Domenico De Sole, president and CEO of Gucci Group N.V., is savoring the revival, which began for the 73-year-old Italian company with the 1994 collection and has maintained momentum. Being the toast of the runways is payoff for sticking with Gucci during rough times, which included the comings and goings of Gucci family members and foreign investors. In 1995, Gucci, wholly traded on both the New York and Amsterdam stock exchanges, saw net revenue rise 89.7% to $500 million.
A native of Rome, Mr. De Sole, 51, joined New York-based Gucci America in 1984, following a career in law. In 1994, he was summoned to Florence headquarters where repositioning of the Gucci brand intensified with Investcorp's acquisition of the remaining Gucci family shares. In 1989, the Bahrain-based group had purchased 50% of the luxury goods company beset by familial bickering, mounting losses and lackluster products.
In October 1995, Investcorp took 48% of the capital of the Gucci Group public. Then in April 1996, its remaining stake went public for $1.76 billion (the initial offering price of $22 reached just over $75 as of mid-November). Gucci's good news continues: First fiscal half net revenue, including royalties, increased 89% to $390 million, and sales in directly operated stores, including franchise, duty-free and department stores, rose 98%. First fiscal half operating profit also skyrocketed, up 145%.
As part of engineering Gucci's return to fashion's "A" list, Mr. De Sole repositioned brand image, reorganized distribution, and invested heavily in promotion and merchandising. Marketing and communication were centralized in Florence, with an eye toward consistency of image and frequency of advertising. Ad spending jumped to nearly $38 million in 1995 from $6 million in 1993, with increases covering public relations, storefronts and retail interiors. Also, Gucci has boosted catalog production to five books from one, boosting global circulation to 600,000 in 1996 from 50,000 in 1995. For 1996, global advertising expenditures are expected to reach $58 million.
Creative director and designer Tom Ford, who was hired in 1990 for the women's collection and now manages store image and in-house ad campaigns as well, also has been instrumental to Gucci's latest success. The 34-year-old native of Austin, Texas, injected color and cutting-edge style into new looks as well as into Gucci classics, like suede loafers now sold in an array of brilliant colors and funky styles. For fall/winter 1997, skinny pants, saddlebags and stilleto-heel boots are expected to be among next year's must-haves. For his efforts, Ford has received a string of design awards.
While the U.S. and Caribbean lead Gucci sales with 35% of volume, Mr. De Sole wants more penetration in Europe, especially Germany. "Over the next two years, the stores are our priority," he said. "We're restyling all stores in the Gucci image to attain global consistency."
By 1998, the company plans to open 16 directly operated stores, including seven in Japan, 15 franchise units and 11 duty-free boutiques. Of 200 retail stores, its 65 directly operated boutiques accounted for 75% of net revenue in 1995.