Ferrari Brings in Armani for Italian Boost to Its Luxury Brand

(Bloomberg) -- Ferrari NV is aiming to move further upmarket with its branded accessories by teaming up with another iconic Italian name, Giorgio Armani SpA, to help push the supercar maker’s handbag and clothing lines into the premium-price space.

Chief Executive Officer Louis Camilleri is tackling a long-held goal of former Chairman Sergio Marchionne, who died in 2018: transform Ferrari into a fully fledged luxury brand. After raising guidance for 2019 sales and profit, the company said Monday that branded goods will contribute 10% of earnings before interest and tax within the next 7-10 years.

Ferrari’s new direction in branded goods means items like parkas and sunglasses will now carry premium-style pricing more in keeping with the image of the company’s sports cars, which can cost more than $1 million each, people familiar with the matter said.

“Our current offerings are too stretched and are in danger of diluting our very precious brand equity,” Camilleri said on a conference call with analysts.

Ferrari has long used mall and airport stores selling polo shirts and luggage to let fans take home a piece of the brand at a fraction of the price.

While that sort of merchandising can reinforce the brand, a focus on $150 watches and $30 caps could risk denting its exclusive image.

”We will reduce our current licensing agreements by some 50%,” the CEO said. “We will also eliminate some 30% of the product categories in which we participate.”

Ferrari’s reputation for top-notch engineering could make more technical categories like watches and eyewear a logical target for its new strategy.

Armani has tried to refocus on its luxurious image by increasing control -- buying back the license to make fast-fashion under the Armani Exchange banner -- and discontinuing mid-range department-store lines. However, sales aren’t expected to return to growth until next year.

Key Earnings Highlights

• Shipments rose 9% during the third quarter to 2,474 units. While the rise was slower than the 13% for the first nine months of the year, the company began delivering its pricey Monza SP1 and SP2 models.
• This is turning into a record year for Ferrari in terms of range renewal after it unveiled two new cars in September. It also plans to unveil a new supercar Nov. 14 in Rome, according to people familiar with the matter.
• Adjusted earnings before interest, taxes, depreciation and amortization rose 11% to 311 million euros, beating an average of analyst estimates of 296.4 million euros
• Shares in Maranello, Italy-based Ferrari rose as much as 7.4% on Monday as investors also applauded quarterly earnings that beat estimates.

--With assistance from Robert Williams.

To contact the reporter on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Jerrold Colten, Tara Patel

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