Armani forecasts two more years of falling sales, profits

MILAN (Reuters) - Italian fashion brand Giorgio Armani, which posted falling sales and profits last year, warned on Thursday that revenues and margins will continue to slide for the next two years before the company returns to growth in 2020.

The Armani logo is seen on an outlet store in Metzingen, Germany, June 16, 2017. REUTERS/Michaela Rehle

The group, along with its peers, is facing competition in an increasingly aggressive industry dominated by large cash-rich giants such as LVMH LVMH.PA and Kering PRTP.PA.

The company said the results were the consequence of an internal reorganization which started early last year, aimed at streamlining its distribution and shop network and its business portfolio under just three labels.

“These results fit in the context of a cycle of anticipated and contained decline in net revenues and operating margins, attributable to the consolidation,” the company said in a statement.

Armani said revenues fell in 2017 for a second year, down 7 percent year-on-year at current exchange rates to 2.35 million euros. Gross operating profit was down 5.4 percent from a year earlier at 438 million euros.

The group said however that net equity was just over 2 billion euros and net cash rose by 14 percent to just over 1 billion euros.

“This substantial level of liquidity offers the group the opportunity to make increasing investments in its own brands with confidence, in order to further strengthen its competitive position in global markets,” the statement added.

Founded in 1975 by 84-year old Giorgio Armani, known as "The King" of fashion and who still runs the company, the group is Italy's second largest fashion group after Prada 1913.MI.

Armani had already foreseen a dip in results when early last year he said that 2017 would be complicated but reassured that his company had “a lot of cash”. The fashion company had initially expected a return to growth in 2019.

The Milan-based group has folded its haute couture line Giorgio Armani Prive and its home design brand Armani/Casa into its Giorgio Armani signature label.

More casual Emporio Armani absorbed the brands Armani Collezioni and part of Armani Jeans, with the remaining part of it being merged into the younger A/X Armani Exchange.

Though he has set up a foundation in his name and indicated that part of his high-end fashion empire should be transferred into the charitable organization, the designer has still not named his successor for when he steps down.

Reporting by Giulia Segreti; Editing by Jan Harvey