SOME SLEEPY LEGENDS OF ITALIAN FASHION GET A MAKEOVER.
Byline: Samantha Conti
In the days before LVMH Moet Hennessy Louis Vuitton bought a controlling stake in her family’s fashion house, Laudomia Pucci remembers having to host many an afternoon tea. During the late Nineties, when she was trying to pump new life into the Florence-based business her father founded in 1949, Pucci would often contact managers or designers she was interested in hiring, but without much success.
“Everyone was very lovely, and we’d say let’s have tea — but it ended there,” she says.
Now that Pucci is part of the world’s largest fashion and luxury group, she can skip the tea and get down to business. “Let’s just say that when you call the good people, you get an answer.”
Pucci had been working with the press and buyers from the U.S., Europe and Japan to bring the brand back to life. And while her efforts had begun to pay off — by 1999, sales had reached $10.5 million and Pucci-esque prints were lighting up runways from Versace to Sportmax — progress was slow. So it didn’t take her too long to agree to sell a 67 percent stake to LVMH.
“To continue growing, to revive the empire, you need global backing,” she acknowledges.
Now, Pucci can pick up the phone and call those managers and designers who once took her calls only half-heartedly, and she can open three stores in the space of three months.
“What took five years before takes five months now,” she said.
But it takes more than just cash to jump-start a vintage label. Yves Carcelle, president of the LVMH Fashion Group, who is overseeing the restructuring at Pucci, calls a brand a “delicate animal” and says revivals take time.
“You can’t rush the process. You have to take time to study and understand the spirit and roots of a house, because if you don’t understand the past, you won’t be able to map the future,” he explains.
But understanding the brand is only the first step. Carcelle, and other luxury managers who are revamping brands of the past, all say revivals are tricky and that success is a delicate blend of quality, design, control over production and distribution, and communication.
Not all brands, however, are destined for resurrection.
“The brand has to have those intangible assets like history and legacy. It has to have a ticket to the theater of collective consciousness,” says Abel Halpern, European representative and managing director of Texas Pacific Group (Europe) Ltd., the American leveraged buyout fund that bought Bally in 1999 and is working to revive the name. “People’s minds are cluttered, they’re overstimulated. Nowadays, there is a magazine for every micro-market, every interest in the world. For a brand to be a good candidate for revival, it has to be in people’s heads already.”
Even when the brand — or designer name — inhabits the mind of the consumer, it doesn’t necessarily have the potential to generate millions of dollars or become a household name. Giancarlo Di Risio, the managing director of IT Holding — which rescued the house of Romeo Gigli from financial collapse in 1997 — said it is crucial to keep a revival in perspective.
“Gigli is a niche designer. He’s never going to make millions upon millions of dollars, and he’ll never be Armani. What we can turn him into, however, is a leader in his niche,” says Di Risio.
If the brand can be brought back from obscurity — or disgrace — then industry experts say the priority, after designers have retooled the product, is to take back control of production and distribution. That means canceling licenses and buying factories, shuttering franchises and opening directly operated stores.
“The more you give to other people, whether they be licensees or franchisees, the more they will interpret the brand. It’s all a question of brand control,” observes Domenico De Sole, president and chief executive of Gucci Group who presided over one of the most spectacular — and speediest — brand revivals in fashion history. He notes that buying back stores was especially important.
“The key to success is communicating with your customer, and the only way to do that is through directly operated stores,” De Sole avers.
Sometimes, even if a brand isn’t tired or dusty, a change of ownership can refresh it, modernize its infrastructure and make it more vital.
When Gucci Group began restructuring Yves Saint Laurent early last year, the company found itself staring down a licensing beast.
“There were 167 licenses, and our business model is not to have any licenses. We immediately bought back the strategic ones: ready-to-wear, shoes, watches and jewelry,” De Sole explains. He has said the strategy with remaining licenses is not to renew them. Gucci then gave a quick facelift to the more than 20 YSL boutiques around the world, as a temporary measure, until it developed a new store concept with Bill Sofield, the New York-based architect who had helped develop the latest generation of Gucci stores. Today, there are 32 YSL boutiques, and the company plans to open up to 20 more this year.
Bally has adapted a similar strategy of control.
“The Bally brand, which had been associated with the international jet set, peaked in the Sixties. In the Seventies, when it went from a brand to a retailer, things started to go downhill. Bally started losing its identity,” recalls TPG’s Halpern, who also oversaw the turnaround of the high-end Italian motorcycle maker Ducati. “When we bought Bally in 1999, it was at death’s door. Our first step was to undo the damage.”
First, there were too many stores — there were 12 in London alone, not including the airports — and a giant wholesale business. One of TPG’s first steps was to shutter more than 100 Bally units and reduce the wholesale business by 85 percent. It also focused heavily on the product.
“We believe in the primacy of a point of view and of design. We never forget that we are in the business of making beautiful objects,” he says.
LVMH’s Carcelle said he believes that time is another precious ingredient in the process of renewing a brand.
“It took us 10 years to transform Louis Vuitton from a travel and leather goods manufacturer to a fashion house. You have to have a step-by-step approach. And it’s very important to send the right signals to the market…even if they are slow to come.”
Carcelle said the company gave rtw designer Marc Jacobs a full year to create his debut collection for the house.
“Marc needed time to understand what Louis Vuitton was about,” explains Carcelle, adding that LVMH gave Julio Espada, Pucci’s new designer, a similar time frame to come up with his first collection for the Italian house. Espada’s first line was set to bow at the fall rtw shows in Milan.
IT Holding’s Di Risio said his company would take a similar approach with the house of Gianfranco Ferre, which it purchased late last year.
“We’ve given ourselves a year to lay down our strategy, which means the first effects of the Ferre restructuring won’t be evident before 2002,” Di Risio said.
And while devoting the proper amount of time is critical in a brand’s revival, managers say it’s also important to know when it’s time to fold.
Bally, for instance, has a five-year deadline.
“In three years, if we are not way ahead of where we are now, we won’t have succeeded,” says Halpern. TPG’s goal is to transform Bally into Europe’s next big luxury brand and position it alongside Gucci, Ferragamo and Louis Vuitton. Although Halpern declined to provide any figures, sources close to the company said TPG is investing $250 million in the Bally restructuring, and that Bally’s sales were $303 million in 2000 and should grow to $364 million this year. When TPG purchased Bally at the end of 1999, sales were approximately $500 million — and the company was losing money.
Once companies fine-tune their product, take control of production and create the right retail environment, they’re ready to tackle advertising.
“Communication is the last piece of the puzzle,” says Carcelle. “Because the real news is already out there: It’s the product, the product environment, the retail concept.”
De Sole points out that the first ad campaigns must reflect the changes at the company.
“I can remember when we were making changes at Gucci and someone wanted to use the bamboo-handle bag in one of the ads. If you’re making a change, you can’t use the bamboo handle! You have to show that you’re new, exciting and young. You have to concentrate on the new image — not the old,” he says.
Rivals De Sole and Carcelle would agree that no two turnarounds are alike. De Sole said that while Gucci and YSL have a similar business model, they are two very different animals.
“We revived Gucci at a time when no one really knew or cared about the company. The turnaround, for the most part, was a non-issue. At the time, we weren’t a public company and our only audience was Gucci’s former owner, Investcorp,” he says.
De Sole and Gucci Group creative director Tom Ford’s success in transforming a nearly bankrupt Gucci into a luxury goods group that will report revenues of $2.5 billion this year has spiced up the revival game.
“With YSL, we are under the microscope: We purchased the company amid the conflict with LVMH and our partnership with Pinault Printemps Redoute. Now, as a publicly quoted company, we are also under much more scrutiny, having to answer to financial analysts and the press about the how’s and why’s of the restructuring,” De Sole says, adding that the YSL makeover has been more difficult for other reasons, too.
“By the time we started working on Gucci, the cleaning up was done. There weren’t a lot of licenses that needed to be terminated, and the company had 60 stores, all of them in good locations. With YSL, there were only 20 stores,” he notes.
Carcelle said that while LVMH’s approach to Louis Vuitton and Pucci may have been similar, tackling Fendi has been a different story.
In 1999, after a fierce bidding war with Gucci, LVMH and Prada formed a joint venture to buy a controlling stake in Fendi for a price believed to be as high as $950 million. Since then, Prada has taken charge of production and LVMH of distribution — although both companies have kept relatively mum about their strategies for the Rome-based company.
“At Fendi, the family had already done a fantastic job of reviving the name. The company was hot when we bought it. Our goal is to create a business structure for Fendi and ease its transition from a wholesale to a retail business, from a company with licenses to one with more integrated production. Also, it is important for us to make those changes knowing that the family is on board, working with us,” says Carcelle.
TPG’s Halpern said part of the nature of a revival is that it’s never finished.
“In this business, you never arrive. The great luxury brands always have to have a meaning, an identity for their customer. When you become successful, you can’t then sit and be placid about the business. You have to constantly engage your customers’ minds and be relevant to them,” he says.
One empire that is determined not to fall to ruin is Giorgio Armani, which celebrated its 25th anniversary last year. In 2000, sales were nearly $1 billion, and they are expected to grow another 25 percent this year as the company diversifies its product lines and expands its retail network.
“The secret of being relevant over time is to remain consistent in your work so that your customers know exactly what you stand for,” says Armani. “Whether we are designing a woman’s suit, a man’s briefcase, a sofa or even a fragrance, the underlying philosophy is the same. Also…one must never lose sight of the fact that we design for real people who have real needs. If we do not answer those needs, we are not in business.”