Versace:  A Great 2014 To Be Replied in 2015

Versace closed a great year in terms of results and announces that the trend will continue in 2015. The Italian fashion brand gained 27% more than the previous year, while sales grew 17% to almost €550 million. It is the second consecutive year to reach that figure. According to the company, all markets where it operates have shown good performance, with a special significance in North America.

The highlight of the announcement is the forecast for 2015. The Italian luxury group expects sales to grow again by a double digit rate –probably near the same 17% in the last two years- surpassing €600 million. This figure would be in line with the long-term objective of the company: to reach €800 million in sales in 2017.

It has also announced that the most exclusive segment is the best performer, so it will be reviewing its pricing policy to meet the market conditions in the different areas. Versace refused to provide details, except to comment that it is watching its competitors (in a clear reference to Chanel) and that any changes will be known in May, after the presentation of the new autumn-winter campaign.

The big challenge of Versace is profitability. Its net margin (ie, the part of its revenues that becomes net profit) is only 4.8%, a rather significant figure in an industry used to manage wide margins. To give just two examples to compare, the net margin of competitors like Chanel and Hermès exceeds 20%.

To improve its relative position, Versace sold a 20% stake to the private equity fund Blackstone. The goal is to grow as much as possible these years (in sales and especially net profit) to be able to do an IPO in 2016 or 2017. The company had 137 stores in 2013 and plans to open 70 between 2014 and 2015 (30 in this 2015) to support this growth.

Disclosure: The author is not responsible for the views expressed in the article. The text has been written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.