MAKING AMERICA NO. 1
Byline: Sara Gay Forden
MILAN — He already outfits Sly, Liz and Madonna, but now Gianni Versace wants to dress a lot more of America.
The house of Versace, which has charted a steady expansion path since its founding 16 years ago, is now zeroing in on America and its goal is to make the U.S. its number one export market.
“The U.S. is our leading priority right now. It has to become our biggest export market,” said Santo Versace, Gianni Versace’s older brother and the chairman of the family fashion house, in an interview last week in his Milan headquarters.
Judging from the enthusiastic comments of American retailers after Versace’s October presentation of the spring/summer ’95 collection, which they praised as one of his most salable, the company appears to be making its move to a receptive audience.
But amid all the optimism, the Versaces were smarting last week from a stinging article in a respected British newspaper, The Independent on Sunday. The article, a wide-ranging cover story on the Versace empire, has the company threatening legal action.
In addition to taking a decidedly skeptical view of the clothes themselves, the article questioned the business viability of the fashion house, asking whether its revenues are really enough to support its expensive, star-studded image, its expanding chain of boutiques, and what it described as the extravagant lifestyle of Gianni and his friends, moving among Milan, a villa on Lake Como and his new home in Miami.
The Versace chairman dismissed the article as “false and tendentious” and said the company’s legal office may file charges against the magazine.
Versace, meanwhile, said his firm is charging ahead with its plan to bring the U.S. market up to more than 30 percent of total sales. Currently, the North American market, including Canada, represents 18 percent of group sales, which the company said reached $272 million (417 billion lire) last year on a consolidated basis and generated a net profit after taxes of $16.3 million (25 billion lire).
Versace’s plans include founding a U.S. subsidiary by early next year to coordinate distribution — now handled directly from Italy — boosting relationships with leading retailers and specialty stores, revamping the fragrance business, and, perhaps most ambitious, seeking a listing on the New York Stock Exchange.
Plans for that, first revealed in WWD in February, are still moving forward, Versace said in the interview, although he hasn’t yet given a mandate to a merchant bank to handle the listing. The choice is between Barclays Bank PLC, where the Versaces have close contacts in Milan, and an unidentified U.S. investment bank.
“I want them to really want this mandate, and they’re going to have to work for it,” said Versace.
Versace said the company is gearing up its internal financial reporting procedures in preparation for Securities and Exchange Commission requirements. He said the firm has been certifying its balance sheets since 1986, and plans to go ahead with the listing in 1995 or 1996.
“They are at a good point,” confirmed Gian Marco Petrelli, general director of Barclay’s Milan branch. “It’s a successful, profitable company that is capable of taking a step like this.”
This step, which would make Versace the first top Italian designer to go public, is all the more reason why the design house was upset by The Independent on Sunday article.
The Independent said “there is confusion about how the numbers add up.” However, the article didn’t attempt any analysis of costs and revenues, and made reference to “frequent rumors…that Versace is somehow linked to the Mafia,” although it never supported the allegation or even directly addressed the issue.
“The combination of gangster clothes, wildly extravagant lifestyle and near-empty shops only fuels the curiosity of those who ask how he makes his money,” reads one sentence. The article also raised questions about the purpose of Versace’s Dutch holding company, Gianni Versace International NV, although it is commonplace for international firms to establish holding companies in the Netherlands and Luxembourg to take advantage of favorable corporate and fiscal legislation.
In fact, Gianni Versace International, which is wholly owned by Gianni Versace SpA, holds most of the group’s international operations, including distribution (stores and commercial) interests in Japan, Germany, the U.K., Switzerland and the U.S.
“Not only are [The Independent’s] allegations untrue, but they are very unpleasant,” Versace said, adding that the fashion house has always made itself available to answer questions about its operations, including financial aspects, and makes its certified balance sheets available upon request, even though it is privately held, by Santo, Gianni and Donatella Versace.
Richard Askwith, a spokesman for the Independent on Sunday, told WWD, “We stand by what was written. We have not heard anything from [Versace] or his lawyers about the article.”
Gianni Versace SpA, the parent company of the fashion group, files annual balance sheets with the local chamber of commerce, although due to bureaucratic lags that affect other companies as well, the most recent available data is for 1992.
“We have always been willing [to provide information] if we are asked,” Versace said. He further pointed out that the company has successful, long-term working relationships with some of the top names in Italian fashion production, and receives frequent requests from its franchisees to open more sales points.
Among Versace’s closest production relationships are: silk manufacturer Ratti SpA, which prints the signature Versace silks; men’s wear manufacturer Ermenegildo Zegna SpA, which manufactures for the top Gianni Versace line and has a joint venture for the V2 line, and Les Copains, which produces the designer’s knitwear, to name a few.
“Gianni Versace is creative, but let’s not forget that we are also an industrial company, and our producers are among the best,” Versace added.
Revenue this year is expected to be up 20 percent over 1993, Versace said, while net profit is estimated to be up “more than 20 percent,” compared with last year. Early indications for the spring/summer ’95 season, judging from sales of the men’s lines and initial sales of the women’s lines, show increases of more than 30 percent for the first lines and more than 40 percent for Versace Jeans Couture, with Versus and Istante trailing with increases between 11 and 25 percent.
“These are very healthy increases, and that’s because our client list has been cleaned out and is solid,” said Versace, a fact corroborated by an external legal/fiscal adviser, Luciano Iannantuoni of Studio Iannantuoni.
“One of the reasons the company performs so well is that the clients pay. If they don’t, they get cut off,” Iannantuoni said.
Versace further explained the firm’s strong performance and its decision to diversify, both geographically and in terms of product range, at a moment when traditional luxury markets are slowing down. He pointed to the launch of Versace Jeans Couture, which is produced by Isernia-based Ittierre, in 1991, and the home line, launched last year. He also pointed to its decision to open stores in Mexico and other expanding markets, including Moscow, where Versace opened a 6,500-square-foot boutique this spring.
“We expanded our product range and started to move into emerging markets, and that has paid off,” Versace said.
Turning back to the U.S., Versace announced plans to triple its sales with Bergdorf Goodman, where it sells the first line, in the next few years.
“We are having a very strong success with the line,” said Bergdorf president Dawn Mello, “and we’re going to do a big job with the space.”
Versace said he is also discussing plans with Saks Fifth Avenue to take a more active role in managing the company’s space in the store.
And that’s not all. Versace also has a major new project in the beauty sector up his sleeve. Although he declined to offer details, it is believed to be a line of cosmetics.