Cavalli’s namesake fashion house is clearly the Italian designer’s baby, and he is having a hard time parting with the empire he has created. It seems that every few weeks Cavalli and his camp change their mind as to what the designer will do with his label.
In fact, it has been just about a week since Cavalli announced that he did not want to sell a stake in his company. Now comes news that Cavalli has signed a letter of intent with the Milan-based private equity fund Clessidra SGR SpA for the sale of a minority stake in Cavalli’s fashion house, at supposedly somewhere between 20 and 30 percent. Terms are supposed to be finalized by the end of September.
Cavalli has been experiencing significant drops in net profit since 2008. The WWD is reporting that in 2008 the house’s net profits dropped 90.6 percent to $1.2 million from $12 million in 2007, although sales increased slightly – up 1 percent to $166 million from $153.4 million afterwards. The deal with Clessidra is key for Cavalli because it would allow him to grow without the help of banks, which is significant given the amount of short term debt the designer has.
A chunk of Cavalli’s problems can be attributed to his licensing deal with Ittierre SpA, given that they filed for Chapter 11 bankruptcy protection in February and therefore have not paid the designer some of his due royalties.
There is good news, however – Cavalli is optimistic and says that he is looking to expand his presence in emerging countries where the brand is still not widely present.