PARIS, France — In the week prior to my meeting with Remo Ruffini, the enigmatic chief executive of Moncler, his company’s stock price dropped by almost five percent after Prada — not Moncler — reported a 21 percent decline in 2014 first-half profits and its slowest revenue growth in more than three years. Investors were also concerned that some of Moncler’s former private equity investors might flood the market with their shares, which could drive the stock price down even further.
Indeed, Moncler’s stock price has dropped by more than thirty percent in 2014, despite the fact that its own first-half revenues this year increased by 19 percent to €218 million (about $280 million). Welcome to the vagaries of the public markets, where the luxury and fashion sectors often remain a mystery to even the most astute investors, who can be easily spooked by the financial results of other luxury companies.
It’s all a far cry from the celebratory atmosphere in Milan, last December, when Moncler’s IPO was oversubscribed by more than 31 times by institutional investors, driving the company’s opening day stock price to 41 percent above its IPO price and making Ruffini, who owns 32 percent of the company, an instant billionaire. But how does Mr Ruffini, a skilled operator who over the last ten years has transformed Moncler from a sleepy French skiwear company to one of the world’s hottest luxury lifestyle brands, balance the short-term demands of fickle financial investors with the long-term thinking required to preserve Moncler’s brand equity, which Ruffini has worked so hard to build?
In our latest CEO Talk, BoF sat down with Remo Ruffini in the showroom above Moncler’s expansive flagship on the Rue du Faubourg Saint-Honoré in Paris to learn more about the transition Ruffini has had to make from running a niche, private-equity-backed skiwear business in a booming luxury market to managing a publicly-traded lifestyle brand, operating in a volatile global marketplace where the future is anything but certain.
BoF: For years, Moncler was financed by a group of private-equity investors. Why did you decide last December was the right moment to take Moncler public?
RR: It’s a long story. I always had three or four private-equity firms on my board. I had to understand this world because for me it was quite new. You know, private equity is not my business. I understand they have to [exit] somewhere and at some point, you have to find another one and another one. It’s a nightmare. Every two to three years you have to [do] your due diligence. So when the Carlyle Group came [on board], I said that I didn’t want to make another private-equity sale. The natural way out for us was to go public. In 2011, we decided to try to go public. We tried, we tried very hard and we repaired everything. But then came the big crisis in Europe in May, you remember. Greece was bankrupt and Spain was in very bad condition. The day before the roadshow on June 2nd, the bank called me when I was on vacation and told me, “You cannot do it. It’s too dangerous. It’s too difficult. The financial market is in very bad shape. You have to [cancel] your roadshow.” At that point, Carlyle said we have to [exit] somewhere. Then Eurazeo told us that they were interested in buying a stake, which they did in June 2011. I was very clear — and I put it in the contract — that in a couple of years, when the market becomes stronger, I want to try again. After about a year and half, I said, “We are ready. I want to try.” All of the work was already prepared from the previous attempt. We tried and, finally, the market was in a very, very strong condition. We went public on December 16th last year. This day was the right moment. After January, the shares continued to go up and down, because in some ways, let’s say, the ‘luxury crisis’ started. The luxury market is not growing as fast as it was before. So, we are very happy in some ways and unhappy in other ways. Before, all of the shareholders would sit around a table. Now, on the conference calls, we have [hundreds] of shareholders, [most of] whom I’ve never met personally. You’re talking to somebody who only cares about numbers. That is a big concern, from my point of view.
BoF: When you think about the trade-off between having private-equity investors around the table looking for an exit and a group of hundreds of institutional investors who simply see Moncler an opportunity for portfolio growth, how do they compare?
RR: They are totally different. In private equity, you have a longer-term vision of five to six years. Then you have what they call ‘long only’ [investors] who are around for one year or a year and a half. Then you have the hedge funds, which flip things after three days, one week, three months. Even the mentality of the way you talk to them is entirely different. It depends on the situation and I cannot say that one is better than the other, but private-equity [investors] come to meetings, they try to understand and they try to help your business.
BoF: Your stock price is down by more than 30 percent this year, sometimes due to factors outside your control. Is that something you’re tracking on a daily basis?
RR: No, we are not tracking [that]. It is something outside of my power. For example, last week, we lost five percent in one day. I called my investors and asked, “Why?” The guy just said the [Prada] numbers were not very good. If it’s like this, I cannot do anything. I cannot call Mr Bertelli to say, “What’s going on?” The only thing I can do is to have a long-term vision. To build a strong company, I have to think about the next three to four years. Every day may be volatile, but in the long-term the company will have a strong business. That’s why I’m not so concerned [about tracking] the shares every day.
BoF: So what are the metrics that you are thinking about, that you think are important in terms of measuring Moncler’s performance?
RR: I think there are two levels. One is the brand perception. I think the perception is very, very important. When you talk to your customers, you hold a relationship with them. I think this is one of the most important things. After that, comes the product. In your store, you have to feel a rich product. We do not follow fashion, but we want to be contemporary and creative.
BoF: How do you reconcile the difference between having to answer questions on revenue and earnings growth on a quarterly basis versus brand perception, which is probably the most long-term indicator of success?
RR: Over the last ten years, I worked to build up a strong brand. Today I work in the same way. I know that in September it was a quarter, and in December, it’s another quarter. But I don’t care about that. If you make decisions [only] thinking about [quarterly results], 50 percent of your decisions will be wrong. My strategy is based on our DNA and heritage. I don’t want to betray this heritage, this origin. Everyone asks why we don’t push Summer – you know, it would be easy to sell more during Spring/Summer, but I don’t want to. If I make shirts and put my logo on them, for sure, we will sell 100,000 pieces. The investors understand this and they welcome it. I said to everybody, “This is my strategy. If you don’t want to follow it, don’t buy my shares.”
BoF: I read somewhere that at the age of 14, you pestered your mother for a Moncler jacket. It made me smile because when I was in China a few months ago a very smart woman said to me that buying a Moncler jacket has become part of the rite of passage of young people in China, just as it was for you when you were a young boy growing up in Italy.
RR: In the 1970s, Moncler was a phenomenon, especially in northern Italy. There were three iconic brands [for me] at the time: Vespa, Moncler, and Ray-Ban. I was born in Como, very close to the border with Switzerland. When you woke up in the morning at seven o’clock, it was below 10, below 15 degrees every day. With a Moncler jacket, you felt incredible. I pushed my mother to buy one. So, when they offered me the [chance to buy the] company in 2003, I said “fantastic!”, because I knew the heritage of the company very well, and I remembered the story.
BoF: But why do you think this product resonates in China?
RR: Moncler is the original [down] jacket. I want to talk with [people like] you. I want to talk with the kids who are 15 years old on motorcycles and skateboards. I want to talk to the ladies. You have to talk with the kids and you have to talk to the grandmothers as well, at the same time. That’s why when I started with Bruce Weber [on our ad campaigns] seven years ago, I said “Bruce, we don’t have to make a fashion shoot, we have to make a sensation, give an attitude, give something that is not just a jacket; that has the ability to talk to different ages, customers, different people, all around the world.” We may be a success in China, but it is not our biggest market. Japan is much bigger than China. Hong Kong is very strong as well and Korea is growing very fast. If you have a great strategy, you don’t have to push too much to sell. I mean, you do want to sell, but what’s more important is to build up your own brand perception.
BoF: Yes, but the Chinese market, and the global luxury market as you mentioned yourself, is going through a very difficult moment. Does Moncler need to adjust its strategy for this new environment?
RR: As I said, China is not our biggest market. Korea is bigger! In the States we are successful, in Europe we are successful, in Japan we are successful, and we are quite successful in China, for sure. Every one or two years there is a crisis. It was Europe in 2010, and China could be the next. Right now Japan is very successful, but I don’t know what will happen in three years. In Japan we are growing 20 or 30 percent a year, and everybody is asking why we are not opening more stores. The most important thing for us is not to push any single market, but to try to be diversified. For me, it’s not important what the market says; it’s most important what my customer says. I think that the customer is the major shareholder in the company.
BoF: What do you think is going to be the biggest challenge for Moncler in the coming 5-10 years?
RR: The biggest challenge for any company is to make it last. This is one of the most important things, because as you can see, there are a lot of companies and the market is growing very fast. People are really looking for something new. You know, with a lot of companies, you feel bored. That’s why I try to add new people to the company and introduce new designs. The biggest challenge for us is wholesale. We sell at Dover Street Market, Browns, and Colette – it’s very difficult. These kinds of people are looking for new things. We cannot compete with department stores. For me what is very important is the energy, the new ideas.
BoF: In a way, maybe that’s the best long-term metric for you: the number of prestigious wholesale stockists, who have very exacting standards. It’s a great way of saying that the product is still relevant.
RR: If you’re in the best stores, you have the best customers. You really have to compete for them. And in the end, you have your jacket on the best people. Galeries Lafayette cannot compare with Colette. If you have the ability to remain in this kind of shop, I think it’s very strong. This is my feeling. This interview has been edited and condensed.