Armani’s Legacy: A New Chapter in Luxury Fashion Unfolds

The future of the iconic fashion brand Giorgio Armani is now in question following the designer’s passing at the age of 91. In a surprising turn, Armani’s will, which was drafted in March and published on September 12, 2023, tasks the Giorgio Armani Foundation with selling a stake in the luxury fashion empire he built in Milan over the past 50 years. This development raises significant questions about the brand’s direction and potential new ownership.

Giorgio Armani had long resisted selling his company to a French conglomerate, even establishing a foundation to protect it from such outcomes. However, with his death, the landscape has changed dramatically. Among the three primary contenders for a stake in the company are two French companies: LVMH and L’Oreal, alongside Italy’s EssilorLuxottica. The news has sent shockwaves through the Italian fashion industry, as many observers had assumed Armani would maintain a strong Italian identity in his legacy.

Analysts estimate that the Armani brand could be valued at a staggering €7 billion (approximately US$8.3 billion), making it a highly sought-after asset in a market with limited targets. The announcement has attracted positive responses from the interested parties. L’Oreal, which has collaborated with Armani on beauty products for nearly 40 years, expressed its gratitude for being considered. Meanwhile, EssilorLuxottica, which is relocating its global headquarters to Paris, also expressed pride in being named as a potential partner.

Despite the enthusiasm, insiders at both companies indicated that outright acquisition may not be on the table. In contrast, LVMH, led by billionaire Bernard Arnault, may view acquiring a stake in Armani as a strategic move to bolster its luxury portfolio. Arnault acknowledged his honor at being named in the will and expressed a commitment to further strengthening the Armani brand globally.

The revelation that LVMH was mentioned in the will surprised some industry executives, particularly in light of statements made by Armani in a 2023 documentary, where he ruled out selling to French firms. One insider noted, “It’s just unthinkable that only a few years later, out of all people, he mentioned Arnault as his preferred buyer.” This shift raises questions about the designer’s evolving perspective on his legacy and future.

Armani’s will also instructs his heirs, including his right-hand man Leo Dell’Orco and family members, to explore other potential buyers that share similar standing and have existing partnerships with the brand. An initial 15 percent stake is to be sold within 18 months, with an additional 30-54.9 percent to follow within three to five years. Notably, the Giorgio Armani Foundation will retain at least 30 percent of the group, ensuring some level of family control remains intact.

The allure of acquiring a stake in Armani extends beyond its fashion lines. The brand’s lucrative beauty licensing deals, particularly with L’Oreal, are seen as significant assets. The Armani Prive fragrance line, launched in 2004, commands a retail price of around €300 per bottle, while the classic Acqua di Gio remains a best-seller in men’s fragrances. However, with the beauty licensing agreement running until 2050, prospective buyers may find it challenging to realize the full value of the brand.

Armani’s diverse product range, which includes everything from EA7 sportswear to high-end collections, might complicate a potential sale. Some luxury executives argue that the extensive variety could dilute the brand’s identity and confuse consumers. In addition to fashion and beauty, the Armani group also encompasses restaurants, hotels, and a high-end home design line, which may not align with the interests of many potential buyers.

While LVMH is frequently cited as the most likely buyer, its focus on high-end luxury may limit its interest in Armani’s more affordable lines, which contribute significantly to the brand’s annual revenue of €2.4 billion. LVMH’s strategy emphasizes tightly controlled product distribution, contrasting with Armani’s approach of utilizing wholesalers that often lead to discounting.

The will also mentions the possibility of a public listing if a stake sale does not materialize. This scenario would align Armani with other Italian family-owned fashion brands, such as Prada and Moncler, which have successfully transitioned to public markets while maintaining control through family ownership.

Armani consistently emphasized the importance of protecting his legacy throughout his career. Following the will’s publication, the executive committee reiterated the foundation’s role as a “permanent guarantor” of the brand’s founding principles. Analysts suggest that by seeking a partnership with a larger group, Armani aimed to secure the future of his brand while allowing for a more rational approach to its management.

According to Bernstein analyst Luca Solca, the desire to preserve the Armani brand legacy is paramount. Although the designer was known for his independence, the current market dynamics may have prompted a shift in strategy. As the luxury industry watches closely, the unfolding developments in the Armani saga will undoubtedly shape the future of one of fashion’s most celebrated names.