Fashion’s swoon calls for a quick Armani fix

EssilorLuxottica SA

20/05/2026 10:13

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Yawen Chen

LONDON, May 20 (Reuters Breakingviews) - Italy’s fashion aristocracy risks learning that succession plans can age badly in a downturn. Italian daily La Repubblica has reported that Giorgio Armani’s heirs may split an initial 15% stake in the designer’s empire among his chosen bidders L’Oréal OREP.PA, LVMH LVMH.PA and EssilorLuxottica ESLX.PA. It looks like a practical move to comply with the Italian’s will, but also brings fresh risks.

The fact that Armani still looks no closer to a sale 8 months after the designer’s passing may reflect both the complexities of the will, and the changing fate of the fashion sector. Armani stipulated that a 15% stake be sold initially, with a potential majority sale down the line, and identified three preferred bidders. The move reported by La Repubblica would still enable one of those three to eventually take control, but also suggests no single acquirer has come forward at the right price. That's not surprising given demand for luxury goods and clothing is falling.

Any sale is made more complex by the fact that Armani is effectively two businesses. One consists of long-dated licences, most notably beauty with L’Oréal and eyewear with EssilorLuxottica, in which partners pay royalty streams to use the Armani brand. The other is the directly-operated business mainly comprised of high-end clothes, where Armani is responsible for product development and marketing.

The licensed franchises are valuable. HSBC estimates L’Oréal and EssilorLuxottica generated roughly €1.5 billion and €0.5 billion respectively of Armani-branded sales in 2024, roughly matching the revenue Armani generated from selling its own stuff. Assume sales of €2.1 billion of licensed products in 2025, in line with the growth rates of both L’Oreal and EssilorLuxottica’s related business, and a 10% royalty rate. That implies €210 million of license revenue. Assume these sales grow 3% annually until the licences expire in 2050 and 2037 respectively, take off tax, and that cash flow is worth €1.7 billion in today’s money, according to Breakingviews calculations.

The Armani-managed fashion house looks less appealing. It has reported a second year of falling sales, and probably contributes less to the group's overall profits than the licence fees. Even including those royalty streams, Armani generated an EBIT margin of just 2% in 2025, next to LVMH’s 22% ratio. Prada’s 1913.F acquisition of Versace, agreed at roughly 1.5 times sales, offers a benchmark. Applying a richer 2-times-sales multiple to what Armani itself booked in 2025 would imply a value of around €4.4 billion. That pushes the total enterprise value to over €6 billion.

That’s still a hefty cheque for anyone to write in this environment. And limiting the sale to three preferred bidders makes the job even harder. LVMH is the logical owner, given its scale and experience, but it is busy shedding challenged brands. And it operates its own beauty business, risking a clash with the L'Oréal franchises.

Given those challenges, splitting the 15% stake three ways may buy time, either for Armani to turn around or a single bidder to emerge, or potentially pave the way for a breakup. But it leaves the long-term question of who owns Armani unclear and may delay a possible offer by a potential alternative player, say Cartier-owner Richemont. The danger is that in a weakening luxury market, Armani may find it even harder to thrive on its own.

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CONTEXT NEWS

Italian fashion house Giorgio Armani is considering ​selling a 15% stake in three ‌equal parts following the designer's death, potentially bringing in three buyers he had selected as shareholders, Italian daily La Repubblica reported on May 10.

Armani, who died at 91 ​last September, had named French luxury ⁠group LVMH, beauty products ​maker L'Oreal, and EssilorLuxottica as preferred buyers for the ​company.

Based on the founder's will, the sale of an initial 15% stake in the group must take ​place within 12 to 18 months of his ​death.

La Repubblica said this would help keep all three ⁠buyers ​engaged in the initial phase.

Armani sales have been falling since 2023 https://www.reuters.com/graphics/BRV-BRV/zjvqmzdqjvx/chart.png

(Editing by Neil Unmack; Production by Shrabani Chakraborty)

((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))