kauguri's

guide to fashion

The Gucci Story - Part 4

Part 1 Part 2 Part 3 Part 4 Part 5

LVMH Takeover Attempt

In the late 1990s, Gucci became mired in a standoff with one of fashion's biggest conglomerates, LVMH Moët Hennessy Louis Vuitton. Just before Gucci Group’s IPO in 1995, Investcorp approached LVMH chairman Bernard Arnault with a proposition to sell him the entire Gucci brand, including its lucrative watch and fragrance divisions. Arnault balked at the $500 million price tag and was unsure that Gucci could ever be revived. Four years later, he sorely regretted that decision. Prada, in an effort to replicate LVMH's success at consolidation, had purchased a sizeable stake in Gucci Group in an ill-fated attempt to take over the company. Realizing that his company didn't have the assets to execute the takeover, Prada’s Patrizio Bertelli offered to sell the shares to someone who could: Arnault. Arnault jumped at the chance. In 1999, LVMH staged an effort to acquire Gucci Group through a creeping takeover, purchasing 34.4% of the company’s stock.

Domenico De Sole was incensed by the news and declined Arnault’s request for a spot on the board of directors, where he would have access to Gucci’s confidential earnings reports, strategy meetings, and design concepts. De Sole reacted by issuing new shares of stock in an effort to dilute the value of Arnault’s holdings. He also approached French holding company Pinault-Printemps-Redoute (PPR) about the possibility of forming a strategic alliance. Francois Pinault, the company’s founder, agreed to the idea and purchased 37 million shares in the company, or a 40% stake. Arnault’s share was diluted to a paltry 20%, and a legal battle ensued to challenge the legitimacy of the new Gucci-PPR partnership. Courts in the Netherlands ultimately upheld the PPR deal, as it did not violate that country's business laws. PPR now owns 68% of the group. The second largest shareholder is Crédit Lyonnais with 11%. As of September 2001 a settlement agreement was put into place between Gucci Group, LVMH, and PPR. 2001 was also an incredible year for the Gucci Group as it acquired percentages of Bottega Venetta, Di Modolo, Balenciaga, and formed a partnership with Stella McCartney.

Ford Leaves Gucci

After a failed attempt at contract renewal with PPR in 2003, Tom Ford and Domenico de Sole decided to take their leave from Gucci Group. Ford’s last show for Gucci returned to the roots of his first successful collection: the culture of celebrity. Print advertisements featured models in sleek, simple gowns inspired by the glamour of 1920s silent film stars. Ford priced up the ready-to-wear and used exotic fabrics like alligator and boar hide. His collection for Yves Saint Laurent followed the lead of the previous season’s Gucci women’s wear, with form fitting kimonos and Asian patterned dresses, while the menswear collection featured classic-looking tuxedos and smoking jackets. The announcement of his departure led to a complete presale of many items in New York department stores, and waitlists for his last accessories formed just days after the collection showed in Milan. In 2005, Tom Ford began designing a line of cosmetics for Estee Lauder, and planned to launch his own line of ready-to-wear and accessories under a Tom Ford label.

Current Creative Team

Following Ford's departure, Gucci Group retained three designers to continue the success of the company's flagship label: Alessandra Facchinetti, Frida Giannini and John Ray, all of whom had worked under Ford's creative direction. Facchinetti was elevated to Creative Director of Womenswear in 2004 and designed for two seasons before leaving the company after a management dispute. Ray served as Creative Director of Menswear for three years before resigning in January 2006, citing his inability to create a consistent image for Gucci during his time as head designer. 32-year-old Giannini, who had been responsible for designing men's and women's accessories, currently serves as Creative Director for the entire brand. Giannini's Spring 2006 collection was lauded for its color and energy, recreating the buzz around the company's ready-to-wear that was first heard after Ford's 1995 season.

----> Part 5 - The Gucci Brands