MC Lvmh Moet Hennessy Louis Vuitton SE

By Matthew Dalton 

Italy's coronavirus lockdown has the global luxury-goods industry straining to keep factories open in the country while adopting precautionary measures to fight the spread of the disease in its ranks.

The makers of luxury goods -- from industry giants like LVMH Moët Hennessy Louis Vuitton SE and Prada SpA to smaller ateliers with global markets -- are providing workers with protective gear, closing workplace cafeterias and warning employees to keep their distance from each other. The Italian government order, issued Monday night, has barred travel and public gatherings across the nation, but it contains an exception to allow business activity to continue.

While the initial outbreak in China took a big bite out of demand for luxury products, the disease's spread to Italy is now testing its ability to make many of those items. The luxury business is one of the few industries in recent years that has boosted its production in Italy, drawing on the country's mystique and heritage as a key selling point with shoppers from New York to Beijing.

Telling staff to simply work from home or avoid physical contact is difficult in an industry whose beating heart is the workshop where dozens of artisans collaborate, often in close quarters. Shutting that production would be a huge blow to the Italian economy. Luxury goods companies employ tens of thousands of people and are among the country's biggest exporters.

"On the production side, remote working is not possible, so it's a question of managing risk by reducing contact between people," says Matteo Lunelli, chairman of Altagamma, which represents Italy's luxury industry. "It should be possible to find a solution to protect the flow of goods and at the same time the health of the people."

Big firms like Franco-Italian EssilorLuxottica SA, which makes eyeglasses for luxury brands like Persol and Bulgari, as well as Oakley and Ray-Ban, continue to operate their factories in Italy. Louis Vuitton, owned by LVMH, has kept open its global shoe factory in the Venice region, site of one of Italy's biggest disease clusters.

But others worry the government might need to impose a hard lockdown, with no exceptions for business. That helped China tamp down the outbreak in Wuhan province, where the coronavirus first emerged and swept across the globe.

"I fear we may be underestimating what needs to be done to contain the problem," says Luca Solca, luxury goods analyst at Bernstein. "The risk is that the government may have to implement more draconian measures, in a similar manner to what the Chinese did in Wuhan."

Pelletteria Graziella, a leather-goods supplier near Venice, has taken a host of steps to keep the virus out of its factory as it continues production. The threat has been at its doorstep for several weeks, since a cluster of cases emerged in the region.

Now, the workshop's 50 artisans wear masks while they work. Last week, the factory installed air filters. Each worker's temperature is taken at the start of the day. Truck drivers making deliveries to the facility aren't allowed to get out of their vehicles.

"It's a little sad to see, but you can understand that it's a difficult situation," says Davide Zampieri, development and production coordinator for the company, which supplies a host of luxury brands such as Bottega Veneta and Dries Van Noten.

The company is also considering closing the factory for at least a week and relying on a network of external workers. For more than a century, the region, known as Riviera del Brenta, has specialized in making shoes and leather goods, fostering a network of artisans that have small workshops in their houses. They often worked by day in factories and then in the evening from home.

"This is our Plan B," Mr. Zampieri said.

The company is under pressure to fill orders made before the coronavirus outbreak spread in Italy. The next round of orders, however, is likely to show a major decline, as luxury shoppers world-wide have cut their spending during the epidemic.

"We are waiting right now to receive the orders, but the feedback is very negative," he says. "For sure, a decrease of 40%."

On the other side of Italy near Florence, leather goods suppliers are still producing as usual. The region, centered on the Florentine suburb of Scandicci, has been spared a major disease outbreak compared with the areas around Milan and Venice to the north.

"The situation [we see elsewhere] on TV is worse than in Scandicci," says Massimiliano Guerrini, whose family owns Almax, which produces handbags for Balenciaga, Fendi and other global fashion brands.

So far, his clients haven't notified him of any canceled orders. The company is advising its workers on proper hygiene and decided this week to close the company cafeteria, to keep large numbers of people from gathering in one place.

Almax runs a factory with 200 artisans, and doesn't have the option of relying on outside workers like Pelletteria Graziella, the leather-goods maker near Venice.

"It's impossible," Mr. Guerrini says. "We are too big."

Write to Matthew Dalton at Matthew.Dalton@wsj.com

(END) Dow Jones Newswires

March 11, 2020 05:41 ET (09:41 GMT)

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