Roberto Cavalli ceases operations in the US

By

Dominique Muret

Published
Apr 2, 2019

Roberto Cavalli is looking to exercise some damage control as it continues negotiations with possible new investors. On Tuesday, April 2, the struggling Italian luxury label will file for a composition procedure (concordato preventivo in continuità) at the Court of Milan, a safeguarding measure which will allow the company to continue its operations, while also reassuring suppliers and creditors, as well as potential buyers. Meanwhile, the brand has ceased its activities in the United States, a market where it has continued to rack up substantial losses. 

"It's been a very difficult market for the brand for a long time and losses were too high. All of Roberto Cavalli's operations in the country are currently suspended," the company told FashionNetwork.com. On Friday, the brand announced in a press release that through its filing for composition, it "intends to utilize a well-defined legal mechanism arranged by the legislator to manage and overcome critical phases that could also lead to the suspension of some activities in foreign countries."

The US is therefore the first market to be affected by these developments. As for other markets, the company is "currently carrying out evaluations," but, as highlighted by the luxury house – owned by Italian investment fund Clessidra since 2015 – "other markets do not have the same weight in terms of costs, because the American structure was very developed." Founded in the 1990s, Roberto Cavalli's US subsidiary employed 93 people and operated seven stores, a concession and four outlets, while its wholesale network also extended into Mexico and Canada. All of the company's employees in the country have now been made redundant and all locations have been shuttered. 

According to Roberto Cavalli, the radical decision was necessary "to protect the sales process, as well as  the brand's other operations." Clessidra, which controls 90% of Roberto Cavalli's capital, has been trying to sell its stake for some time now. Most recently, the firm has been in discussions with American investment fund Bluestar Alliance, which owns Bebe, Catherine Malandrino, Tahari and Brookstone, among other brands. 

Roberto Cavalli could no doubt have done with a little more time to reposition itself but, lacking investors and struggling with financial difficulties, the company had no choice but to file for composition, a situation which has worried unions in Italy, where the company employs 270 people.

On Monday morning, the company's management met with unions and local bodies in Florence but as one unionist pointed out, "it was hard to understand whether there's actually a serious intention to find an industrial group able to ensure the continuation of such an important brand's production." The label's management did, however, imply that several firms were interested in the brand and that it will continue its operations while it searches for a buyer.

In 2017, Roberto Caballi saw its sales decline 1.8% to 152.4 million euros but did manage a significant reduction in its operating loss, which narrowed from 26.2 million euros in 2016 to 7.1 million a year later. At the time, the brand highlighted Europe as its primary market, representing 45% of total sales (Italy alone accounted for 20%), followed by the US (27%), the Middle East and Asia. The brand is yet to report its financial results for 2018.