Country Overview: Italy has a diversified, primarily industrial economy with roughly the same total and per capita output as France and the UK. In recent years, it has pursued a tight fiscal policy to meet the requirements of the European Union and has benefited from lower interest and inflation rates.
The country is divided between an industrial north, dominated by private companies, and an agricultural south, with 20% unemployment and a heavy welfare burden. Most raw materials needed by industry and 75% of energy requirements are imported.
The current government has enacted numerous short-term economic reforms, but has moved slowly on lightening the tax burden. Strong labor unions have opposed changes in a generous pension system. Economic growth was slow in 2006, with unemployment remaining high.
What to Watch: Italy -- Milan in particular -- is where the stock exchange meets the fashion industry.
This season, shoemaker Ferragamo has invited its buyers, clients and the media to show off its latest collection right here on the floor of the stock exchange to make the statement that they are on track for their 2008 IPO listing. But this is just one of the many luxury groups headed for listing.
Among others: Prada, the largest of group, could be valued at up to four billion euros. Damiani, the jeweller that Hollywood loves, is the first in line and its IPO is due before year end. And Versace, after a very successful turnaround, could be next.
Then there’s Cavalli, Brioni, Belstaff, Sizty, Patrizia Pepe that could all join the likes of Valentino, Bulgari, Tod’s and Luxottica that are already on the big board.
After a long tradition of family business, much of Italian fashion is ready to turn to the market to fund their growth and to go global. In fact sales are booming and numbers speak clearly — exports grew by 20 percent in the first quarter of 2007.
Gowns, accessories, shoes, jewels, eyewear, this is where Italian brands make the difference. But this growth has a price — more stores, more lines, more investments — from accessible luxury to superniche products. This is where opportunity lies for investors.