Dolce & Gabbana Looks to Beauty to Safeguard Independence

Dolce & Gabbana Srl, the Italian fashion house known for bold, Mediterranean-inspired designs, says its beauty business now holds the key to an independent future in the rapidly shifting luxury industry.

Revenue from beauty products is expected to rise more than 20 percent for the 12 months through the end of March 2025, to €610 million ($665 million), chief executive officer Alfonso Dolce said in an interview. That would lift total annual revenue to around €2 billion.

The company is also targeting €1 billion in beauty sales by the end of the 2027 financial year, following a shift from licensing to direct management of production and distribution of fragrances, makeup and skincare.

Dolce & Gabbana’s pivot on beauty comes at a fraught moment for the fashion sector, where a global slump has raised questions about the standalone future of some of its rivals.

Hong Kong-listed Prada SpA is nearing a deal to buy Gianni Versace Srl, while fashion icon Giorgio Armani rocked the industry last year when he said he no longer rules out a merger or listing once he exits the scene.

Dolce & Gabbana’s reaction has been to double down on its independence by broadening its revenue streams. Along with the decision to directly manage the beauty business, it’s also testing the waters in real estate and hotels.

“We asked ourselves, what more do we have to say to the fashion industry after 40 years at the top?,” said Dolce, 60, who holds the top job at the firm his brother Domenico and Stefano Gabbana founded in 1985.

Dolce & Gabbana Holding Srl, which encompasses the group’s offerings in clothing, furnishing accessories and beauty, reported about €1.9 billion in revenue for the 12 months through March 2024, up 19% at constant exchange rates compared with the previous year, driven by an almost five-fold increase in beauty.

But the company’s earnings before interest and taxes are still just a fraction of its Italian rivals. Dolce & Gabbana posted €4 million in Ebit at the end of the last financial year, compared with €1.28 billion for Prada on sales of €5.4 billion.

The jury is still out on the firm’s other big diversification bet, property and hotels.

“The success in beauty is a good testament of the brand strength,” said Luca Solca, a senior analyst at Bernstein. “I don’t think that hospitality/hotels will play a big role for them.”

The firm is seeking additional funding, including for its real estate ventures, which cover residences in Marbella, Spain, in Miami and in Dubai, as well as hotels in the Maldives and Saudi Arabia.

That’s another change in tack for a group that’s traditionally financed investments internally, Dolce said. A €300 million term loan that’s about 25% repaid dates back to 2022. The fashion house also has a €100 million working capital facility.

It’s now in talks with bank lenders for as much €150 million. A decision by those creditors is still on hold.

Summer Visitors

The diversification moves were prompted by what the CEO acknowledged was over-reliance on visitors to the Mediterranean, and the group’s post-Covid rebound was short-lived, he said.

The 2022 Russian invasion of Ukraine shaved off more than €100 million from the top line, while sales to Chinese customers tumbled as the country’s economy dipped and consumer tastes shifted.

Still, Dolce insists his firm can thrive as an independent. “If the macroeconomic environment deteriorates further, we have our own properties, our warehouses and we can always cut ad spending, which is twice as high as our peers,” he said.

Dolce also remains adamant about not wanting outside investors, at least for now.

“We listen to everyone, investment banks, family offices, private equity firms,” the CEO said. “But our response is always the same, at the moment we’re not interested in opening our capital.”

By Antonio Vanuzzo, Luca Casiraghi and Flavia Rotondi

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