Fashion label Valentino set for sale: Three lessons from an icon

Iconic fashion label Valentino – famous for its signature red gowns worn by stars from Sophia Loren to Anne Hathaway – it set to be sold for the second time in five years, with a sovereign wealth fund from the Middle East the likely buyer.

Valentino, which is owned by European private equity firm Premira, is being shopped around as investor appetite for luxury brands grows on the back of strong demand for luxury goods in China.

Reports out of London suggest that the brand will be sold for above $700 million, with Sky News reporting the royal family of Qatar is the front runner.

Premira has confirmed to Bloomberg that it is in exclusive talks with a bidder, but has not named the potential suitor.

The sale would mark the end of a tumultuous period for Valentino, which Premira acquired in 2007 in a $3.6 billion deal that saw the private equity firm also snap up iconic menswear brand Hugo Boss.

But the GFC left Premira – which had borrowed heavily to complete the deal – with some major problems and in 2009 it was forced to restructure the company which held the Valentino and Hugo Boss investments.

The brand also struggled to contend with the departure of its legendary founder Valentino Garavani, who retired in 2008.

However, Valentino’s performance has been improving. In 2011, sales jumped 20% to €322.4 million ($A387 million), while earnings tripled to €22.2 million ($A26.5 million).

The longevity of the fashion icon, which started in 1959, contains some valuable lessons for SME.

1. Have a brand that can change with the fashion

Staying in fashion for more than 50 years is not easy for any brand and it’s probably even harder in the fashion game, where your customers expect you to be constantly on the cutting edge.

Valentino Garavani cleverly anticipated this challenge and made his signature not a style of garment, but a colour – the label’s famous bright red became known as ‘Valentino Red’.

The colour gave Garavani the flexibility to stay on the cutting edge of fashion while branding at least part of his range in a way that made his label instantly recognisable.

2. Outlast the founder

Many would argue that Valentino the label has diminished since the departure of Valentino the man. But remember that Garavani sold the business in 1998 for $US300 million and it was re-sold in 2002 for $US210 million. The current price tag of $700 million suggests that Garavani’s retirement hasn’t killed the group’s momentum.

The key to outlasting any founder is clearly a strong brand. But succession is also important.

Valentino’s creative output is now controlled by Maria Grazia Chiuri and Pier Paolo, who worked with Garavani as accessory designers for more than a decade. The pair have worked hard to get the right balance between striking out from Garavani’s legacy and embracing it, partly by ensuring the focus is on the label and not them. “From the first moment we joined the company, we were at the service of the brand. We were not the brand, which is an anomalous situation in the fashion industry and very egocentric,” Chiuri said last year.

3. Get the right partner

The story of Valentino is really the story of two men: Garavani and his long-time life and business partner, Giancarlo Giammetti.

The pair, who met in 1959 as Garavani was establishing his business, formed a simple partnership – Giammetti looked after the business side, Garavani looked after the clothes.

Giammetti, who trained as an architect, steered the Valentino business into a number of key areas, including the pioneering use of expensive fashion advertising spreads, the move into ready-to-wear collections (rather than just inaccessible catwalk fashion) and licensing of the Valentino brand across a range of other products.

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