18 Jan 2010
Many aspire to the casual elegance of Tod’s shoes and the cosseted lifestyle they suggest: the good life, fun, the freedom from drudgery, the restrained elegance of it all. And the potency of this near-universal dream has bought massive success to 56-year-old Diego Della Valle and his family. It’s also brought Della Valle a number of high profile board posts. He sits on just about every fashionable, deluxe Italian brand – from Ferrari to LVMH – you care to name. But success was never guaranteed and the clever re-invention of Tod’s by Diego Della Valle is not over yet.
The young Diego grew up surrounded by the scent of cow hide. It flooded the shoe factory in the small town of Casette d’Ete near Ancona. But the operation lacked a certain focus, and it wasn’t immediately apparent how this lack could be fixed. As a young man Diego himself was more interested in nightclubs and football, despite attempting to qualify as a lawyer, than fixing the family firm. Lots of distractions and law, in the end, also became one of them.
Instead of applying himself to torts and lawsuits, the young Italian businessman ditched his law degree at the University of Bologna and instead began to apply himself to the power of marketing the family business – with formidable results.
By the late 1970s Diego has catapulted his family’s relatively low-profile shoe maker into the big time by designing a new kind of shoe. The “driving” shoe, loosely based on a hunting moccasin he’d brought on a trip to the US, was to combine comfort with understated elegance – a practical shoe. The sole was made up of rubber pebbles that supplied grip and it could be worn in just about any weekend environment. But Diego’s masterstroke was getting Fiat boss Gianni Agnelli to wear them at weekends when he attended widely televised Juventus football matches. Sales rocketed.
Even then though this shoe was a clever type of branding that relied on understatement and good quality materials rather than “must have” fashion. Quite a trick to pull off. Until then the firm had chugged along nicely selling their deluxe wares to upmarket retailers like Saks who then re-sold these shoes under their own name. This success was something different though.
But let’s fast-forward to today. Diego Della Valle now has a very enviable life, or so it must seem to outsiders. With success assured, he is free to live the life of casual sophistication his products imply. He has the 17th century hillside house (actually, a former monastery) surrounded by lush gardens high up in the hills of Casette d’Ete; there is a silver Dolphin helicopter at his disposal not to mention the Falcon 2000 jet that regularly speeds him to New York, Barcelona or Tokyo. He holds an honorary degree in Economics and Commerce from Ancona University and has been awarded the prestigious Cavaliere del Lavoro title given to high-achieving Italian captains of industry. He is a lover and supporter of the arts and a member of Italy’s Great and Good. It appears every bit the charmed life.
Dignity, duty and enjoyment are at the heart of a good life; those words come not from Diego but his father, Dorino, now in his eighties. “If I had five minutes left with my son,” he told a Time interview in 2006, “I would tell him that is what life is about.” It’s a powerful maxim that distances the family from the racy film star lifestyle that Diego could so easily have fallen for. What Diego has indubitably done instead is create a brand that puts craft and substance back in the heart of this family business.
Della Valle’s factory is rarely idle. It has the capacity to turn out in excess of 15,000 shoes a day and many of the workers have spent their whole lives working for the business. Della Valle has also expanded into handbags and he’s also shown himself highly astute in leveraging the Italian artisan-ness of Tod’s into other brands. These include the sports shoe brand Hogan, the casual wear label Fay plus Roger Vivier, the French accessories house. It’s a formidable squad of brands, all the more remarkable for their, so far, individual short shelf life.
This shoe business has its roots from a cobbler’s basement in the 1920’s by Diego’s grandfather Filippo, but Tod’s didn’t get universally known until 30 years ago and the younger brands have even less hinterland. It’s also a strong team effort. Diego’s brother Andrea works side-by-side controlling the business; the two brothers’ father, Dorino, is still very much a presence and Diego’s son, Emmanuelle, remains a creative director within the company. His wife helped design the company HQ, a massive $60-million glass and marble palazzo style factory filled with modern art and is the biggest employer in the town, Le Marche, located in Italy’s middle region and sixty miles from Rome.
However the Italian consumer luxury goods market has been hard hit in the recession. President Silvio Berlusconi regularly implores Italian consumers to go out and purchase but his electorate appears to be playing sensible for the most part prefering to preserve the family budget. Ostentation is not an option for many, even in super style-conscious Italy.
Time on his side?
Now in his early fifties Diego Della Valle still has comparative youth on his side. He’s also keen to keep expanding his growing stable of brands. In a year best known for seeing some economies and many businesses utterly shattered, Tod’s has effortlessly risen high above the storms and squalls. Like many European businesses its share price dipped sharply – to €25 – at the beginning of the year. Almost a year later though it has more than doubled to close to €52.
An astonishing achievement. If the Christmas period went to plan, the share price could rise still further.
“I have the impression this year we have seen the stabilisation of this growth trend, although it is small it is still a growth trend… and it will continue in 2010,” said Della Valle at the Times Luxury Summit in Monaco earlier this year. Tod’s appears to share its recession immunity with France’s Hermes and Louis Vuitton. Earlier in November Tod’s sales edged up 1.8 percent to €559.4m in the first nine months of the year and earnings before interest, tax, depreciation and amortisation amounted to €129.3m, up almost 0.5 percent. According to Reuters Estimates, analysts are expecting Tod’s to report revenues of almost €720m and earnings per share of €2.70 for 2009.
Meanwhile Della Valle is ensuring that Tod’s must attempt to be different – even from other Tod’s stores and the company has revamped shops around the globe to differentiate them from each other. More broadly, the business model has shown to be robust in a very tough sales environment. Luxury shoes and bags are holding up well generally whereas watches and jewellry have been decimated.
Long-term, some fund managers and analysts think the company has plenty of room for expansion, especially in places like India and China. Although both countries have their own high-end brands (though not many) high-end European brands still command a premium. Lately Della Valle has been on the prowl for acquisitions. The family recently bought a sizeable stake in debt-ridden eyewear maker Safilo (they also own a large stake in rival eyewear group Marcolin). They also recently bought a small two percent stake in Gucci sunglasses. It’s inevitable Della Valle sees collaboration opportunities and the analyst community thinks a Marcolin-Safilo alliance holds promise.
Critics, politicians and celebs
Critics of Della Valle? There are a few. Mr Della Valle does not greatly like unions and they do not like him. It’s unlikely that the company will be on any green or ethical fund manager’s stock picks. In 2007 Tod’s came bottom of a WWF report entitled Deeper Luxury for its environmental, social and governance performance. Della Valle’s relationship with Silvio Berlusconi is troubled, to say the least, despite a lot of shared similarities (both own football teams, are large employers and are individually hugely wealthy). Berlusconi has publicly accused Della Valle of skeletons in the cupboard and having left-wing sympathies. Della Valle has been more gracious, stating that Mr Berlusconi has bouts of worrying aggressiveness and that he should rest more. It’s a more considered criticism in line with the company’s conservative, unruffled image.
However underneath, Berlusconi himself may feel real concern – the fear that one day Della Valle could forge a political career for himself, possibly even ousting him. Della Valle denies he has any such ambition. Being a businessman and a politician he says are totally different career paths. But he’s not immune to being interested in politics and politicians. In 2008 he entertained British politician Peter Mandelson at his new designer home on the Italian island of Capri. Mandelson had certainly lent a helping hand to the Italian shoe business magnate’s interests.
The ex EU trade commissioner had previously proposed a 20 percent tariff on cheap Chinese shoes flooding the EU and has also strongly pushed anti-competition measures that will protect EU economic interests from the flood of cheap Chinese products.
Della Valle’s sports interests also are an important part of his life, though these are becoming less important, possibly because they are less successful. Brother Andrea recently stepped down as president of Fiorentina – the club is owned by Diego. Match-fixing allegations have also swirled around the pair though both brothers have stressed their complete innocence.
But while the parade of celebrities – and there is lengthy queue of them including Gwyneth Paltrow, Julia Roberts, Cameron Diaz, Robert De Niro and Tom Cruise, to name just a few – are happy to parade his wares, life continues to look sweet. The fashion entrepreneur has the red Ferrari, the jet, even JFK’s beautiful mahogany yacht Marlin, not to mention a beautiful family. What more could he possibly want? If there is any remaining intention inside him of ridding Italy of the politician many Italians love to hate, then his political tact is impressive. More likely it’s a dream too far though – even for Della Valle.