by Dana Thomas
“I don’t need you!” he blasted.
Then he stormed out of the room.
McQueen later changed his mind and took the job.
I met McQueen a few weeks before his Givenchy ready-to-wear debut in Paris for a cover-story profile for Newsweek International. He sat at Hubert de Givenchy’s desk, which overlooked the avenue George V. He had just shaved his hair into a Mohawk for the cover picture, and the trimmings were scattered across the white Formica desktop. During our talk, McQueen told me, “My clothes are out there on a limb, and I get slagged for it. It’s like Hitler and the Holocaust. He destroyed millions of people because he didn’t understand. That’s what a lot of people have done to me because they can’t understand what I do.” He quickly sought to shift away from the house’s longtime muse: “[Audrey] Hepburn is dead,” he told another reporter.
Arnault was just as cold-blooded when reorganizing the executive offices. In 1996, he replaced Parfums Givenchy’s longtime head Jean Courtière with former Procter & Gamble executive Alain Lorenzo, and Parfums Christian Dior head Maurice Roger, known as the “Philosopher-King” for his disavowal of marketing studies, with Patrick Choel, a no-nonsense executive who had worked for Unilever for thirty years, most recently as CEO of Chesebrough-Pond’s in the United States. Not surprisingly, the press dubbed Arnault the “Terminator.” “For a European, I have a U.S. approach,” Arnault explained. “That is, I face reality as it is and not as I would like it to be. I build for the long term.” A longtime colleague put it more succinctly: “[Arnault] is 100 percent capitalist in a country that has never accepted capitalism. And he has rubbed everybody the wrong way.”
The new designers fulfilled their mandate—they grabbed headlines with crazy stunts like the Dior collection of newsprint dresses inspired by the homeless—and the new marketing executives made the most of the hoopla. Not surprisingly, many longtime old couture clients fled to more traditional houses such as Yves Saint Laurent and Chanel.
“There I was sitting in a row of the Dior show with French first lady Bernadette Chirac and former first lady Claude Pompidou, and they looked like they had been hit in the face with a cold dead fish,” New York socialite and lifelong Dior client Nan Kempner told me after a Dior couture presentation of Edwardian-style getups in 1997. “They couldn’t believe what they were looking at: this conservative house where they’ve all bought their clothes for years. How much was there that Madame Chirac or Madame Pompidou could wear?”
Arnault didn’t care; couture lost money, heaps of it. A new generation of Dior customers flooded the LVMH brand stores to buy something linked to the newly hip brands. Perfume and handbag sales doubled, tripled, and that’s where the big profits were. “Selling to the right clients isn’t an issue anymore,” couture client and American socialite Susan Gutfreund conceded. “When it’s all filtered down, it sells to the masses. You walk through the airport and buy a pair of Dior sunglasses that you can afford and you feel like you have a bit of the magic.”
FOR MUCH OF THE 1990S, Arnault’s only real competitor on the group level was a conglomerate now known as Richemont, the Swiss-based firm that owns Cartier, Van Cleef & Arpels, Dunhill, Montblanc, and Chloé, and is controlled by Johann Rupert, an Afrikaner businessman from Johannesburg, South Africa.
Richemont began modestly: during World War II, Rupert’s father, Anton, took over a small tobacco factory in Johannesburg with two friends. But after the war, Anton’s entrepreneurial skills took over: he licensed cigarette brands from Rothmans, a well-known London tobacconist and, in the 1950s, went global. In the 1970s, Anton bought stakes in Cartier and Alfred Dunhill, which owned Montblanc writing instruments. Like Vuitton at LVMH, Cartier became the cornerstone and cash cow for what would become a luxury group. Cartier added a moderately priced contemporary line called Les Must de Cartier, which fueled growth and expansion.
In 1985, Johann Rupert, a banker who had worked for Chase Manhattan and Lazard Frères in New York and had run his own merchant bank in South Africa, joined the family-run firm. At the time the group was growing rapidly: it acquired Chloé, a fashion house known for its hippie-chic clothes, and Piaget and Baume & Mercier watches. In 1988, partly in response to trade sanctions against South Africa’s apartheid rule, Rupert reorganized the business. He separated the luxury brands from the family’s tobacco and mining assets, moved them to Luxembourg and Switzerland, and became CEO of the new group. He became chairman of Richemont in 2002.
Johann Rupert is as elusive as Bernard Arnault is known. He rarely appears in public and grants few interviews. The one time he made headlines in the British papers was for telling Margaret Thatcher to “stop interrupting me while I’m interrupting you.” He travels incessantly, logging seven hundred hours a year on his two company jets. “In order to judge the mood and judge the future, you’ve got to go to the East,” he once said. “You’ve got to go to South America. You’ve got to walk the streets of New York.” He never attends fashion shows. “You are the star,” he explained to Chloé’s chairman Ralph Toledano, “not I.”
When Rupert visits his brands’ stores, it’s informally: he drops in, unannounced and often unrecognized. He gives his CEOs complete autonomy but knows what’s going on. Though his background is in finance, when he meets with his executives, he talks marketing and strategy, not figures. He looks long-term and rarely sells off his brands or trades them like Monopoly properties when they don’t perform. He invests in them, sometimes quite heavily, and waits however long it takes for the return. Most of Richemont’s sales are in jewelry and watches. “We concentrate on style rather than fashion,” he explained. “We do not want to sell things that we have to discount two times a year.”
While Arnault and other luxury tycoons were busy snapping up brands in the late 1990s, Rupert played the game conservatively. He made two major deals: he bought 60 percent of the legendary Paris jeweler Van Cleef & Arpels in 1999 for $265 million from the Van Cleef family, and he paid $1.86 billion in 2002 for three luxury watch brands—Jaeger-LeCoultre, International Watch Co., and A. Lange & Söhne—from Vodaphone. And he acquired controlling stakes in two smaller companies: Old England haberdashery and Lancel luggage. Rupert received—and turned down—offers by Tag Heuer, Ebel, Chaumet, and Zenith; each in turn was quickly picked up by LVMH. “It’s not just about what you buy,” he explained. “It’s also a question of whether you can support the brands you have when times are bad…In my view, you ultimately create shareholder value better by building goodwill, rather than buying goodwill.”
Unlike LVMH, Gucci Group, the Prada group, and other luxury conglomerates that clump their brands together to get better prices for retail leasing and advertising and produce their different brands at the same factories with the same workers, Rupert keeps his companies independent of one another. “Product integrity has to be more important than synergies,” he said. “David Ogilvy [the advertising executive] used to say, ‘The consumer’s not a bloody fool; she’s your wife.’ The consumer wants to know that Piaget watches are made in the Piaget factory. [That’s] what makes it special. Otherwise it’s just another brand.”
The Ruperts own 9.1 percent of Richemont—the rest is traded on the Swiss exchange—and control the company with 50 percent of the voting rights. As a result, Rupert says he does not feel pressure to deliver substantial profit increases each quarter. “We are not in a hurry,” he has said. Indeed, when analysts said he paid too much for Van Cleef, he shrugged. “In five to ten years’ time, it will turn out to be a good acquisition,” he said shortly after the purchase. He is so cautious that banking analysts have nicknamed him “Rupert the Bear.”
The strategy has worked well. In 2005, Richemont did $5.25 billion (€4.31 billion) in sales. Cartier accounts for about half of Richemont’s revenues, and a staggering 85 percent of its operating profits, according to analysts. About 60 percent of Cartier’s earnings reportedly are from sales of watches.
WITH ITS BRANDS growing exponentially, and the money r
olling in from the sales of perfume and accessories, LVMH was flush and Arnault was feeling omnipotent. In 1998, he quietly began to buy up large chunks of stock of Gucci, one of the hottest brands at that moment.
Gucci has had a roller-coaster ride of a history. The company started in 1923 as a small shop in Florence selling imported luggage. As the business grew, owner Guccio Gucci added a workshop to produce his own designs. During supply shortages in the 1930s, caused by economic sanctions imposed by the League of Nations on Mussolini’s Italy, Gucci started experimenting with new materials like canvas and bamboo, and making smaller items such as belts and wallets. In the 1950s and 60s, under the guidance of Guccio’s sons Rodolfo and Aldo, the company flourished; its floral scarves, bamboo-handled handbags, and horse-bit loafers were favored by such icons as Jacqueline Kennedy and Grace Kelly.
The 1970s brought family infighting and overlicensing of the brand. By the late 1980s, more than twenty-two thousand products, from cigarette holders to scotch, carried the Gucci name. “It was pretty much trading on its past reputation,” said Brian Blake, who joined the company in 1987 and a decade later became its president. “A very large proportion of business at that time was driven by the ‘interlocking G’ canvas material, which was very inexpensive to produce and had very low price points. No truly discerning luxury goods client would shop at Gucci.” Famed marketing strategist Faith Popcorn put it more bluntly: “When you see [Gucci’s signature red and green] stripe, you want to throw up.”
In the 1980s, Rodolfo’s son Maurizio took over the company, and brought in Domenico De Sole, an Italian-born, Harvard-educated lawyer at a top Washington law firm, as president and managing director of Gucci America to right its course. Over the next few years, De Sole fired 150 of Gucci’s 900 employees, hired managers with serious retail experience, brought distribution in-house, reined in licensing, and bought back franchises—in effect, applying Henry Racamier’s model of vertical integration. In 1989, Maurizio convinced legendary retailer Dawn Mello to quit her job as president of Bergdorf Goodman in New York and become Gucci’s creative director in Milan. Mello discarded most of the existing products and hired a new design team, including Tom Ford, a twenty-nine-year-old former model/actor who studied interior architecture and had a few years experience in the Seventh Avenue rag trade, to revive and update great old classics as well as create a sleeker image for the house. “The bamboo-handled knapsack was the first thing I did when I came to Gucci,” Ford told me. “The first day.”
Gucci had a new staff, a new look, and a new business plan. But it wasn’t enough. Maurizio’s astronomical spending combined with an economic downturn caused by a war in the Middle East and a recession in the United States—both big Gucci markets—nearly did the company in. Losses were reportedly $102 million between 1991 and 1993, and the company was on the verge of bankruptcy. Investcorp, a Bahrain-based investment group that had bought out a number of family members in the late 1980s, paid $170 million for Maurizio’s remaining 50 percent share in 1993. A year and a half later Maurizio was shot dead in Milan by a hitman hired by his ex-wife. Mello left, Tom Ford became creative director, and De Sole was named chief operating officer of the company.
One of De Sole’s first moves was to drop the price on all Gucci products by 30 percent, putting them lower than Chanel and Hermès and on par with Louis Vuitton and Prada. Then Ford worked his creative magic to draw the public to Gucci. When he presented the first Gucci collection under his complete control in March 1995, he shattered Gucci’s staid aristocratic image and established a more modern and blatantly sexy voice. “Before I sent that first women’s show down the runway with the hip-hugger pants and the metallic shirt, I remember being so terrified because it was a dramatic change,” Ford told me in 1996. “I really had to rethink Gucci, and what Gucci should be. And a lot of [editors and retailers] said, ‘Oh, it’s great, but it’s not Gucci.’” It didn’t matter. The public loved it. Gucci sales shot up from $264 million in 1994 to $880 million in 1996. Smaller houses and mass-retail chains like Gap and Zara followed Ford’s design lead. Investcorp floated Gucci on the stock market, making it one of the most successful initial public offerings in fashion ever.
Back in 1991, Arnault had taken a good long look at Gucci with the idea of buying it. But after reportedly doing a great deal of due diligence, he backed off, telling associates that the brand wouldn’t go anywhere. Instead Arnault watched it blossom into a star brand, and now he wanted it, badly. In early 1999, after quietly spending $1.4 billion to buy 34.4 percent of Gucci stock—10 percent of which he purchased from Prada—Arnault launched a takeover bid. Tom & Dom, as Ford and De Sole were known in the fashion press, fought back. Arnault was called “the wolf in cashmere” and “a snake.” Women’s Wear Daily dubbed the confrontation “The War of the Handbags.” Ford threatened to quit if Arnault succeeded in his takeover; the clause in his contract that allowed this quick exit was called the Tom Bomb. De Sole declared, “Arnault is trying to steal this company.”
On Friday, March 19, 1999, it all came to a head. At 8:30 a.m., Arnault held a meeting of his top executives at the Disneyland outside of Paris. After that, he was to meet with De Sole again. But De Sole had other ideas. He and Ford called a press conference in Paris to announce the formation of Gucci Group with the help of their white knight—and Arnault rival—François Pinault, a French financier who controlled a group called Pinault-Printemps-Redoute (PPR), which included the auction house Christie’s, the Printemps department store chain, and La Redoute catalog. Pinault bought 40 percent of Gucci, for $2.9 billion—or $75 a share, $10 less than Arnault was willing to pay. Pinault also bought the Yves Saint Laurent Rive Gauche ready-to-wear and cosmetics companies for $1 billion. Arnault said he found the move “stupefying.” “[Pinault] came to my home with his wife, and my wife was seated next to him at the wedding of his son,” Arnault whined to Women’s Wear Daily. He was particularly bent out of shape that Pinault didn’t have the good grace to consult him first on the deal.
Pinault laughed. “What, do you think I was going to ring him up and say, ‘Cher ami, I’m stealing Gucci away from you?’”
Ford was soon designing both Saint Laurent and Gucci, and he and De Sole applied the vertical integration model to Saint Laurent to turn it into a global luxury brand. It took a lot of work. Saint Laurent’s former business head Pierre Bergé was of the old licensing school. When PPR took over Saint Laurent, it had 167 contracts with licensees for everything from clothing to cigarette lighters. It only had thirteen directly owned stores worldwide. PPR acquired a few more classic houses—including Balenciaga, Bottega Veneta, and the jeweler Boucheron—which were renovated (with a new designer at the helm) and streamlined. It also financed the launch of two new labels: Stella McCartney, who left her design post at Chloé, and Alexander McQueen, who quit Givenchy. In April 2004, Ford and De Sole left Gucci Group because PPR wanted to take away their autonomy and have them report to senior group executives—in other words, more corporatization.
Gucci’s victory against Arnault was significant: it was the first time Arnault was beaten at his own game. The loss was stinging: “Bernard Arnault hates to lose,” a close Arnault associate told me. Before the creation of Gucci Group, there were a handful of groups, but they didn’t really compete; LVMH was far and away the leader. Now with the formation of Gucci Group, Arnault had a direct competition for brands, for designers, and for customers. It was a new game, and Bernard Arnault no longer dictated the rules.
THE BIGGEST WINNER of the LVMH–Gucci battle was Prada: with the $140 million profit its chairman Patrizio Bertelli made from selling his 10 percent share of Gucci to LVMH, he went shopping for luxury brands. In 1999, Bertelli bought 51 percent of the trendy New York–based ready-to-wear company of Austrian designer Helmut Lang, a stake in the British shoemaker Church & Co., and (after years of wooing) controlling interest in German designer Jil Sander’s highly successful ready-to-wear company. In a mere six months, Bertelli had put toge
ther a substantial privately held luxury goods group; combined, the brands did more than $1 billion in sales turnover annually.
It’s hard to tell from the outside of the Milan-based headquarters that Prada is one of the world’s most successful luxury brands and the cornerstone for an important luxury group. When you arrive at the company compound at Via Bergamo, 21, you think the cab driver has made a mistake. The street is gray and dreary, a deeply industrial section of a deeply industrial town. (LVMH’s corporate headquarters, by contrast, are now in a sleek new building on the avenue Montaigne, across the street from the posh Hôtel Plaza Athénée.) You enter Prada through an anonymous portal-like oak door—there is no name, no plaque, nothing—and are greeted by a security guard dressed in gray. Everything is gray: the security office, the cobblestone courtyard, the various factory-like buildings surrounding it, and many of the cars parked in it. The only thing that gives the place away is the guard’s uniform: it is not the typical formless security garb but tailored Prada with its stark—some would say neofascist—lines. That, and the clocks behind him showing the time in Milan, New York, Los Angeles, Tokyo, Sydney, and Hong Kong. When I was there in the spring of 2006, several of them were off by more than a few minutes.
I was taken to a room I had read about often. It is officially Miuccia Prada’s office, and it is as stark and contrived as her designs: poured concrete; a slew of orange and yellow molded plastic Eames chairs; and, sticking up in the center of the floor, a metal tube slide—by artist Carsten Höller—that runs three floors down to the parking lot and is titled The Slide No.5. Prada has whizzed down it when asked to by reporters.
Prada entered the room as if it were her salon and she had been ushered in by her trusted butler rather than her communications director. This was a woman who had been raised in haute bourgeois society, with servants and grandeur and politesse. Unlike her competitor Donatella Versace, who so obviously came from nothing, Prada’s airs are not airs at all: her snobbery is in her bones. She was wearing a tightly belted full-skirted dress like 1950s matrons used to wear—think of Lucille Ball in I Love Lucy—but made of navy blue silk faille that rustled when she walked, with a light blue Oxford-like shirt underneath. On her feet was a pair of bamboo platform shoes that squeaked as she crossed the painted cement floor and made her teeter like a Chinese woman with bound feet. In her graying chestnut hair, cut sensibly at the shoulder, she had the requisite bourgeois headband, in dark green knit. She didn’t have a stitch of makeup on, not even lipstick, but her brows were well brushed. Her aristocratic profile is the sort that has been rendered in marble by masters, and her sharp nose is well freckled. On her ears were big dangling antique diamond earrings—somebody’s heirloom, if not her own—and just above her left breast a big, gaudy 1950s-like brooch.