The Legacy of Giorgio Armani Faces a Business Makeover in a Changing Luxury Landscape

Giorgio Armani, the legendary designer who passed away in Milan on Thursday, left behind a brand known for its elegance and timeless appeal. However, the business model that underpins the Armani empire is now seen as somewhat outdated in an evolving luxury market. Armani, who founded his eponymous brand in the 1970s with just $10,000, was known for his reluctance to follow trends—both on the runway and in the boardroom.

The future of the Armani brand now rests with the Giorgio Armani Foundation, established in 2016 to govern the company after his death. The foundation’s bylaws allow for the business to go public, but only with the approval of a majority of its directors. Given the brand’s global recognition, it would likely attract significant interest if ever put up for sale. However, as a ready-to-wear label, it would not command the same valuation as luxury brands like Chanel or Dior, which benefit from high-margin handbag businesses.

Recent financial figures suggest the Armani Group, which is privately owned, may be facing challenges. Sales declined by 5% last year, outpacing the overall luxury industry. Operating margins have also dropped to a slim 3%, though this may be partly due to heavy investments in store refurbishments. The brand’s revenue is heavily reliant on third-party retailers and licensing agreements, a structure that has fallen out of favor in recent years as luxury brands increasingly focus on direct-to-consumer strategies.

Armani’s wide price range, from high-end couture to affordable T-shirts, has also muddied the brand’s positioning. While the company has already reduced the number of sub-brands from seven to three in 2017, further streamlining could involve focusing on the more premium lines—such as the couture label Armani Privé and the pricier Giorgio Armani brand—and potentially sacrificing revenue from outlet stores.

The recent sale of a stake in another Italian ready-to-wear brand provides a glimpse into what Armani might be worth. In 2023, Kering bought a 30% share in Valentino at a valuation equivalent to 16 times its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the previous year. Ralph Lauren, another brand run by its founder, also trades at a 16 times multiple. Based on Armani Group’s disclosed EBITDA of 398 million euros (about $467 million) in 2024, the business might be worth around $7.4 billion at today’s exchange rates.

Despite these challenges, the consistency of Giorgio Armani’s design legacy remains a rare strength in an industry that often sees frequent creative director changes. As the brand moves forward, it may need a more modern business strategy to remain competitive in the luxury sector.

The Armani business also faces the challenge of adapting to a rapidly shifting consumer landscape, where digital engagement and sustainability are becoming key drivers. The brand’s current structure, with its reliance on third-party retailers, may hinder its ability to control brand messaging and pricing, which are critical in today’s market.

As the fashion world reflects on Giorgio Armani’s legacy, the question remains: will the brand’s next chapter be one of reinvention or stagnation? The answer may lie in the hands of the Giorgio Armani Foundation and the strategic choices it makes in the coming years.