The Business of Armani's Fashion House

Lynne Kiesling

Today's Wall Street Journal has an interview with Giorgio Armani about the business side of his vastly successful fashion house (subscription required). Coming to prominence in the 1970s and 1980s for soft, yet elegant, tailored fashions for men and women, Armani has extended his name brand to home furnishings, fragrance, makeup, and accessories. In addition to the very high quality of the products, I have always been impressed with the simple, unfussy elegance of his designs, and the intelligence of his decisions.

When Giorgio Armani's business partner died in 1985, leaving their Italian fashion house without a commercial manager, the future seemed bleak. Mr. Armani, who for the company's first 10 years had concentrated on design, stepped into the void.

Since then, the 71-year old Piacenza native has become a rarity in the fashion industry: a designer who also controls the business side of his empire. Other designers have tried to follow in Mr. Armani's footsteps, but no one yet has embodied the two facets of the luxury-goods industry as successfully.

If Mr. Armani's design acumen was visible early on -- ripping the traditional stiff lining out of jackets to create a casual suit -- he has had to prove himself as a chief executive. To expand his business, Mr. Armani has created less-exclusive spinoffs of his luxury Giorgio Armani label, introducing lines such as Armani Jeans for casual clothes and Armani Exchange for trendy urban wear. He has expanded the Armani brand into a range of product categories such as accessories, home furnishings, restaurants, car interiors, chocolates and, most recently, hotels. Giorgio Armani SpA has become one of the world's biggest fashion groups, with €126 million, or about $152 million, in profits on €1.3 billion in sales in 2004. The company reports 2005 results Wednesday.

Though his clothes are now considered by fashion critics to be more conservative than avant-garde, as a businessman Mr. Armani has been willing to take risks. He was one of the first designers to make an event of dressing Hollywood stars, paving the way for celebrity marketing. When, during the late 1990s, luxury-goods companies like LVMH Moët Hennessy Louis Vuitton and Gucci Group frantically bought up small fashion houses to become multibrand conglomerates, Mr. Armani stayed solo. He snubbed an acquisition overture by LVMH chief Bernard Arnault.

Not avant-garde, but clean, high quality, and great clothing for men and women who are self-confident enough that they don't have to wear designer-of-the-month.

Note in particular his comments on brand and brand extension:

WSJ: You have spread your brand from hotels to couture clothing to home furnishings and chocolates. How do you avoid diluting the Armani name?

Mr. Armani: I have always paid great attention to having brands that don't overlap. I choose a brand for a particular market and balance my collections in terms of look, price, distribution and location. When I began making jeans, the press was skeptical that someone who made luxury ready-to-wear could start something so commercial. But I considered it a medium to speak with a less affluent clientele.

WSJ: When does brand extension work?

Mr. Armani: It's effective when you do something like home furnishings, which is a sector people are interested in and which has become an alternative to dressing.

I think one reason the Armani brand is still such a valuable intangible asset is his attention to careful, intelligent brand extension. Keep a core vision and a core image, and apply it in new ventures.

One other focus of the interview is Armani's successor; he's 71, and is starting to give some thought to his creative legacy and who will carry it forward. This transition raises an interesting question: when a brand is so strongly attached to a charismatic leader, how well will it fare with another creative leader?