- CEO Gian Giacomo Ferraris has initiated a company-wide reorganisation
- Milan offices to close; all functions moving to Florence
- Production, logistics and retail network to be rationalised
- The company will eliminate 200 positions
FLORENCE, Italy — Just hours after news broke that designer Peter Dundas is leaving Roberto Cavalli after only 19 months at the brand, chief executive officer Gian Giacomo Ferraris has announced a radical and comprehensive reorganisation of the entire company.
The Italian label will be closing its Milan operations and transferring all functions to its offices in Florence. Production and logistics will be rationalised and the company will close, relocate and sell stores across its retail network. Cavalli, which currently employs 672 people, will eliminate 200 positions. Ferraris expects the company to return to operating profitability in 2018.
“The fashion industry is facing uniquely challenging times, with changing consumer demands, significant contraction in various key markets and fundamental transformation in the industry’s dynamics. In this environment, only iconic brands with a coherent business model and an efficient organisation can survive,” said Ferraris in a statement. “After my initial examination of the company I believe the Cavalli brand has what it takes to succeed. But the reality is that the company’s costs must be in line with its revenues and that is the task we now have to embark upon.”
Ferraris is something of a turnaround specialist, who led a successful revitalisation strategy at Versace, which, like Cavalli, was once a poorly managed, family-run operation. Ferraris joined Cavalli in July, a little over a year after Italian private equity group Clessidra Capital Partners took a controlling stake in the business.
"When you have got a fashion brand that has diminished in size over the years, and has also significantly decreased in profitability ... you absolutely have to intervene on the cost side," says Mario Ortelli, head of the luxury sector at Sanford C. Bernstein.
"They are refocussing the brand on its core business and the cost cuts will improve the profitability. The move to Florence brings the brand's operations back to its origins and it can help the new creative team to relaunch the brand's leveraging its core attributes in a way that appeals to today’s consumer."
“The CEO was very effective in reorganising Versace and this is not a million miles away from what he has successfully achieved at Versace,” added Luca Solca, head of luxury goods at Exane BNP Paribas. “I would say his chances of success are higher than 50 percent for sure.”
Cavalli has not yet named a successor to Dundas, who joined the label in March 2015. It was a return to the brand for the Norwegian, who served as Cavalli’s chief designer from 2002 to 2005, before working as creative director at Emanuel Ungaro and, subsequently, joining Pucci.
Dundas interpreted the Cavalli house codes with a series of rock goddess-inspired collections. But his debut was shaky. Of Dundas' Spring/Summer 2015 collection, BoF editor-at-large Tim Blanks wrote: "The fact that his first steps were surprisingly less sure-footed than expected only highlighted how complicated that process is going to be."
Dundas' Spring/Summer 2017 collection for Cavalli, shown at Milan Fashion Week last month, was well-received, however, and the designer's work for the brand was starting to gain traction, aided in part by his longtime collaborator George Cortina.
Roberto Cavalli, like many other luxury brands, faces a challenging climate. In 2015, the global market for personal luxury goods grew to €253 billion (about $284 billion), up only 1 percent on the previous year in real growth terms, according to Bain & Company, a global consulting firm.
"The reality is that the luxury market is growing in low single digits," said Ortelli. "For brands, it's about stealing market share from one another. If you're not a supercool brand, you inevitably lose market share in such a competitive market environment."