Dolce & Gabbana likely to favour minority investor over IPO

Italian fashion house Dolce & Gabbana is expected to seek a minority investor in the near term rather than consider a stock market listing, five financial and industry sources told Reuters.

CEO Alfonso Dolce told Italian newspaper Corriere della Sera’s weekly supplement earlier in July that both options were under consideration.

The family-owned group is not ready for a listing while it grapples with difficult market conditions and focuses on integrating its beauty business, the sources said.

An investor could help provide fresh resources and revamp the business, two of sources said, without ruling out that this could lead to a listing in the more distant future.

Discussions are at an early stage and Dolce & Gabbana has not hired any adviser to explore a possible listing or stake sale, the sources told Reuters.

Dolce & Gabbana declined to comment.

Many independent Italian luxury companies have been struggling with succession issues and an increasingly competitive market, leading fashion houses such as Missoni and Etro to open their capital to financial investors. Diesel’s owner OTB said it aimed to list in the next few years.

Dolce & Gabbana set up a new company two years ago to manage its beauty business, including the development, production and sale of perfumes and cosmetics, the first Italian luxury house to make such a move. It had previously managed the business through licensing.

The company is also grappling with challenging trading conditions which are impacting the entire luxury goods industry. Larger rivals LVMH and Kering both fell short of market expectations in the latest quarter.

Dolce & Gabbana said this month that revenues at the group increased 17% to 1.9 billion euros in the year to end March.

It did not disclose its profitability.

Uncertain outlook

As well the difficult trading conditions, the IPO market is proving difficult. Italian luxury sneaker maker Golden Goose last month pulled plans for a listing in Milan blaming market volatility due to geopolitical uncertainty.

An M&A deal for the company might also be tricky given current market conditions, which have led to a drop in the valuations of luxury groups, as well as different expectations of sellers and buyers, especially in the case of financial players, the sources said.

“The geopolitical and macroeconomic situation, especially in markets like China, Russia and Middle East, do not help visibility in the fashion industry,” said Carlo Alberto Carnevale Maffe, an associate professor of Strategy and Entrepreneurship at SDA Bocconi School of Management.

Domenico Dolce and Stefano Gabbana founded the company in 1985 and they are still in charge of creative direction. The pair have long supported staying independent. In the past they said they had refused offers to buy the group.

Dolce, 65, and Gabbana, 61, have no direct heirs. In a 2019 interview, the two designers said they wanted to leave the company to family and employees.

Dolce’s brother, Alfonso, is shareholder and CEO, while his sister Dorotea has also a small stake in the group.
Dolce did not rule out a possible future stock market listing when asked about the possibility in May, but said the move was not a priority.

Dolce & Gabbana is controlled by Dolce & Gabbana Holding, which in turn is controlled by D&G srl – the holding company of the two designers – with a 80% stake. Alfonso Dolce has a 16.5% stake in D&G srl.