Corporate Credit Rating for GIORGIO ARMANI S.P.A.: A3+ (Affirm)

modefinance published on its CRA website the Corporate Credit Rating (Affirm) of GIORGIO ARMANI S.P.A., reviewed according to the updated financial statement (31/12/2017).

modefinance confirms the rating previously assigned to the entity, equal to A3+ (Affirm).

The company has confirmed its high capability to meet its financial obligations, thanks to a very high capitalization, which makes it resilient to potential adverse macroeconomic conditions.

The reasons that have driven this decision are:

• The overall financial and economic situation of Giorgio Armani S.p.A. in 2017 can be considered very strong. With respect to the previous year, the Company improved its solvency and liquidity, recording a small decline in profitability, which remained by the way adequate. In terms of solvency, improvements were due to higher shareholders’ funds, and to lower total liabilities, with an almost null exposition towards banks and credit institutions. With regard to liquidity, higher cash and cash equivalents pushed all main indicators on adequate levels, higher than those registered within the sector by healthy companies. Finally, as of profitability, Giorgio Armani S.p.A. recorded a contraction in turnover and in all main operating margins, mainly due to a rationalisation of Group’s portfolio of lines, but all main profitability indicators remained on adequate levels;
• Comparing Giorgio Armani S.p.A. with its peer group, it emerges that the Italian fashion house is well positioned in terms of turnover, being ranked at the 69th percentile of the peer group distribution. The Group presents an excellent condition of solvency, with a ranking of 91/100, and an adequate profitability, with a ranking of 49/100;
• Giorgio Armani S.p.A. is a long-established company, being funded in 1975. Today it is a world-wide symbol of fashion and a solid international group, which comprehends 13 subsidiaries and 524 directly managed stores all over the world, with a total of 8,100 employees;
• The Global Ultimate Owner of Giorgio Armani S.p.A. is Mr. Giorgio Armani, founder and also chairman of the Board of Directors, which includes other six counselors, three of whom belonging to Armani family. Despite being to some extent family managed, results show that the Company has so far been well managed. The overall assessment of the Armani Group, which counts 13 subsidiaries, is positive, since most of the Group’s companies have a good level of creditworthiness. With the establishment of Fondazione Giorgio Armani, the founder and sole owner of the Company has tried to secure the future the Group, which should therefore not be quoted on stock exchanges nor sold, at least in the short run. However, it remains to be seen whether this scheme will succeed and lead the Company to a new prosperous phase;
• Analyzing industry’s creditworthiness and comparing it with the one of Giorgio Armani S.p.A., it emerges that the Italian maison presents an extremely solid condition of solvency, with better indicators than the peer group, whose median values, however, remained on virtuous levels. The Company outperforms the peer group also in terms of liquidity, thanks to higher values of current and quick ratios, which are, on the other hand, not completely balanced in the sector. Taking profitability into account, the Company presents approximately the same ROE and ROCE of the industry, on adequate levels;
• Giorgio Armani S.p.A. realizes the majority of its total revenues in Europe, North America and Pacific Asia and it is therefore highly influenced by their macroeconomic situation. In 2017, all main macroeconomic indicators of these regions have shown a recovery, but 2018 forecasts show a slowdown, at least for Europe and China;
• The Italian government decision to increase the deficit-to-GDP ratio to 2.4% had a negative impact on the BTP-BUND spread, which rose over 300 points. Given the almost null bank exposure of Armani, the higher interest rates do not represent a direct threat to the Company, but the possible negative consequences that this entails cannot be undervalued. Other potential sources of risk could arise from the impacts of the Brexit, in particular if a formal trade agreement is not struck, and from other protectionist policies such as those threatened by U.S. President Donald Trump, although the presence of a Group’s subsidiary in New York should protect the Company from these duties.

The present Corporate Credit rating is issued by modefinance under EU Regulation N. 1060/2009 and following amendments.

The present Corporate Credit rating is Unsolicited: the rated entity and/or related third parties have not participated in the rating process and modefinance has no access to accounts or other relevant internal documents of the rated entity and/or related third parties.

Solicited and unsolicited ratings issued by modefinance are of comparable quality, as the solicitation status has no effect on methodologies used. More comprehensive information on modefinance Corporate Credit Ratings are available at this link.

The present Corporate Credit Rating is issued on MORE Methodology 2.0 and Rating Methodology 1.0. A comprehensive description of both methodologies, as well as information on modefinance Rating Scale and Mappings, is available at this link.

For information on historical default rates of modefinance Corporate Credit Ratings please refer to ESMA Central Repository  and ESMA European Rating Platform.

The quality of the information available on the rated entity and used to determine the present rating was judged by modefinance as satisfactory. Please note that modefinance however is not in a position to guarantee the accuracy of those information. As such, modefinance can accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect.

The present credit rating was notified to the rated entity in order to identify potential factual errors, as prescribed by the CRA Regulation.

The Rated Entity or Related Third Party has not purchased ancillary services from modefinance.

The rating action issued by modefinance was performed independently. The analysts, members of the rating team involved in the process, modefinance Srl and its members and shareholders do not have any conflicts of interest in relation to the Rated Entity and/or Related Third Parties. If in the future a potential conflict of interest is identified in relation to the persons reported above, modefinance Ratings will provide the appropriate information and if necessary the rating will be withdrawn.

The present Credit Rating is an opinion of the general creditworthiness that modefinance issues on the rated entity, and should be relied upon to a limited degree. The issued rating is subject to an ongoing monitoring until withdrawal.

Chiara Di Piazza - Head Analyst
chiara.dipiazza@modefinance.com
+39 040 3756742

Fabio Politelli - Assistant Analyst
fabio.politelli@modefinance.com
+39 040 3756742

Pinar Dilek - Responsible for Rating Approval
pinar.dilek@modefinance.com
+39 040 3756740