 years, have shown a relentless passion for providing extraordinary products at ordinary prices.
It's true that some consumers may still not be familiar with our brand, but it must be said that our second largest market is Japan, a market which we entered 15 years ago. Our presence there has grown little by little and today we have more than 60 retail locations in Japan, including five freestanding stores, all of which are directly operated by us.
In all, we have over 80 directly-operated stores and more than 150 franchise stores ar0und the world, so Furla really is a global business, if not quite yet a global brand. We aim to increase awareness of Furla and our high-quality products through the visibility of our stores.
BoF: Many other accessible luxury brands are suffering, reporting dismal results and exposing the prospects for an uncertain future. Do you still believe in the concept of accessible luxury in this economic tornado?
The fact that Gucci and Louis Vuitton have continued to lower their entry price points proves that there continues to be a market in the middle. We have always been in that price range, from about £150-500 (about $225-750). Our product is 100 percent Made in Italy unlike many other brands that are in the same price range. We offer the best price for value in the market.
Our business continues to perform extremely well, with €157m in revenues in 2008, reflecting a growth rate of 4.5 percent over the previous year. Our EBITDA margin (a measure of operating profit) is a healthy 15 percent. The company has no debt.
BoF: You mentioned retail expansion. Where are you focusing your attention and how will you continue to grow the Furla business?
We continue to expand our retail presence and apart from our newly-launched stores in the UK, including a flagship store on London's Regent street and a store in the Westfield Mall, we are opening more stores in China. Our stores in Shanghai and Beijing are directly-owned by the company, and we have local franchise partners for secondary Chinese cities, which are increasingly important. We have also recently launched a line of men's bags and women's shoes.
BoF: Speaking of shoes, I read about the Furla Talent Hub initiative. How does this fit into your strategy?
Furla has always been a supporter of creative talent, and in fact, Italy's premier award for Contemporary Art, Premio Furla Per L'Arte, is a long-standing company initiative. We thought, why don't we do something similar for young designers. And while many brands talk about supporting young talent, we wanted to put our money where our mouth is. The project was born in 2007, in collaboration with Franca Sozzani of Vogue Italy and their Who's On Next competition
The Furla Talent Hub supports promising young shoe designers from around the world, enabling them to present their creative vision through products that are produced under the Furla brand name, in the spirit of Furla DNA. Most recently, we collaborated with Alice and Lisa Ferrari, Courtney Crawford, Nicole Brundage, and Max Kibardin in this way. We were so impressed with Max that we asked him to design our first line of Furla shoes for Autumn/Winter 2008-09, which are available in store now. And of course, Max continues to produce his own shoe line under his own name.
BoF: And finally, what is it like working as a CEO in a family business? Does it make it more complicated to make rapid business decisions?
Throughout my career in the fashion industry I have always worked with founders and family members, including Armani and Ferragamo. To make this work effectively, it is important that I stay in constant communication with the shareholders. The fact that we are privately-owned means we can take a long-term view towards our business strategy and our investments. This is very powerful, especially in times like the ones we find ourselves in today.
CEO Talk is BoF’s forum for in-depth discussions with the fashion industry’s global decision makers, conducted by founder and editor-in-chief Imran Amed.
This interview has been edited and condensed.