The hottest ticket in Paris the week of March 12, 2001, when designers presented their fall/winter ready-to-wear collections in venues around the city, wasn’t a fashion show at all but the highly anticipated Tuesday night opening of Les Années Pop, an exhibit jointly sponsored by Gucci and Yves Saint Laurent at the Centre Pompidou. Les Années Pop was not only Gucci Group’s first major cultural exhibition but its dramatic entree onto the Parisian fashion, cultural, and social scene. The drama started with the setting: a giant, shimmering, back-lit rendition of Andy Warhol’s portrait of Elizabeth Taylor hung high above the entrance, greeting visitors with a cartoon-like glow radiating from the turquoise background, white complexion, black hair and dramatic eyes, and ruby-red lips. In the square below, a cast of handsome young escorts sporting black tuxedos and holding giant black umbrellas accompanied guests through the evening drizzle along a long black carpet that snaked up to the door. Once inside, a series of escalators ferried visitors up five floors along one side of the Pompidou, which had been darkened for the occasion, to a champagne reception at the trendy George V restaurant on the top floor. Tom Ford had worked his magic, tracking the escalators with an eerie trail of red lights that threw the figures and faces traveling aloft into a stream of moody silhouettes that resembled the opening frames of a James Bond film more than the inauguration of an art exhibit. The streaming crowd scrolled past like a virtual “Who’s Who” of French fashion, art, and business. PPR owner and Gucci shareholder François Pinault made an early entrance and exit with his gray-suited entourage; designer Jean Charles de Castelbajac, whose collections over the years have made colorful tribute to the Pop era, toured the exhibit wearing his trademark purple scarf and chatting with a friend wearing a Pop-inspired outfit from his latest collection. Other figures present included fashion icon Pierre Cardin; celebrities Bianca Jagger and Chiara Mastroianni; Ford’s fashion muse Carine Roitfeld, also the newly appointed editor of French Vogue; Italian Vogue editor Franca Sozzani; U.S. Vogue editor Anna Wintour; International Herald Tribune fashion writer Suzy Menkes; young English designer Alexander McQueen, whose fashion house had recently been acquired by Gucci Group; and many more. Fortified with flutes of chilled champagne, the guests excitedly praised the fifth-floor exhibit. The show, comprising pieces dating from 1956 to 1968, featured some 200 works of art, 100 architectural projects, and 150 Pop objects, including Yves Saint-Laurent’s famous Mondrian dress; outfits by Courrèges, Pierre Cardin, and Paco Rabanne; and an exhaustive and colorful collection of plastic items—portable radios, kitchen gadgets, television monitors, tables, chairs, storage compartments, and a complete collection of Tupperware nesting bowls and beakers.
Tom Ford, whose reputation as a designer was hanging on the presentation of the Yves Saint Laurent Rive Gauche ready-to-wear collection the next afternoon, slipped through the gridlock that had closed around him in the bar and made an early exit, leaving an ebullient Domenico De Sole to massage the crowd.
Domenico De Sole was in top form. Since winning the battle against LVMH the summer before, he had led the mission to build Gucci into a multi-brand group. After buying Sanofi Beauté, which included Yves Saint Laurent and a slew of top fragrance licenses ranging from the historic Roger & Gallet fragrance label to Fendi, Oscar de la Renta, and Van Cleef & Arpels, Gucci had also bought 70 percent of high-end Italian shoe maker Sergio Rossi, 100 percent of luxury jeweler Boucheron, 85 percent of Geneva-based luxury watchmaker Bédat & Co., and 66.7 percent of leather goods brand Bottega Veneta. In a move that electrified the industry, De Sole and Ford also launched a new strategy to buy stakes in the fashion houses of young, promising designers. Although they failed to reach an agreement with men’s wear designer Hedi Slimane, formerly at YSL and subsequently at Christian Dior, they bought a 51 percent stake in the business of talented young British designer Alexander McQueen in December 2000. The move effectively snatched McQueen out from under the nose of Bernard Arnault, who had hired McQueen to design for Givenchy and had already renewed his contract. De Sole told the press the move had nothing to do with Gucci’s continuing legal tussling with LVMH. Nonetheless, Givenchy canceled its couture show in January and its ready-to-wear show in March, staging private showings to small groups of clients and journalists while Arnault and McQueen traded barbs in the press.
“He’s always complaining about something,” said a bitter Arnault to the New York Times, adding that LVMH didn’t fire the young designer outright, “because we’re polite.”
“The house was scraping at the wall for more budgets,” retorted McQueen to Time magazine, calling the atmosphere within the LVMH group “bitchy,” and the company “insecure.”
By early April 2001, Gucci had announced an agreement with another young designer, Stella McCartney, daughter of Paul and Linda McCartney, whose creations for the Chloé label had established her reputation as an emerging talent. The next young designer on Gucci’s shopping list was Nicolas Ghesquiere, who had made his name at the legendary haute couture house, Balmain, which Gucci acquired in July 2001.
“Tom and I had been talking for a long time about how to bring in new design talent,” De Sole said in March 2001 during an interview in Milan before the Gucci women’s ready-to-wear show. “These are young, unbelievably talented designers, to invest in them doesn’t cost very much compared to established brands, and the return could be astronomical. This could be a home run,” he said.
In addition to its shopping spree, during the past year Gucci had also moved fast to streamline the drooping Yves Saint Laurent business, cutting 100 of its 167 licenses to transform the house from a license-driven operation to one exerting direct control over production and distribution, except for eyewear and a few other products. Gucci restructured YSL’s factories, merged overlapping operations, freshened-up existing stores with new paint and display arrangements (“There were holes in the carpet!” De Sole recalled), scouted new strategic locations, and opened a prototype of its new store concept developed with architect William Sofield (who also did the Gucci stores) for Las Vegas’s Bellaggio mall complex.
Ford’s creation of an arresting new advertising campaign for the historic Yves Saint Laurent fragrance, Opium, had gained instant notoriety. The campaign, widely seen in print ads and on posters in bus shelters around the world, featured actress Sophie Dahl, her hair newly colored red. Dahl posed nude, except for exotic makeup and stiletto heels, lying on her back and caressing herself with languid fingers in an image that made her body appear as smooth as a marble statue. The campaign won an award in Spain and generated an uproar everywhere else—along with thousands of dollars of free publicity for the Gucci Group.
In other streamlining moves that exploited Gucci Group’s new synergies, Sergio Rossi began producing YSL’s shoes, Gucci Timepieces took over watch production and distribution for all the group brands, and Gucci’s own facilities started distributing YSL cosmetics in the United States.
“Now, if you buy a YSL lipstick in Saks Fifth Avenue in New York,” De Sole loved to repeat, “it has been shipped by Gucci’s warehouse in New Jersey!”
De Sole had also plucked a cadre of bright new division managers away from Gucci’s leading competitors. His biggest coup was hiring Giacomo Santucci away from Prada to become the new president of the Gucci Division. At Prada, Santucci had not only been commercial director, but also functioned as a number two to CEO Patrizio Bertelli. He had been key in pushing the group’s expansion in the Far East as well as its debut in the cosmetics business with an innovative line of skin-care products featuring mono-dose packaging. Thierry Andretta was lured from Celine, the LVMH brand where he had just engineered a turnaround, to head up Gucci’s new business activity, and Massimo Macchi came over from Bulgari to oversee jewelry and watches. Gucci’s American, merit-driven management style, good salaries, and attractive stock options program had become known throughout the industry.
“People want to work at Gucci,” said De Sole during the Milan interview. “This business has n
o asset except people. I can now hire whomever I want!”
De Sole and Ford hadn’t overlooked continued growth at Gucci itself. During the previous year, the company had renovated flagship stores in New York (the Fifth Avenue store had remained untouched since Aldo Gucci’s ambitious marble, glass, and bronze renovation in 1980), Paris, and Rome; opened a new store in Japan; reacquired control over franchises in Singapore and Spain; and bought Zamasport, its women’s ready-to-wear production arm.
“Gucci is now a well-oiled machine,” De Sole said during the Milan interview.
De Sole and Ford set their sights on securing their spot in the major league of the Parisian fashion establishment with Yves Saint Laurent, but they knew their dream would not be easy to achieve. In October 2000, Ford’s debut collection for YSL had received lukewarm reviews in the press. Saying he wanted to go back to the roots of the Yves Saint Laurent name, Ford had shown pared-down black and white pants suits with strong shoulders, with a few simple dresses mixed in. Ford and De Sole had graciously invited both Yves Saint-Laurent and his business partner, Pierre Bergé to attend the show, which was set in a linear, one-story, collapsible black box Gucci had erected in the middle of the delicately manicured gardens behind Paris’s famed Musée Rodin. The austere black box contrasted starkly with its gracious setting behind the eighteenth-century mansion amid carefully pruned fruit trees and rose bushes. Inside, moody purple lighting, wafting incense, and large, padded, black satin seats suggested a smoky lounge rather than a fashion show. The black box—one journalist dubbed it the YSL “jewel box”—was the theater in which Ford’s ability to take over from one of the greatest designers of all time would be tested.
As expected, the reclusive Yves Saint-Laurent hadn’t appeared, but Bergé did and sat scowling critically in the front row, flanked by Saint-Laurent’s famous muses: the androgynous blond Betty Catroux on one side and the more feminine and eccentric Loulou de la Falaise on the other. Critics claimed the well-executed but simplistic show related more to Gucci’s sleek, sexy style than to the legacy of Yves Saint-Laurent. Maybe Ford didn’t have what it took to design both Gucci and YSL, fashion editors whispered among themselves.
“I knew it was going to be tough,” Ford said later. “They’re big shoes to fill, but the thing is, I’m not trying to fill the shoes. I’m not trying to be Yves.”
Insiders knew that beyond the design challenge, just getting that first show produced had been a Herculean undertaking. All of the YSL seam-stresses and design staff had been split off with the couture operation, which had remained in the hands of Yves Saint-Laurent and Bergé. Other hurdles included restrictions presented by the French labor and production system. So Ford had created the first YSL ready-to-wear collection with his Gucci design staff and in Gucci factories. Since then, Ford has brought in a young design director, Stefano Pilati, formerly of Prada’s Miu Miu collection, and has built up a strong new design team for Yves Saint Laurent.
Tension escalated when Yves Saint-Laurent, after his no-show at Ford’s debut for YSL ready-to-wear, attended Hedi Slimane’s debut show for Christian Dior’s men’s collection in January 2001. Saint-Laurent, caught chatting in the front row with LVMH’s Bernard Arnault by a video crew, was filmed saying that he “suffers like a martyr” and that “it’s terrible, it’s terrible.” Then he added, “Mr. Arnault, get me out of this scam.” The conversation, which was aired in February by cable network Canal Plus, was interrupted by Saint-Laurent’s business partner, Pierre Bergé, “Yves! There are microphones everywhere, don’t say anything!” Although there was no direct reference on the tape to what Saint-Laurent was upset about, tout Paris widely assumed he was referring to the sale of the YSL ready-to-wear business to Gucci and excitedly awaited the next development in what was proving to be the city’s most riveting luxury war since Arnault’s bid for Louis Vuitton back in 1989. Although the champagne evening at the Pompidou was a masterful stroke in Gucci’s advance on the Parisian fashion establishment, the true test awaited Ford at the YSL fashion show the next day.
The afternoon of March 14, 2001, Domenico De Sole watched as an animated crowd of journalists, fashion editors, buyers, and photographers started filing into the long black box for YSL’s fall collection. While Tom Ford scrutinized his cast of smoky-eyed models backstage in his final check before sending them out on the runway, De Sole worked the crowd spilling into the black satin seats. He greeted François Pinault and PPR’s CEO Serge Weinberg, as well as the group’s other business partners, before retreating to a strategic observation spot on the stairs to one side of the runway. He clocked the attendance of key retailers, fashion editors, and business partners, not to mention his own flock of new Gucci vice presidents.
Despite the glittering success of the Les Années Pop exhibit the evening before, the real test of Tom Ford’s talent hung in the outcome of the next twenty minutes on the YSL runway, and nothing could be taken for granted. The lights went down, the music heated up, and the models strode down the runway, in a powerful, rustling, ruffled, and ruched tribute to Yves Saint Laurent’s bohemian chic days. With the exception of the first two gathered silk dresses—one pink, one rose—the rest of the collection was totally black: sexy, sheer peasant blouses floated over deep corset belts and flounced skirts, soft blouses with peplums slipped over exotic scarf-skirts that dipped down towards modern bondage sandals, sleek smoking jackets strode over flamenco skirts and a slew of sinuously tight skirts. The collection triumphed with its modern take on Yves Saint Laurent’s spirit. Still standing on the stairs, De Sole breathed a sigh of relief. In the rave reviews published the following day, fashion editors and buyers widely ranked the collection one of the high points of the entire season. Tom Ford and Gucci were riding the fashion wave once more; however, their euphoria wouldn’t last long.
Bernard Arnault stole the limelight the next day with an unexpected announcement that had been sent out at the same time that the world’s fashion editors sat entranced in YSL’s black jewel box: after negotiating until two A.M. that morning, LVMH had hired a relatively little-known Welsh designer named Julien MacDonald to replace McQueen at Givenchy. Despite Ford’s successful YSL show, newspapers around the world gave the larger headlines to LVMH with Givenchy the next day.
Competition and legal sparring between Gucci and LVMH had reached new heights. In the marketplace, LVMH had been actively pursuing its own expansion drive through a slew of acquisitions, which included Italian designer label Emilio Pucci, U.S.-based day spa Bliss, California-based beauty brand Hard Candy, luxury watch labels TAG Heuer and Ebel, fine shirts maker Thomas Pink, BeneFit cosmetics, Donna Karan, and a joint venture with diamond sourcing giant De Beers Consoliated Mines Ltd. Arnault had also recruited new management talent, including bringing in Pino Brusone, formerly managing director of Giorgio Armani SpA, initially as senior vice president for acquisitions and brand development for LVMH Fashion Group and later designated CEO of Donna Karan International. In March, LVMH announced record results for the year 2000, when sales leapt 35 percent to $10.9 billion, and forecast double-digit sale and profit growth in 2001. LVMH cited the outstanding performance of Louis Vuitton, which continued to be the group’s star performer, as well as successful fragrance launches including J’adore by Christian Dior, Flower by Kenzo, and Issima by Guerlain.
A few weeks later Gucci reported its results had beat all 2000 projections, with revenues jumping 83 percent to $2.26 billion and diluted earnings per share at $3.31 (compared to estimates of $3.10 to $3.15). Net profits were nearly flat at $336.7 million.
“The year 2000 was a critical year,” De Sole told journalists gathered at Amsterdam’s Hilton Hotel for the results report. “This year has seen the most dramatic changes in the history of the company since we went public, because Gucci evolved from a one-company–one-brand reality to a multi-brand entity,” De Sole said. “We also proved that we can manage better than the others. We continued to manage Gucci well, and we showed our speedy and aggressive managem
ent style.”
On the legal front, after two years of heated courtroom battles, the Gucci vs. LVMH contest continued unabated. LVMH had pursued legal actions both to have the PPR alliance overturned and to force PPR to make a full bid for Gucci. In the fall of 2000, Gucci filed a complaint with European Community anti-trust officials, arguing that LVMH was violating Europe’s competition law. The complaint argued that LVMH was abusing its position as a Gucci shareholder by trying to frustrate its acquisition strategy, and it called for LVMH to sell its 20.6 percent stake in Gucci. In January 2001, LVMH returned to court saying it was prepared to accept an offer made by PPR in May/June of 2000 to buy its shares at $100 per share. PPR lawyers said that offer was no longer on the table.
Gucci’s savvy acquisitions, success in corporate team-building, heady fashion moments, and astute legal defenses couldn’t make up for the major blow it received on March 8, just a week before the jewel-box triumph. That day, Judge Huub Willems of the Amsterdam Court of Appeals Enterprise Chamber—a commercial court with special powers to review corporate acts, in particular with respect to bankruptcies and mismanagement—finally decided to launch an investigation into Gucci’s alliance with PPR, the agreement that had helped to fend off the LVMH advance in 1999.
“This is everything we have been asking for the past two years,” said James Lieber, LVMH’s director of corporate affairs, the day of the announcement. “We believe today’s decision signals a step toward the cancellation of the PPR transaction.” The court also ordered Gucci to fund the investigation, which would be carried out by three independent, court-appointed investigators for an estimated $100,000. LVMH promised in its court filing that if the PPR accord was annulled it would permanently limit its shareholding in Gucci to its current 20.6 percent, would not seek nomination of a representative to Gucci’s board of directors, and would not interfere with Gucci’s management or acquisitions strategy. LVMH also offered to round up a group of top international investment banks to execute a new $3 billion capital increase so Gucci wouldn’t have to forgo the cash it had received in the deal with PPR.
The House of Gucci Page 46