Gucci\’s $4 billion dollar man
Before his wife had him gunned him down in a Milan doorway on Mar. 29, 1995, Maurizio Gucci had done a pretty good job of running into the ground the luxury goods company founded by his grandfather. In 1993 Guccio Gucci SpA, whose supple loafers adorned some of the world’s wealthiest feet and whose distinctive handbags were draped over many a pampered shoulder, lost over $22 million on revenues of $230 million.
Unhappy trade creditors were banging on Gucci’s doors.
Payrolls went unmet.
Less than six years later Gucci Group, as the company is now called, is coining so much money from one of the planet’s hottest brand names that the company has become a takeover play. Last month Bernard Arnault, chairman of France’s mighty lvmh luxury goods group, deftly acquired 26.7% of Gucci Group’s 59.4 million publicly traded shares for lvmh, pushing Gucci’s market value to over $4 billion.
Here’s how it happened:
In 1983, Aldo Gucci, Maurizio’s uncle, had gotten into serious American tax trouble (Aldo was briefly imprisoned in the U.S.). His brother Rodolfo retained a 40-year-old Harvard Law School-educated lawyer named Domenico De Sole to handle the case. The young lawyer made himself so useful that Rodolfo asked him to run Gucci America, Inc., on a part-time basis.
To everyone’s surprise, De Sole, who was born in Rome and educated at the University of Rome before winning a scholarship to Harvard Law, took Gucci up on the offer.
Before long the part-time job had become full-time, and De Sole was butting heads with Maurizio Gucci, who took over management of the parent company in 1984. A very nasty fight erupted over Gucci America’s head designer, a gifted young Texan named Thomas Ford. “Maurizio Gucci wanted to fire Tom,” recalls De Sole, “but I said no. You have to understand Maurizio wasn’t a bad man, just a little crazy.
Things weren’t going well, and he’d lash out at people. I thought Tom worth protecting.”
Fortunately for De Sole and Ford, Nemir Kirdar’s Bahranian investment company Investcorp had purchased half of Gucci in the late 1980s. As Gucci began to disintegrate in early 1994, Investcorp bought the other half, bid ciao to Maurizio Gucci and — a stroke of genius born of desperation –
turned to De Sole to rescue the company. De Sole promptly promoted protg Tom Ford to Gucci’s head designer.
De Sole tells a story to describe Gucci’s bleak picture when he and Ford took charge. “This was before we had begun to roll, when we were largely in the planning stages.
Investcorp’s then-CFO came into my office in despair.
‘Gucci’s going to destroy us!’ he cried. He was inconsolable.”
Chuckling, De Sole adds: “We figured we had to do something quick and splashy, because if we didn’t Investcorp would panic and sell out.” But do what? With what? In 1993 the company had just lost $22 million, and 1994 wasn’t going to be a whole lot better.
De Sole: “There wasn’t much money for advertising, so we decided to sink what we had into fashion, which is a highly publicized business. We could piggyback the Gucci name on to the coverage of the fashion shows. Somehow we had to send out the message that a new Gucci was being born. We had to make the brand fly!”