Italian Menswear Brands Invest in Retail, Experience, Bank on Tourism

MILAN — Physical retail continues to be paramount for fashion brands and their appetite to invest in real estate assets will remain strong.

That was one of the findings of Cushman & Wakefield‘s inaugural European Luxury Retail report, issued last month. Also according to the American real estate services firm, fashion companies accounted for more than 40 percent of retail floor space leased across Europe in the first half of 2023. Fashion also accounted for the largest share of leases for bigger spaces — larger than 11,000 square feet — in the period.

However, while the race to secure the right space is no doubt intensely competitive, as physical stores remain crucial, there are nuances emerging.

Gildo Zegna, chairman and chief executive officer of the Ermenegildo Zegna Group, said, “Store visibility and location are extremely important for any luxury brand. But brands are different and unique and can require store spaces of different sizes and specifications. For example, for our group, the target store for Zegna is different from Thom Browne and from Tom Ford Fashion. Visibility, along with the right size, the correct adjacencies and the types of customers a given location will serve, are key factors to ensuring a good return on investments. Today across the group we have a strong network of stores and relationships with landlords that we have built over time, which ultimately creates a competitive advantage for each brand and for the group as a whole.”

Men’s Fashion Week kicks off Friday and closes with the Zegna show on Monday in Milan, a city that is increasingly key for fashion brands both in terms of real estate — cue Kering’s acquisition for 1.3 billion euros of an 18th-century palazzo on luxury thoroughfare Via Montenapleone last April — and as an attraction for international travelers as tourism has surged after the pandemic. Americans — and increasingly Chinese — are flocking to the city.

“North Americans are very important for the group and even more for Zegna. They are growing double digit domestically and also abroad and Italy is one of their preferred destinations,” Zegna said. “We have important stores in summer and winter resorts as well as in key airports, which are recording sound double-digit-growth performances, not only but also with the Americans.”

“Tax-free shopping in the first quarter of the year surpassed the pre-pandemic record by 20 percent,” said Stefano Rizzi, managing director of Global Blue Italia, driven mainly by  American tourists whose tax-free spending in the period more than doubled compared with 2019, also thanks to a favorable exchange rate.

Americans were the nationality with the highest recovery, spending an average of 1,252 euros, up 38 percent on 2019. Milan is the destination where American tourists spend the most, as it is for Chinese tourists.

“This growth more than compensated the delay of the full recovery of Chinese  travelers” — now standing at a 62 percent rate. This is a “fundamental” cluster for tax-free shopping and Italy, continued Rizzi, has “always been one of their favorite shopping destinations. We hope to see a full recovery by the end of the year. However, the profile of the Chinese shopper has changed and for brands it is essential to understand the new trends, implement adequate training programs and develop focused marketing strategies.”

Gianfranco D’Attis, CEO of Prada, said Chinese consumers “are one of the most important clusters” for the brand “and what we have seen in the first months of the year is that they are traveling again, being active outside their borders, in Japan but also increasingly in Europe. Japan has been one of the best performing markets fueled by both local and foreign consumers.” At the same time, all of the Asia Pacific region “remains strategically very important” for Prada, said D’Attis, reflected in the numerous events organized in the region over the last year, including, for example, Prada Mode, the brand’s architectural and cultural activation, traveling to Tokyo and South Korea.

Prada, which will hold its menswear show on Sunday in Milan, is also turning “a strong focus” on the U.S. “American tourists have been a very important contributor to growth in recent years in Italy, and Europe in general, and remain important. As we said already, we are also optimistic about the opportunity for Prada in the U.S. market,” D’Attis said.

An example is the recent acquisition of 724 Fifth Avenue in Manhattan, which houses the Prada flagship store, and 720 Fifth Avenue next door for a combined $835 million.

Miuccia Prada and her husband Patrizio Bertelli were pioneers in offering specific experiences to customers, which would include art and cultural initiatives.

“An important element of Prada’s DNA is the distinctiveness of its boutique network and of some venues, the so-called epicenters, that are capable of going beyond the concept of retail itself and hosting clients in a dimension completely surrounded by the brand’s culture and substance,” D’Attis said. “We have long believed that luxury consumers want to embrace a complete cosmos, full of experiences. Prada’s retail strategy has always been along these lines; in this context, we are prioritizing investments in New York, as well as in other key cities around the world, such as Milan, London, Paris, Shanghai, Hong Kong and Tokyo to name a few, where we will work to offer the unique curated experiences of the Prada universe.”

Canali has also been venturing into new territory, opening the first Caffè Canali in Beijing, followed by a second one in Shanghai.

“A physical retail network is irreplaceable to create a complete relationship with the customer, and e-commerce will always be a complement to the business,” said Stefano Canali, president and CEO of Canali, which is marking its 90th anniversary this year with an event and exhibition Friday evening, and a dedicated capsule collection. “Depending on its purpose and the context, the size can vary, it can be a jewel box or a more imposing size. We fine-tune and adjust our presence depending on the product, the customers and the location,” said the executive, adding that the company is not present in travel retail doors. Asked about securing the right space, vis-à-vis the competition with large conglomerates, he said “there is room for everyone, we play different matches for different consumers.”

Following the renovation of the Milan store in Via Verri, which was unveiled during the city’s Salone del Mobile in April with an expansive garden and lounge, the company will remodel its Beverly Hills store between the end of 2024 and 2025.

Antonio De Matteis, CEO of Kiton, said the company has over the years invested in building its network of stores, and this strategy will continue. “We are looking at three to four openings in 2025, and a new store will open in Tokyo in September,” De Matteis said. “Our product offer has been expanding, with more accessories to show in stores so we need to find bigger spaces, but this can be a challenge.”

Wholesale and retail are evenly split and he believes this is “the right balance. Wholesale grew in 2023, and we believe that if a product works well in a multibrand, it’s a good sign.” Despite “the rough seas,” the CEO said, referring to the macro and global headwinds, he was upbeat about business, saying the company recorded a 16 percent sales increase in the first quarter. He singled out Americans and North European tourists, as well as French, flocking to the Italian stores, while customers from the Asia Pacific region are more visible in Paris and London. Like Canali, Kiton does not operate travel retail doors.

Massimo Ferretti, executive chairman of Aeffe, said that “with the arrival of spring we have registered a promising recovery of tourism, both Asian and American in Italian cities, which positively influences the performance of our stores in Milan, Rome and Venice. We expect the trend to continue in the summer months, also in a city such as Paris. With the Olympics, we will see an incredible influx of visitors.”

Aeffe comprises the Alberta Ferretti, Pollini and Moschino brands and it is a special moment for the latter in particular, as the brand is returning to the menswear calendar under the creative direction of Adrian Appiolaza, who will also show his resort 2025 collection. Ferretti sees this show, which will be staged Friday evening, as particularly significant, since Appiolaza’s first runway show in February was “internally defined ‘project zero’ as it was realized in record time,” although he enthused about the “extremely positive feedback” to that collection. The upcoming show “is really the fruit of an entire creative process orchestrated by Adrian, which will present the aesthetic direction of the brand.”

Contrary to some of his peers, Brunello Cucinelli has been upbeat about America and China, as sales in the Americas last year rose 20.8 percent to 404.4 million euros, accounting for 35.5 percent of the total, and revenues in Asia soared 40.4 percent to 306.8 million euros, representing 26.9 percent of the total.

Not only is the atmosphere in America “very positive,” but Cucinelli also sees Italy as increasingly attractive for American tourists.

As part of a three-year investment plan, the company is expanding its factory in Solomeo and building a new 48,600-square-foot men’s tailoring factory in Penne, in the central region of Abruzzo, historically a production hub that specializes in sartorial menswear. It will be completed in spring 2025 and will employ around 350 artisans.

Corneliani has also been boosting its production prowess through a 15 percent increase in artisans, after a new company was set up in December 2021, with new refinancing. CEO Giorgio Brandazza said sales in 2023 rose 20 percent to 75 million euros on 2022. In 2021, revenues amounted to 40 million euros.

Last year the company inked an exclusive partnership with Triluxe Apparel Group, a leading brand-building organization with more than 20 years of experience in the premium and luxury menswear segment, with showrooms in New York, and the company kicked off an expansion strategy in the U.S.

Exports account for 90 percent of total sales, said Brandazza, mapping out a key development project in China, where the company has a branch in Shanghai and will open more than 20 stores in the country in the next two to three years, many of which will be directly operated. After the recent opening in Shenzhen, coming up next are a store in Wuhan in June and in Changchun by the end of the year, or early 2025.

“The attention will be on protecting the growth [along with] the positioning and the image of the brand,” said Brandazza, adding that the Italian lifestyle is “perhaps taken for granted but an asset that is very much appreciated by foreign markets, in particular Asia.”

The brand is available at around 400 points of sale globally, and counts 50 franchised stores. Units in Riyadh and Dubai are in the pipeline, as the Middle East is also an area of expansion for the brand.

Caruso went through “a rebirth” in 2023, said CEO Marco Angeloni. Last year, sales were up 30 percent over 2022, reaching 40 million euros, and the company has no debt, he added proudly. “We have become more flexible, faster and more efficient,” Angeloni said of the industrial prowess of the company, based in Soragna, Italy, which also produces sartorial designs for several luxury brands.

Angeloni hired 66 new employees last year and was especially proud of a welfare agreement he touted as innovative, spanning 2024 to 2027, to “show that we care, welcoming young people and to guarantee economic and mental well-being.”

Among the initiatives, the company will support families with seriously ill members or young children with disabilities, offer therapist sessions, financial benefits, training, protecting for a year victims of any kind of violence and paying for legal consultancy. “We guarantee part time to a parent until a child is three years old, and raised the amount of meal vouchers by 55 percent,” Angeloni said. “There will also be rewards for each year an employee stays on and at the end of the year it will be linked with our EBITDA [earnings before interest, taxes, depreciation and amortization].”

Caruso is available at 200 multibrand stores around the world, while the company closed its Milan and New York flagships during the pandemic. “Actually, the brand is more ready for a store now than then, since the collection has grown and its codes more defined and appealing,” said Angeloni, praising the arrival of Max Kibardin as creative director in January to refresh the brand. “He has a special intuition for trends,” he said of the designer, praising his “playful elegance, chic, colorful romanticism. He thinks out of the box but is not disruptive,” he added, pointing, for example, to the floral applications on Caruso’s “queen” of the collections, the jacket.