This story first appeared in the February 23, 2011 issue of WWD. Subscribe Today.
Luxury loves company — and Gucci has plenty.
Following a period of rapid growth in the Nineties, which saw its revenues rush past the $1 billion threshold in 1998, the Italian brand began constructing what would become the world’s third-largest luxury conglomerate.
Once PPR was invited to take a controlling stake in Gucci and thereby fend off a hostile takeover attempt by LVMH Moët Hennessy Louis Vuitton, it injected $3 billion into the Italian brand to help fund an acquisitions drive.
The first name on the shopping list was Yves Saint Laurent.
Having catapulted Gucci into the big leagues with runway heat and operational muscle, then-brand stewards Tom Ford and Domenico De Sole set out to pull off at YSL what became industry shorthand for brand rejuvenation: “do a Gucci.”
“We want this company to be as financially successful as Gucci,” De Sole touted at the time.
Ford, anointed Gucci Group’s creative director, took up the design helm of YSL, while one of De Sole’s key deputies and rising stars, Mark Lee, was handed the management reins. In addition, Chantal Roos was recruited to rejoin YSL Beauté, where she had engineered the blockbuster launch of Opium.
Ford created fashion fireworks and marched the brand into leather goods; Lee made 150 licenses do a disappearing act and built what he billed as a “world-class” retail network, a radical and expensive strategy that drove the mythic French house deeply into the red.
Six months after Ford and De Sole exited in 2004, Lee moved over to the Gucci brand. Since then, designer Stefano Pilati and chief executive officer Valérie Hermann — who will step down this spring to become president and ceo of Reed Krakoff — have focused on building sales via product expansion to support the cost structure of its boutiques. The company reached breakeven in 2008, aided by such hit leather goods as Tribute shoes and Downtown and Muse handbags.
Signaling a new phase of “focused expansion,” YSL last year unveiled plans to open a 10,000-square-foot flagship on Avenue Montaigne, Paris’ premier luxury street, in 2012.
After digesting YSL — along with a 70 percent stake in Italian footwear firm Sergio Rossi — the year 2000 saw a slew of acquisitions that would ultimately form Gucci Group’s “other brands” stable — and see it invest in new designer names alongside European heritage labels. The investments included majority stakes in English fashion house Alexander McQueen, French jeweler Boucheron and Geneva-based watch brand Bedat & Co.
The spending continued into the following year. Gucci Group landed a legendary brand, and a red-hot designer, when it sealed a deal to acquire Balenciaga, giving Nicolas Ghesquière a 9 percent stake. It also formed a 50-50 joint venture with Stella McCartney to build her famous name into a global brand alongside her hip and cheeky take on fashion (minus leather goods, given her staunch animal-rights principles).
Finally, it acquired Bottega Veneta, a specialist in luxury leather goods that quickly became a second powerhouse within the group, expanding into ready-to-wear, jewelry and a home line.
In 2010, Bottega’s sales totaled 510 million euros, or $678 million, up 27 percent, while sales at YSL rose 13 percent to 269 million euros, or $358 million. Revenues at other brands increased nearly 17 percent to 564 million euros, or $750 million. Dollar figures are calculated at average exchange rates for the year.
The Gucci Group division accounted for 58 percent of PPR’s profits in fiscal 2010. Last year, net earnings rose nearly 30 percent to 897 million euros, or $1.19 billion, on revenues of 4 billion euros, or $5.32 billion, up 18.3 percent.
Gucci Group has trimmed its luxury portfolio in recent years. In 2008, L’Oréal paid PPR 1.15 billion euros, or $1.56 billion at current exchange, for YSL Beauté Holding, including its Roger & Gallet subsidiary. And in 2009, Gucci sold Bedat to Malaysia-based Luxury Concepts Watches & Jewelry.