ROME—Italy's Mariella Burani Fashion Group said it has signed a five-year contract to make and distribute the ready-to-wear collection of Italian fashion designer Giambattista Valli, a deal aimed at growing both companies as the luxury goods industry suffers through the economic crisis.
The licensing deal would give the 43-year-old Mr. Valli a stronger industrial and marketing base on which to build his five-year-old namesake brand, which has garnered international attention through fashion mavens like Queen Rania of Jordan and Sarah Jessica Parker.
Burani, a fashion group listed on the Milan stock exchange, expects Mr. Valli's ready-to-wear collections to generate around 60 million euros in sales over the next three years. Mr. Valli, who until now has produced and distributed clothes via another Italian company, made 20 million euros in sales last year on his ready-to-wear line and other business, including wedding dresses and furs.
Partnering with the Giambattista Valli label, which is sold in key markets such as the U.S. and Middle East, is likely to boost the fashion cachet of Burani, which owns its own brands and distributes other labels, including La Perla, under license. The two sides are also considering the possibility of starting an accessories line under the Giambattista Valli name. Financial details of the deal, including the breakdown of profits between the two companies, weren't disclosed.
The deal is a blow to Burani's rival, Italy's Gilmar Group, which has been making and distributing Mr. Valli's collections since he first launched his label in 2004. Mr. Valli was Gilmar Group's most important creative figure, who also designed for Gilmar's Iceberg brand.
In an interview, Mr. Valli said the licensing deal will allow him to stay independent, without seeking financial partners to take a stake in his business. "I want to keep this independence. This is important from even a creative point of view," said the designer, who shows his collections in Paris. "I am not involved with any investors or bankers. It is therefore very important to organize my business from a licensing point of view."
At first seemingly resilient to the global economic downturn, the 175 billion euro luxury goods business is now suffering as high-spending consumers cut back. Profitablity for the global industry as a whole, as measured by earnings before interest, tax, depreciation and amortization, or EBIDTA, is expected to fall 21% in 2009, according to Altagamma, an association of Italian high-end fashion companies.
Though few players are immune, the situation is particularly difficult for small, independent fashion brands that are struggling to boost sales, pay off debts and cut costs—without being able to rely on the financial reservoirs of big groups such as LVMH Moet Hennessy Louis Vuitton SA or PPR SA.
Italian company Itierre SpA, which produces ready-to-wear collections for Italian designer Roberto Cavalli, and Itierre's parent company It Holding filed for bankruptcy protection in February after running out of money to service its debt or make royalty payments to designers, including Mr. Cavalli.
In an attempt to better manage their businesses and find ways to fuel sales, some independent fashion companies, including Salvatore Ferragamo SpA and Gianni Versace SpA, have recently hired nonfamily executives and branched out into new areas, such as furniture, hotels and interior design.
Burani—which designs, produces and distributes high-end footwear, leather accessories and jewelry collections—has also been hit by the global slump in demand. The company, which posted 700 million euros in sales in 2008, is currently evaluating a debt restructuring plan. The company sees new licenses as a way to bolster revenue and expand.
The Valli license "could help us enter into other markets that we are really interested in such as in the ex-Soviet bloc," said Andrew Burani, managing director of the company's product and operations, in an interview. "We have about 10 collections and we have the potential to do more. We are currently in talks for more licenses."
Mr. Valli's clothes are currently distributed in more than 220 locations in 42 countries. The new license will kick off with Mr. Valli's pre-Fall/Winter 2010 collection. In the interview, Mr. Valli said that smaller companies such as his may be able to emerge from the economic crisis strongly because they don't have too many overhead costs such as factories and expensive boutiques around the world.
"Small independent houses are going to surprise," Mr. Valli said. "They are the ones that have the potential to really jump as they are more agile," he said.
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