Armani Looks Ahead

Thi

s is a big year for Giorgio Armani. It marks the 25th anniversary of his company and, on July 11, his 65th birthday. And he has big plans. There's the exhibition of his work opening at the Guggenheim museums in New York City in October and Bilbao, Spain, next March, then traveling to Tokyo, London and Venice. He is launching home and cosmetics lines, as well as shoes and handbags, unveiling an office in Milan with a theater for his fashion shows, and building a huge outlet, also in Milan, to house Emporio Armani, Armani Jeans and the first Armani Casa store--not to mention an Armani cafe and a Nobu sushi restaurant. All this atop stellar financial success: in 1998 the company racked up $850 million in sales and net income of $135 million, making it the most profitable fashion house in Italy.

But new realities have intervened. In February, Andrew Grossman, the man Armani hired 10 months earlier to oversee U.S. operations, was asked to resign. Industry insiders say Grossman's middle-market thinking clashed with Armani's. In March, Matthias Vriens, the creative director Armani hired last July, took a job at Gucci. And then in April, Armani's managing director and key deputy, Giuseppe Brusone, made it known he would be leaving after 15 years with the company. Suddenly the question appeared to be, How will Giorgio get things done?

Armani maintains that the company is on track for a glorious Y2K. Unlike competitors Gucci and Prada, Armani has been spending his cash--some $650 million in 1999--not on acquisitions but on tightening his control over the way his products are made, displayed and sold. Last month he bought two of the Italian factories that produce his signature White Label collection from conglomerate GFT, and he recently established an office in Singapore to run his Asian business. He has also bought back the franchise for his stores in Japan. The new accessories collection should be very lucrative, the company says. The shoes and handbags debut this fall with a flashy ad campaign.

Still, Armani is facing stiff competition on its home turf--men's suits--from the likes of Ermenegildo Zegna. And 19 years after its introduction, the younger and cheaper Emporio Armani collection is struggling to define its identity with the notoriously fickle 25- to 35-year-old market. That was one reason Armani hired Grossman, his first U.S. chief in five years.

For the time being, Armani is running things himself, but he still needs to find replacements for Brusone and Grossman, and some see that as a good opportunity. Says luxury-goods consultant Armando Branchini: "Giorgio Armani products have great potential, but they need new ideas and new management--a new approach to the market." Armani himself agrees. Sort of. "Armani does not have the big brand problems of Nike and Coke," says corporate spokesman Robert Triefus. "Mr. Armani doesn't feel the brand needs to be reborn. But it's going through an evolution. Absolutely."

And 2000 is just the year for it.