Ferragamo CEO: Fashion Needs To Return To Boring!

By Colleen Barry, AP

MILAN--It's back to the basics for the Italian fashion scene.

Major players gathered here Tuesday for an industry summit say the world economic crisis has pushed the fashion industry to the brink, and called for -- gasp! -- a return to normal, an embrace of the boring.

Participants including CEO Andrea Guerra of the Luxottica eyewear company and Ferragamo CEO Michele Norsa said the key to survival is to concentrate on the core product after industrywide cost-cutting.

"We need to return to being more boring. That means if we are good at eyewear, we need to make eyewear and thank goodness for 49 years we have made only eyewear. Others thought the time was ripe to do everything, and they now see that doing everything was a disaster."

More than anything, the crisis has defined a new normal, he said.

"There is no going back. We think that this is the critical moment, but I am convinced that 2005, 2006 and 2007 were the years of unreality," Guerra said, with unchecked growth and free spending. "This is a new world, it is not about declines and crashes. It is normal growth."

Norsa said the industry must reckon with permanent shifts in spending patterns.

"We have lost consumers who spent without looking at prices," Norsa said.

Sales growth will fall 5 percent in 2009 after a modest 4 percent growth last year, according to a study by Bank of America-Merrill Lynch.

In general, the biggest companies with annual revenues above euro300 million are doing the best, said Paula Durante, a luxury analyst at Merrill Lynch.

Apparel is being especially hard hit this year, because most orders are made months in advance, while accessories are the most resilient category, Durante said.

Mario Boselli, head of the Milan Fashion Chamber, said the Italian government has not yet formulated a response to help the fashion industry.

"There is a slow recovery, but that is a problem. You can't recover so slowly and without energy or you risk losing a lot of this country's wealth," Boselli told the gathering.

Boselli said he expects to see the worst when full-year earnings come out in the winter with revenues dropping on average of 15 to 20 percent. He expects more small companies to close and others to seek bankruptcy protection.

"An intervention has to be in the interest of the government in terms of costs and benefits," he said.