WWD has a monster of an article today about our dear friend The Economy; contrary to the usual treatment, however, this one's an in-depth exploration of how the financial crisis will affect our fancy European friends. As it turns out, they're not immune over there: Several fashion and luxury-goods houses should batten down the hatches for the next twelve to eighteen months. What to expect?
A drop in revenues almost certainly, with the sector expected to contract in 2009. More seriously, however, industry experts believe there’s a risk of bankruptcy for some firms as heavy leverage cripples their operations.
Companies without debt, like Giorgio Armani SpA, Dolce & Gabbana Srl, and Hermès International should be fine — in fact, there's "significant opportunity" for these houses, should they want to invest during the downturn. But for houses where debt exceeds earnings, there could be trouble on the horizon.
Prada SpA, for starters, finished 2007 with $703 million in net debt. Execs are "convinced that [they] are among those in a better place," financial speaking, but the numbers are such that in September there was speculation that they might sell a minority stake to investors in Dubai (where investors are practically rolled off an assembly line). Escada AG, meanwhile, has cut its annual forecast twice this year and is warning that 2008 may close with bigger losses than 2007's $36.8 million. And IT Holding SpA — which owns Gianfranco Ferré and licenses Just Cavalli, Costume National C'N'C, and Galliano — is "in serious difficulty." They're carrying some $405 million in debt, and their parent company has an additional $178.3 million of debt of its own.
Of course, if and how these companies survive depends a lot on how they've financed everything. But just knowing gloom and doom are a possibility in the European luxury markets is a serious blow to our happy-go-lucky-aspirational-denial coping mechanisms.
Most Viewed Stories
Mary-Kate Olsen Strains Every Muscle in Her Face in an Attempt to Smile
The Fashion Executive Who Doesn’t Wear Underwear on Dates
25 Famous Women on Being Alone
22 Intimate Lost Photos of Marilyn Monroe
Prince George Has No Time for Justin Trudeau’s High Fives
How Angelina Jolie Won the First Big Battle in Her Divorce
It’s Time to Get Over Your White Feelings and Start Taking Action for Black Lives
Madame Clairevoyant: Horoscopes for the Week of September 26
The Will & Grace Reunion Was Intensely Documented for Social Media
2009 Called — It Wants Its Vogue-Versus-Bloggers Fight Back.
From Our Partners
powered by PubExchange
Latest News from The CutNaomi Watts and Liev Schreiber Are Separating After 11 Years Together
“The best way forward for us as a family is to separate as a couple.”Outrageous Party Photos From Andy Warhol’s Factory Days
Preview the book Brigid Berlin: Polaroids.Morning Sickness May Suck, But It’s Actually a Sign of a Healthy Pregnancy
An upside to the nausea.2009 Called — It Wants Its Vogue-Versus-Bloggers Fight Back.
Vogue called blogging “pathetic,” and bloggers were not pleased.I Can’t Believe I Like This Victoria’s Secret Beauty Product
And why you’ll love it, too.Cheap Thrill: The Perfect Pair of High-Waisted Jeans
Swedish denim label Dr. Denim is here to make denim shopping a lot easier.Vanderpump Rules Drama Is the Only Constant in This Crazy Thing We Call Life
Season five arrives on November 7.Emily Kinney on Life After The Walking Dead
Her new show Conviction premieres next Monday on ABC.5 Things on Sale That You’ll Actually Want to Buy: From Saint Laurent Jeans to an Isabel Marant Sweater
We dug through the internet to bring you some great deals.Here’s One Reason Why Women Are Underrepresented in Politics
It starts at the local level.
They also have a Fourth of July block party.My Favorite Fruit-Shaped Hand Cream Doubles As a Pill Holder
Can also hold gum, almonds, and paper-clips.Mary-Kate Olsen Strains Every Muscle in Her Face in an Attempt to Smile
It was a good effort.A Weekend of Hair Envy With Rubi Jones
Including an impromptu Weasley family look for a Potter-themed party.All It Took for Anti-Vaxxer to Admit She Was Wrong Was Her Entire Family Getting Sick
Rotavirus made her change her tune.Aparna Nancherla on Sad Girl Twitter, Period Tech, and Vocal Fry
The comedian has a new season of Womanhood coming out soon.Tom Hiddleston Caught Deep in Conversation With a Dog
Hiddleston's canine companions steal the show in his new Gucci ads.More of the Best Street Style From Milan Fashion Week
Sleeveless fur, seashell coats, and Jourdan Dunn in schoolgirl plaid.To the Eternal Relief of Amanda Chantal Bacon, Father John Misty Has Deactivated His Twitter and Instagram
Amanda Chantal Bacon’s good crystal vibes have worked in her favor.Decadent Jewels in the Midst of Destruction
Where diamonds and rubies collide with the grotesque.