By  on April 24, 2006

LONDON -- On a balmy evening in May 2004, Bond Street was abuzz with a party to fete the reopening of the Asprey flagship. Lawrence Stroll, Asprey's shareholder of reference, and his partner, Silas Chou, gave their guests a night to remember.

They decked the refurbished store, on which they'd spent $50 million, in Asprey's signature deep purple, right down to the garbage bins. Shoeshine boys in purple uniforms sat outside the front entrance, giving guests a last-minute polish, while window washers in purple overalls and no shirts worked on the glass until it sparkled.

Inside, servers passed around boiled quails' eggs packed into purple Asprey gift boxes. In between bites of hors d'oeuvres and sips of champagne, 1,500 guests watched Asprey's artisans polish silver plates and mount chunky diamonds in rings.

"It was a very understated affair," said guest Kenneth Cole with deep sarcasm. "A moderate display of midpriced merchandise."

"I feel like a proud papa," said the cigar-puffing Stroll, who, along with Chou, had purchased the Asprey and Garrard brands in July 2000. Their plan was to focus Garrard on high-end jewelry and silver while turning Asprey into a global luxury brand extraordinaire, one that would go head-to-head with Tiffany and Hermès. The brand's refurbished 40,000-square-foot flagship on Bond Street was already Europe's largest luxury goods store, filled with 23,000 different products, from emerald-cut engagement rings to purple cashmere sweaters to silver saltcellars and first editions of "Mother Goose."

From the beginning, Stroll and Chou, who declined to be interviewed for this story, vowed they were committed to Asprey, no matter how long it would take to build the business. The previous December, they'd opened a 20,000-square-foot, $50 million flagship in Manhattan's Trump Tower, and some 40 smaller stores were on the horizon. Their goal was for Asprey to hit $400 million in sales by 2012, and then they would mull taking the company public.

After their success helping transform Tommy Hilfiger into a megabrand with sales of $1.87 billion, the two were flush with cash and full of hope. Asprey was going to be their biggest coup yet. With three royal warrants; a posh clientele dripping with titles and country estates, and a dusty, utterly British brand name full of potential, the brand was going to be their next cash cow.But less than two years after Asprey's Bond Street extravaganza, Stroll, Chou and the deep-pocketed shareholders they'd brought in to help finance their dream disappeared entirely from the company's books. Shareholders, including Edgar Bronfman Jr., Morgan Stanley and TAG Group, the holding company of the Lebanon-based Ojjeh family, spent a total of $500 million on Asprey over five years. Earlier this year, A&G Group, the parent company and shareholders' vehicle, went into technical receivership, and a few weeks later, in March, the Asprey and Garrard brands were sold to private investors for little more than their debt.

So what went wrong? Observers both inside and outside Asprey describe a venerable company whose new shareholders were arrogant, insensitive and naive about how to build a luxury brand.

"Asprey was a grand old lady creaking at the seams, and it's true she needed a face-lift," said George Wallace, chief executive of London-based retail specialist Management Horizons Europe. "And instead, they created Frankenstein's monster."

Since its founding in 1781, Asprey had built a reputation as the sort of place that British aristocrats, right up to the royal family, would go for their sterling silver candelabra, tea sets and martini shakers. Royal warrants from Queen Elizabeth II, the Prince of Wales and the late Queen Mother are fixed to the wall in the front room of the Bond Street store, showing Asprey's status as an official supplier to those households. When it was owned by the Asprey family -- and later by Prince Jefri, the younger brother of the Sultan of Brunei, who purchased Asprey in 1995 -- it was legendary for its intimate, clubby atmosphere. The old store, which closed in 2002 for refurbishment, had a faded Edwardian charm, with a maze-like layout stemming from the fact that it was a series of venerable town houses knocked together into the flagship.

"We knew the Asprey family, and they knew us," said one posh socialite, whose parents were longtime Asprey customers. "The salespeople were au fait with customers' tastes, and even knew what they had in their homes. Often, they even knew the people you were buying for."

Admittedly, by the time Stroll and Chou acquired it, fewer and fewer of those old-time customers were walking through Asprey's famous revolving door at 167 New Bond Street. Even before Prince Jefri bought the retailer, it increasingly had become reliant on Middle Eastern customers -- as well as himself -- for the bulk of its business. Under the prince's ownership, that balance tilted even further and the Brunei royal family eventually became Asprey's largest single customer, reportedly accounting for more than half of its sales.More and more products were developed specifically with Middle Eastern customers in mind -- bejeweled, life-sized cheetahs; huge golden candelabra, and even, one time for a private client, life-sized palm trees whose dates were precious gems.

When Stroll and Chou arrived, they rapidly set about redressing the imbalance -- especially since Middle Eastern visitors already had lessened because of weaker oil prices. Still, instead of reaching out to Asprey's traditional customer base, the duo ignored them and instead tried to make Asprey young and trendy. And some London dowagers are still smarting from the snub.

"The new attitude was: 'We don't want that type [the dowagers] in the store anymore,'" said one source who worked for Stroll and Chou. "They had the cream of British society coming into Asprey and they wouldn't connect with them. They were myopic in their vision of who, exactly, that customer was."

Stroll, however, had no doubts who the new customer was: people like him. In addition to turning Hilfiger into a cash cow, he and Chou had helped build Ralph Lauren's European business, and later sold it in 1989. Their strengths were in building brands via licenses, and sourcing fashion garments at low prices. True, both men were luxury goods consumers, but they had little expertise in Asprey's type of products. Still, that didn't stop Stroll from injecting himself into the creative process at Asprey.

One former designer describes the meetings when, four years ago, Hussein Chalayan was designing the brand's ready-to-wear; Alessandra Gradi, the jewelry, and Thierry de Baschmakoff, the home accessories. "There were creative directors for every single division, so it was like the United Nations -- 50 people sitting around a table. Then Stroll would come in and scrap months of work in an instant.

'Where's the logo?' he'd inevitably ask. We'd walk out scratching our heads, thinking: 'Did that really happen?'"

Stroll even scrapped Asprey's first ad campaign, which the staff had been working on for six months, and brought in Bruce Weber instead. Weber shot a moody, black-and-white campaign that bowed in November 2003 and featured Asprey's official face, Keira Knightley, along with C.Z. Guest, Mark Shand, Keira Chaplin and Joseph Fiennes frolicking with elephants. There was no doubt Stroll was going to sell the British aristocratic lifestyle right back to the Brits and to the world."He was going to fill those big stores up with licensed products and timeless classics -- that's where all the money was going to come from," said one industry observer.

Stroll, himself, put it a different way, just after purchasing Asprey and Garrard for $150 million. Shortly after insisting that he and Chou bought Asprey because they loved the brand and that he hoped one day to pass the business on to his children, Stroll told WWD in disbelief: "How foolish is it that there isn't an Asprey watch? An Asprey pen? An Asprey lighter? We plan to correct that."

Not long after, however, a part of Asprey's heritage went straight out the window -- Stroll and Chou slashed the number of the company's leather, gold and silversmiths. Three years ago there were 15 silversmiths working in-house at Asprey. Today there are six.

"A lot of the silver production just went to Asia," said one former employee. An Asprey spokeswoman said a total of 20 craftsmen specializing in jewelry, silver, watches, leather, embossing and engraving currently work in-house at Asprey.

In other sectors, money was no object. Asprey's new owners thought nothing of helicoptering Rosa Monckton, the chief executive officer they'd plucked from Tiffany & Co., to and from her country home in Sussex each day. Monckton left after 18 months, and was replaced by Gianluca Brozzetti, a veteran luxury goods manager who had worked at LVMH Moët Hennessy Louis Vuitton and Bulgari. Brozzetti is among the new investors in Asprey, who also include the New York-based private equity firm Sciens Capital Management LLD and the Greenwich, Conn.-based hedge fund Plainfield Asset Management LLC.

Two years ago, Stroll and Chou also were eager to attract a high-profile creative director to the brand. Tom Ford spent time at Stroll's estate in Mustique that winter amid speculation that Stroll was trying to lure the then-outgoing creative director of Gucci Group to Asprey. Karl Lagerfeld was spotted walking through Asprey in London that July, fueling speculation that Stroll might be holding talks with him about heading the brand. It was at a time when Lagerfeld was in talks with LVMH about his contract at Fendi, which had several seasons left to run.Then there were the investments in the New York and London flagships. The original plan was to open the two $50 million stores simultaneously. Building works delayed the opening of the English store, so it was New York that made its debut first with a 700-strong guest list that included Uma Thurman, Sigourney Weaver and Natasha Richardson. Karen Elson spun the tunes while guests nibbled on fish and chips catered by The Ivy. The 20,000-square-foot store, which, like the Bond Street unit, was designed by architect Sir Norman Foster and interior designer David Mlinaric, was all set to be Fifth Avenue's temple to luxury, except that, in the end, hardly anyone came.

Prices were notoriously steep for a brand with which few American consumers were familiar. As a result, the store suffered -- even the perennially self-confident Stroll couldn't deny that.

"New York was a marketing experience, and not necessarily a pleasant one," he told WWD last summer. "We opened a store that was larger than the business required. In hindsight, would we do it again? I don't know."

Stroll and his fellow shareholders were shelling out $1 million in rent each month. Under the old Asprey and Jefri regimes, Asprey did three times as much business in a store in the Trump Tower that was a third of the size. In the pre-Stroll and Chou days, insiders say, the rent was "modest" and the U.S. business was just breaking even.

"It took the former owners 15 years to achieve those results," said one insider.

Asprey will close the Fifth Avenue store later this year and is looking for a smaller site. But the Trump Tower flagship wasn't the brand's first and only store drama. A year earlier, management sold Asprey's Bond Street flagship for $100 million. The company negotiated a long-term lease on the property, and began renting the store for about $4 million a year, the market rate. The money from the sale of the lease, the company said at the time, was to be pumped into store expansion.

"The writing was on the wall then, wasn't it?" said William As­prey, a former director of the firm.Indeed, Asprey was springing new leaks every day. A few months after the Bond Street sale, Asprey confirmed it had hired Citigroup to hunt for new investors to pump another $50 million into the brand to fund further retail expansion.

Sources say that, by that time -- just a year after the Bond Street opening -- Asprey's shareholders had had enough. They'd begun bickering about who would inject the next round of cash into the ailing business.

"No one was going to move unless the other did," said one insider.

Warner Music chief Bronf­man, with his 32 percent stake, was the largest single shareholder, followed by Stroll and Chou, who had a combined 40 percent stake. Morgan Stanley Private Equity held 20 percent and TAG Group, the former parent of Tag Heuer watches, owned the remaining 8 percent. Shareholders also had begun to dicker with management over money issues. It was then that Brozzetti, who also declined to be interviewed, switched from management into survival mode.

"That company had a 'For Sale' sign on it starting last August," said one insider. "Technically, management was looking for a $50 million investment for retail expansion, but at that point, any investor willing to stump up the cash would have become the majority shareholder. The other shareholders' stakes had been diluted by then."

The shareholders, who had vowed they would stick with Asprey for the long run, wanted out -- but they also wanted a return on their investments. More than one prospective buyer said the sellers initially asked for a "lunatic" sum of money for a company with sales of $54 million and losses of about $85 million.

"We rejected it out of hand; they were greedy about the value," said an investor who looked at the book early in the process. "The business model just didn't work: Rents were incredibly high and sales were low."

With a stack of lower-than-expected offers on the table, Brozzetti and his team managed to put a more realistic plan together. Late last year, he got Deloitte on board and put A&G Group into administrative, technical receivership.

"It was a voluntary, internal decision that was unanimously agreed by the shareholders," said the spokeswoman.Brozzetti also struck a deal with the bank HSBC to provide the working capital for both Asprey and Garrard so the brands could continue to operate while their fate hung in the balance. Eventually, Brozzetti managed to sell the brands in a debt-for-equity swap, with the value of the two businesses effectively nil. Sciens and Plainfield paid $80 million to $100 million, including the purchase price of Asprey and Garrard and future investment in Asprey. Three days after the sale, Asprey International, the newly minted parent of both brands, spun off Garrard to Ron Burkle's Yucaipa Cos. for $20 million to $30 million.

"I regard Gianluca as a hero," said one prospective buyer. "He held onto his pride after everyone else jumped ship, and he persevered after Asprey's shareholders failed to find a solution."

The day after the companies were sold, Stroll and Chou put on brave faces. In a statement, they called the sale "the right next step" to take advantage of the long-term potential of Asprey and Garrard.

"Over the past several years, the A&G team has put in place a solid foundation by properly repositioning the brands and commencing an international retail expansion. While the investment did not perform up to our expectations, it was relatively small compared to our overall portfolio and Sportswear Holdings' day-to-day attention," the statement said.

The ill-fated $500 million investment in Asprey included the $150 million purchase price of Asprey and Garrard; $150 million for real estate development -- chiefly the London and New York stores -- $100 million on marketing, inventory and product development; $60 million for uncontrollable costs, and the remaining $40 million to cover operating losses. An Asprey spokeswoman said much of the money went to "correct issues set in motion by previous owners." Indeed, in the 1999 fiscal year, shortly before Stroll and Chou bought the business from Prince Jefri, combined turnover at Asprey and Garrard was about $75 million and the losses were $152.4 million.

Asprey's newest shareholders have their work cut out for them. Industry observers say the brand has to downsize, trim back the product lines and store rollout plans, reconnect with its traditional clients -- and cultivate patience."It's by no means a lost cause," said London jeweler Harry Fane, whose mother was a Garrard and who's been working with the displaced silversmiths. "It needs owners with a great vision and great sensitivity for the values of the brand. They need to leave Ralph Lauren to Ralph Lauren and Burberry to Burberry, and get back in touch with Asprey's roots."

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