Ferrari’s luxury goals face policy reset as Prada hits skids

Bloomberg

Ferrari NV’s ambition to compete with luxury-goods brands like Hermes or Prada has failed to make headway in the six months since its initial public offering, raising pressure on the new board to reset the sports-car maker’s strategy.
Scepticism over the company’s prospects has caused the stock to tumble about 20 percent since its October listing. The new board of directors, loaded with luxury experts, must address the challenge of pouring resources into its bread-and-butter cars, maintaining the pricey presence in Formula 1 racing and extending the brand into more high-end products, all without the financial muscle of a strong parent company.
“Ferrari has an identity crisis,” said Adam Wyden, founder of ADW Capital Partners in Washington. “They told the world they are a luxury-good company so they should start behaving like Hermes or Loro Piana with their status-symbol supercars. It’s not about selling T-shirts or caps” to racing fans.
Ferrari’s sluggish start as an independent company coincides with a rough time for the luxury-goods industry. The attacks in Paris and Brussels deterred hard-spending tourists from Asia and the Middle East from traveling to major European cities, compounding already sagging demand in China. That’s hurt the likes of LVMH, Burberry Group Plc and Prada SpA, one of the hardest hit stocks with a 42 percent drop in the past 12 months.
The car manufacturer is working to hone its non-automotive products after realizing some fashion items in its stores “are not what I call a luxury brand extension,” Chairman Sergio Marchionne said in an interview in Amsterdam after leading Ferrari’s first annual shareholders meeting as a stand-alone company.
Ferrari’s luxury expansion was a cornerstone of Marchionne’s sales pitch to investors as the company was spun off from mass-market manufacturer Fiat Chrysler Automobiles NV, where he’s the chief executive officer of the Italian company.
His responsibility for implementing Ferrari’s strategy will likely increase after the supercar maker’s long-time CEO Amedeo Felisa retires, people familiar with the matter have said.
Marchionne told shareholders Friday that Felisa will decide how long he wants to stay on as CEO, and Felisa declined to comment on any retirement plans.
To evaluate its luxury options, Ferrari’s new board will include Delphine Arnault, executive vice president at LVMH Moet Hennessy Louis Vuitton SE; Adam Keswick, deputy managing director of Jardine Matheson Holdings Ltd., the parent of Mandarin Oriental Hotel Group; and Lapo Elkann, a member of the Agnelli family who helped to create Ferrari’s “tailor made” customisation unit in 2011.
Lapo’s brother John Elkann, the head of the Agnelli family which now controls Ferrari, will also be on the board and is unfazed by the share’s choppy performance.
The supercar maker’s “long-term prospects look even more exciting on the back of Ferrari’s best year ever,” with record sales and a 9.4 percent increase in net income, Elkann said in a letter on to investors in the family’s Exor SpA holding company. Despite the difficult market environment, “we are determined to hold on, which is possible due to the permanent nature of our capital and because our staying power is real.”
Ferrari’s expansion into luxury fashion and accessories has already had its share of upheaval.
The manufacturer hired Luca Fuso from eyewear maker Safilo in September to replace Andrea Perrone, the former chief of luxury suitmaker Brioni. Perrone was brought in by Marchionne’s predecessor as chairman, Luca Cordero di Montezemolo, to
expand merchandising and brand licensing.
The effort included a clothing line called Pr1ma, which offers 1,980-euro ($2,200) cashmere bomber jackets, 450-euro turtleneck sweaters and 180-euro T-shirts.
“We have a great basis and great DNA in which to build the brand extension,” but “we have to do it very carefully” to maintain a high-end image, Marchionne said. Friday. John Elkann and Marchionne “have spent lot of time discussing it with potential sources of help and partners,” with a target of bringing out new products by the time Ferrari celebrates its 70th anniversary in 2017.