Fast Clothes

A scarf from the latest collection of upscale clothier Burberry and the cashmere-and-silk number — designed in its classic signature beige plaid — will set you back around €200. A scarf from high street fashion retailer Benetton — a multi-coloured wool creation in this season's bright hues — will cost you around €30. Which to choose? Ask a fashionista, and you might be in for a long debate. Ask Emilio Foà, and you won't wait long for an answer. A little over a year ago, he jumped at the chance to leave his deputy CFO job at Burberry's headquarters in London to become CFO of the €2 billion Italian business, which is 67% owned by the Benetton family. While the decision to move down the retail rail might raise a few eyebrows in the fashion world, Foà says the two companies have a lot more in common than people realise. Besides, it was a promotion that he couldn't refuse.

Yet Foà couldn't have joined Benetton at a trickier time. In an industry where it once reigned supreme, it has languished in recent years while rivals, such as Spain's Zara and Sweden's Hennes & Mauritz, have been rewriting the rules of the fast-fashion world, modernising supply chains and making new designs fly from drawing boards to shop floors in a matter of weeks. By the early 2000s, it was clear that Benetton was left "in a world of its own," says Frans Hoyer, an analyst at research house Proactive Independent Ideas (PI-Ideas). "It didn't really tap into trendiness, and that was obviously missing a trick."

Of more immediate concern for the new CFO, however, was that he arrived at Benetton's headquarters — a frescoed, 16th-century villa in Italy's north-eastern Treviso region — amid the fallout from the sudden resignations a few months earlier of the CEO and CFO, Silvano Cassano and Pier Francesco Facchini. Though largely given credit for masterminding a sorely needed turnaround programme that started in 2004, the two apparently fell out with Benetton family shareholders over the firm's international expansion strategy.

Picking up where the previous team left off, Foà and new CEO Gerolamo Caccia Dominioni are in a better position than many other turnaround teams — particularly because Benetton has a powerful, world-famous brand that's been working in its favour ever since it burst onto the fashion scene in the 1980s with brightly coloured knitwear and bold, socially conscious ad campaigns.

But many observers express amazement that the brand maintains so much power while the company falters, reporting generally flat sales between 2001 and 2006. "Benetton has been living on the glories of the past without big investments. It's just been pure maintenance, without any strategic plan," says Francesca Di Pasquantonio, an analyst at Deutsche Bank.

Recently promising investors annual average sales growth of at least 7% for the next decade, Foà insists that Benetton is putting its slacker days behind and undergoing "massive cultural change." For starters, it's ramping up the number of new fashion lines introduced each year from two to as many as 12 for each of its five brands. Meanwhile, the organisational structure is being simplified to increase accountability and visibility, while speeding up decision-making. There's also a much-needed capital investment programme — including €250m this year alone — to fuel expansion, bolster IT and supply-chain systems, and update shop decor.

What's in Store
The early signs of the turnaround are promising. Last month, Benetton announced 2007 results that included a 16% increase in net profit, to €145m, on a 9% increase in revenue, to €2 billion. Yet observers point out that this is only the beginning. "The task isn't about taking a factory and moving it from point A to point B," observes Hoyer of PI-Ideas. "It's about dealing with all the nitty-gritty complexities to revitalise the brand, all those important parts of the supply chain in between what they've become known for, the manufacturing at the back end and the advertising at the front end."

The new management team, led by Alessandro Benetton, appears well equipped for the long haul. The Harvard Business School-educated, private-equity executive was appointed vice chairman last year, taking over from his father and company co-founder, Luciano, who remains chairman. CEO Dominioni comes from Warner Music, with valuable experience of the "ups and downs," in Foà's words, of an industry with products facing extinction. Foà, meanwhile, joined the fashion industry nearly eight years ago, when he left a pharmaceuticals company to join Florence-based Gucci as group controller, working under CFO Robert Singer (currently CEO of pasta company Barilla and a non-executive director at Benetton). The job with Burberry came after that, in 2005.

Foà was both surprised and intrigued by the offer to move to Benetton. Though joining a firm whose financials were on a five-year slide wasn't to be taken lightly, he liked the idea of being "a fully fledged CFO" instead of a "number two," he says. He also appreciated the chance to join "one of the few good Italian companies" with an international scope and a corporate-governance structure balancing family interests with external shareholders.

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