MILAN — There are still more questions than answers swirling around Gianni Versace SpA.
This story first appeared in the May 26, 2009 issue of WWD. Subscribe Today.
The company on Monday issued a statement following a board meeting in which it said the firm approved a new three-year plan prepared by Bain & Co. It said Versace operated in the black in the first quarter, but that revenues fell 13.4 percent, partially as a result of the bankruptcy of Ittierre SpA, which produces the VJC Versace and Versace Sport lines. The company said April and May showed an improvement in business, however.
As for the future of its chief executive, Giancarlo Di Risio — that is where the confusion came in. Versace said Di Risio was present at the board meeting, along with directors Donatella Versace; her brother, Santo; Leonardo del Vecchio; Paolo A. Colombo; Marco Salomoni, and Massimo Cremona.
But the statement did not address Di Risio’s future, although sources confirmed he is expected to step down within the next few days.
Instead, all the Versace statement said was, “With regards to the recent news items and articles that have appeared in the press, the board unanimously and categorically denies the existence of friction between the ceo and creative director Donatella Versace regarding the necessary policy of cutting costs.
“The financial and operational management of the company has always been the responsibility of the ceo, as laid out by the corporate governance of the company and the board has always unanimously given priority to any actions taken to guarantee the patrimonial and financial stability of the company,” the statement added.
No further information on Di Risio’s future was given, and a Versace spokeswoman declined comment. Sources said the company felt compelled to issue the statement because of reports Di Risio was stepping down after clashes with Donatella Versace over cutting costs.
If, as expected, Di Risio departs, it will mark the beginning of a summer of musical chairs at Italian fashion houses, at least at the ceo level.
Roberto Cavalli is searching for a ceo, and leading executives at other labels are either already out, facing the push or considering jumping.
Cavalli, who is in talks to sell a 20 percent stake in his business to Italian private equity firm Clessidra SGR SpA, has sounded out a number of executives at rival houses regarding taking the reins of his business, WWD understands. His daughter, Cristiana Cavalli, is company president but, as yet, there is no ceo.
Elsewhere, some executives have either been shown the door or run for it. Gucci Group dismissed Didier Bonnin as president and ceo of footwear and accessories subsidiary Sergio Rossi SpA last week, after two years in the job, and appointed former YSL Beauté chief financial officer and managing director of the Roger & Gallet beauty brand, Christophe Mélard, on Monday; Brian Blake quit Prada SpA in April for personal reasons, after 18 months as chief operating officer and commercial director. (Brought in ahead of an initial public offering, which was postponed yet again, Blake has not been replaced.) The same month, Marco Franchini relinquished the top job at Bally International AG for personal reasons, after seven years at the helm.
Speaking on condition of anonymity, one leader of an Italian fashion company said, “Everybody’s reputation is being shattered in this climate. Executives are not as bad as they look when they are losing, just as they are not as good when they are winning. The problem is that shareholders are thinking in absolute terms not relative terms.”
Giovanna Brambilla, partner at Milan-based executive search firm Value Search, a member of the Taplow Group, said a changing of the guard was to be expected with the unprecedented financial and economic crisis and, in some cases, new ownership, forcing companies to rethink strategy and, with it, their executive committee and senior management.
“Big events accelerate change and the crisis is doing just that. Companies are looking for improvements in performance and the stress levels are much higher at the top level,” Brambilla said.
Concetta Lanciaux, principal of Switzerland-based Strategy Luxury Advisors, added that the “generational transformation” in Italy, “where many family businesses are [experiencing] the pain of delegating to the first generation [of] professional management” — something which happened in France a decade ago — was compounding the delicacy of the situation.
“As a consequence the executive model is being [revisited] to its core,” Lanciaux said.
She explained that executives in Italy who had been hired to do a specific job, such as rationalize a collapsing business, once this was achieved, were being asked to go beyond their original remit and in some cases lacked the strategic and/or management skills or flexibility to do so.
“The result is a negative performance that the crisis cruelly accelerates,” Lanciaux said.
That would appear to be the case at Versace.
According to sources, despite Di Risio’s early success at Versace — after 18 months in the job, he returned the company to profitability in 2006 — his strategy later built in one-off income items, such as the Palazzo Versace Dubai set to open in 2010, which are no longer competitive in this environment. Versace also invested around 45 million euros, or $57.5 million, in 11 new stores, mainly in Asia, and has so far refused to drop prices, instead opting to re-launch secondary line Versus.
Discussing the dangers of the downturn with WWD in February, Di Risio said: “The crisis doesn’t mean that you have to upset or change the company. It just means that you have to be much more careful than before in terms of acquisitions or investments, and much more careful regarding expenditure. If we were to completely rearrange the company and the crisis were to be finished in a year, we would find a firm that was no longer positioned in a certain way and that had undone its strategy. That’s when you would find yourself in a real crisis.”
However, sources said Friday: “In the current climate, shareholders are thinking, ‘first survive, then let’s talk philosophy.’”
Last year, net profits at Gianni Versace SpA fell 30.7 percent to 9 million euros, or $13.2 million, on revenues that rose 8.3 percent to 336.3 million euros, or $494.3 million. Dollar figures were converted at average exchange rates for the periods to which they refer. The company has not disclosed its net indebtedness, although Di Risio told WWD in February is was less than 20 percent of turnover.
“But you don’t get fired just for [financial and strategic reasons],” sources said. “It doesn’t look like Di Risio played his cards too well.”
Di Risio’s autocratic and hands-on management style is thought to have led to a breakdown in relations with the family when the results did not materialize.
Brambilla anticipated more executive changes to come.
According to sources, those companies observers are keeping a close eye on include Valentino Fashion Group, where ceo Stefano Sassi has been feeling the heat from private equity owners Permira; at Salvatore Ferragamo, which has indefinitely delayed a much-anticipated ipo and where ceo Michele Norsa’s relationship with the founding family is under strain, for similar reasons to Di Risio and the Versaces, and at Jil Sander, where ceo Gian Giacomo Ferraris is said to be unhappy since Onward Holdings Co. Ltd. acquired the label in September.
However, Lanciaux cautioned that personnel change did not necessarily guarantee success.
“Miracle men don’t exist,” Lanciaux said. “Collaboration and team work are needed at all levels of a business.”
Lanciaux added that Italian luxury and fashion houses needed to put into executive search the same rigor and pleasure they take in making products.
“Dare I say that the successful post recession…companies will be those that succeed in aligning great products and organizational renewal,” she said.
The Italian press has linked a wide array of executives to the opening at Cavalli, although Ferraris is the front-runner, WWD understands. One source speculated that Ferraris and Ferragamo’s Norsa could also enter the frame at Versace.
“Di Risio’s replacement will likely come from industry and quickly,” sources said.
However, Brambilla said the sector was suffering from strategic homogenization and needed new blood and fresh thinking.
“If you move a person from brand A to brand B to brand C, etcetera, the kind of strategic approach they bring is more or less the same. By bringing in expertise from other sectors, we can enrich the system,” she said.