MILAN, Italy — This is how luxury is made: At the foot of the Italian Alps, rows of machines sift, comb and twist wool from cashmere goats, Merino sheep and Andean vicuna. In one aisle, a worker in a green polo and khaki pants reattaches some fibres so they can be spun into yarn and become capes or coats that can sell for $42,000.
Technology aside, it’s a process that hasn’t changed much since Pier Luigi Loro Piana joined his family’s textile business 40 years ago. What’s different: Loro Piana, 64, no longer controls the company that bears his name. Since 2013, the manufacturer has been in the hands of French luxury conglomerate LVMH, which paid 2 billion euros ($2.2 billion) for an 80 percent stake.
The sale led to a new chairman and a new chief executive officer, and this year could bring an end to the Loro Piana family’s involvement. Pier Luigi hopes it doesn’t also mean a decline in the quality that allows the 92-year-old company to charge clients eye-watering prices at a time when even the very wealthy are reining in spending on luxury goods.
“Quality will save our company,” said Loro Piana, wearing a blue double-breasted wool, linen and silk suit over a white shirt, navy tie and tasseled brown loafers. “This has to be the real mission.”
LVMH has respected those values so far and being one of its 70 businesses has made Loro Piana stronger, the executive said at the Italian company’s offices in nearby Quarona. This year Loro Piana will reopen a store on luxury-shopping hub Avenue Montaigne in Paris, and Loro Piana is serving as a kitchen for the French group’s other fashion brands to cook up ideas, he said.
Loro Piana is something of a rarity within LVMH and the fashion and luxury goods industry in general: It controls every step, from raising the vicuna on a 2,000-hectare nature reserve in Peru to weaving yarns into apparel and accessories for distribution in its 156 stores. About three-quarters of Loro Piana’s estimated 800 million euros of revenue comes from finished products, the rest from supplying textiles to other brands. The company produces about 5 million meters of fabric each year.
Back at the mill, a technician in a white lab coat pores over an electronic microscope as she checks a cashmere sample. Behind her is a photo of her counterpart in Beijing, who has already analysed another sample from the same batch, also taking more than 1,000 measurements, to ensure it meets Loro Piana’s standards for purity, fineness and length.
“From this material, which is very soft, to think that you produce a fabric, something that you wear, something that you use,” said Loro Piana, recalling his amazement the first time his father showed him that the butter-soft cashmere he touched could be transformed into a suit. “It’s the oldest technology in the world.”
The Loro Piana family has been trading wool and textiles since the beginning of the 19th century and established the company in 1924. Franco Loro Piana, Pier Luigi’s father, started exporting fine fabrics in the 1940s and Pier Luigi and his older brother, Sergio, joined in the 1970s. Sergio died in December 2013 at the age of 65, shortly after the sale went through.
Since then, Bernard Arnault, the billionaire owner of LVMH, has installed his son, Antoine, 38, as Loro Piana chairman and appointed a French CEO. Pier Luigi stayed on as deputy chairman, fulfilling what he says is his “duty” to smooth the transition to new ownership. Loro Piana’s longtime chief operating officer quit last year.
The Loro Piana family’s continued involvement isn’t guaranteed. Put and call options on its 20 percent stake expire this year, meaning LVMH can still ask members to sell it or the Loro Pianas can push LVMH to buy it. Pier Luigi says he doesn’t know what’s going to happen. Discussions are ongoing but LVMH would welcome the Loro Piana family staying as a shareholder, says Antoine Arnault.
“My feeling is that they want to continue to be part of the capital,” Arnault says of the Loro Piana family. “What I feel our clients want is stability.”
While the management shuffle was to be expected — LVMH replaced the top brass at Bulgari after purchasing the jeweller in 2011 — Loro Piana faces a luxury market Deutsche Bank has described as the most uncertain in nearly a decade. Global luxury sales will expand at best by 2 percent in 2016, making it the industry’s second-weakest year since 2009, estimates Bain & Co.
Some companies are closing stores: Loro Piana shuttered two locations, in Italy and South Korea, in the first quarter. Others are reviewing how much they charge customers and what they sell, as terror attacks and elections diminish the feel-good factor that drives consumers to buy luxury goods.
LVMH doesn’t plan to change Loro Piana’s strategy of “bringing the best that nature can offer in terms of luxury for your lifestyle,” said CEO Matthieu Brisset — who is leaving to take another role in LVMH, the conglomerate said Monday. Starting in September, he will be replaced by Fabio d'Angelantonio, who has worked for sunglasses maker Luxottica since 2005.
Because Loro Piana made-to-order suits can fetch tens of thousands of euros, there's a misconception about the brand, Brisset said, noting that it also sells cashmere sweaters for 800 euros. “It’s a question largely of communication.”
For Autumn/Winter 2015, Loro Piana introduced products online whose prices were 30 percent lower than the cheapest items the previous season, according to marketing consultant ContactLab. The $1,650 median price of the collection was down 2 percent compared with spring-summer online, ContactLab estimates.
Widening the price range online is a tactic LVMH has used more aggressively at other fashion and leather goods brands it owns, notably Louis Vuitton and Givenchy. The plan to offer a more balanced selection of products in Loro Piana stores may lead to selling more items at the lower end of the price range. But it doesn't mean the company will be making cheaper cashmere sweaters, Brisset says.
For Pier Luigi Loro Piana, the important thing is that quality doesn't suffer: “You don’t have to make things which are just expensive,” he said. Still, "I don’t see a possibility for Loro Piana to be successful changing the strategy. The strategy should remain the same.”
By Andrew Roberts and Flavia Rotondi; editors: Matthew Boyle and Anne Swarsdon.