GUCCI MOLDS YSL STRATEGIES

Byline: Samantha Conti

MILAN — The game plan is starting to take shape.
Fewer than four months after buying Yves Saint Laurent, Gucci Group has begun to put major plans in place for the French fashion house: a new generation of wholly owned stores, a leather accessories line to be produced in Italy and, true to Gucci form, a steady elimination of licenses.
In an interview with WWD, Gucci Group chairman and chief executive Domenico De Sole lifted a corner of the veil on the company’s strategies for YSL and Sergio Rossi — both of which Gucci acquired in the fourth quarter of 1999.
De Sole said Gucci would buff YSL’s image in the ways it knows best — by canceling nearly all of YSL’s licenses, most of which expire in the next two years, and creating a chain of slick boutiques. Gucci Group bought YSL and its parent, Sanofi Beaute, in November for $1 billion.
“Licensing is not the business model Gucci believes in, so our strategy is not to renew licenses as they come up,” De Sole said, adding that Gucci had already purchased YSL’s “only strategic license” when it bought clothing manufacturer C. Mendes SA earlier this year. Mendes, which produces YSL’s ready-to-wear collection, also held the rights to the worldwide distribution of that line until 2005. In addition, it owned 11 of the 25 YSL stores around the world.
As for the fragrance licenses, Gucci named Chantal Roos chief of Sanofi Beaute earlier this week, and a spokesman said the group remained committed to “all” the brands in the Sanofi stable. YSL fragrances and cosmetics account for more than 60 percent of sales at Sanofi. The division also includes the Roget et Gallet brand and the licensed fragrance businesses of Oscar de la Renta, Van Cleef & Arpels, Fendi and Krizia.
It is also well known that Gucci is attempting to retrieve its Gucci fragrance license from Wella Group — even if it means acquiring Wella’s entire Cosmopolitan Cosmetics subsidiary, which would give Gucci other brands, like Rochas and Anna Sui.
De Sole said the drop in YSL’s licensing royalties would be offset by a string of new and revamped boutiques that should account for a significant portion of sales by 2002.
“We plan to open 50 to 60 YSL stores over the next couple of years,” he said, adding that Gucci Group creative director Tom Ford would continue to work with New York architect Bill Sofield, who helped create the new Gucci stores.
Currently, YSL’s only U.S. store is on Madison Avenue, and De Sole said he would like to see stores on the West Coast — in Beverly Hills and San Francisco — and in other locations across the country. The Gucci chief emphasized the importance of a directly operated store strategy for all the companies in the stable.
“The key to success is communicating with your customer, and the only way to do what is through directly operated stores,” he said. “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.”
Speaking specifically about Yves Saint Laurent, he said, “The brand is not going to acquire credibility if the wrong product is in the wrong location.”
De Sole said that while YSL’s and Gucci’s images would remain distinct, the two would share “back-office synergies” — and Gucci’s production know-how.
“I’m talking about using the same architect for the stores, and the same person to scout real estate opportunities for both companies,” he said. “What we want to do is leverage the Gucci organization.”
He added that YSL had no license for leather goods, so Gucci has already stepped in and begun producing YSL leather accessories. Like their Gucci counterparts, the YSL accessories are being developed in small, specialized laboratories outside Florence. De Sole said the accessories collection would be unveiled during the spring 2001 collections in Paris.
YSL ready-to-wear will make its debut later this year under new chief designer Tom Ford. De Sole said the collection would be “totally different; within the YSL tradition, but younger. Unlike Gucci, YSL has a history of ready-to-wear. There is a path to follow.”
The group announced this week it was beefing up the overall design and creative team. Matthias Vriens will become senior art director and Milan Vukmirovic will become design director of the group. Stefano Pilati, who until now worked on Prada’s Miu Miu collection, was named women’s design director for Yves Saint Laurent rtw.
De Sole is also forging ahead with strategies for Sergio Rossi, the high-end Italian footwear company it purchased.
“We want to develop its leather goods offering, including handbags, and open stores in the U.S.,” he said. But it’s a two-way street: De Sole added that Sergio Rossi had already begun making some shoes for Gucci and for YSL.
As for Gucci’s ongoing hunt for acquisitions, De Sole said he’s looking at “several companies, mostly in Europe.” He said the one major criterion for acquisitions was that they make sense.
“We’re not masters of the universe,” he said. “We want companies that we can understand and make successful.”
De Sole said he “doesn’t feel under pressure” to make acquisitions right away, and that he wants to spend the group’s $2.5 billion wisely. “We are managers, not financiers. Our job is to buy companies, fix them and bring value to the group as whole.”
Gucci Group should be getting some top-flight advice from one of its newest managers, James McArthur. A former managing director at Morgan Stanley Dean Witter, McArthur helped with Gucci’s initial public offering in 1995 and will now oversee the group’s strategy and acquisitions.
“He’ll be looking at opportunities and advising us. He’ll also be filtering the tons of phone calls we get from companies interested in selling,” De Sole said.
The Gucci chief admitted that building a strong management team was becoming increasingly important as the Gucci empire grows.
“Tom and I now need to delegate,” said De Sole. “Back in 1994, when Gucci’s sales were $200 million, we were doing everything. Now, with expected sales of $2 billion, it’s physically impossible.”
As reported in these columns, analysts at Morgan Stanley in London are expecting Gucci Group’s consolidated sales to reach $1.27 billion in 1999 and $2.03 billion in 2000. Sales at Gucci are set to rise to $1.21 billion for 1999 and $1.36 billion for 2000, according to analysts.
In the third quarter of 1999, Gucci’s total sales were more than $302 million, the highest quarterly sales in the history of the company. Gucci will release its forth-quarter and year-end financial results on March 22.

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