Monthly Archive: October 2016

When Your Competitive Advantage Walks Out the Door: Gucci and Cavalli

Chairman Domenico De Sole and Vice Chairman Tom Ford had masterminded Gucci’s transformation from a near-bankrupt family firm with an over-diversified brand into one of the hottest fashion houses at the turn of the millennium. As creative director, Tom Ford had established Gucci as a style leader and hired young designers. De Sole’s astute leadership had instituted careful planning and financial discipline, and built Gucci’s expansion in Asia and global presence.

In September 2001, French retailer Pinault Printemps Redoute (PPR) agreed to acquire Gucci Group. In November 2003, the managers and shareholders of the two companies were stunned to learn that De Sole and Ford would be leaving Gucci in April 2004. How great a blow was the departure of the duo to PPR? In theory, a new CEO and a new creative director could be hired. In practice, however, talent of the sort of De Sole and Ford was hard to find; especially a combination of CEO and designer who could collaborate around a shared vision.

The stock market’s reaction was ominous. Gucci was worth US$ 1.2 billion less without De Sole and Ford.

Just this week, Roberto Cavalli CEO Gian Giacomo Ferraris has initiated a comprehensive reorganisation of the company, including store closures and severe cuts to global headcount as Peter Dundas exits. The Italian label will be closing its Milan operations and transferring all functions to its offices in Florence. Production and logistics will be rationalised and the company will close, relocate and sell stores across its retail network. Cavalli, which currently employs 672 people, will eliminate 200 positions. Ferraris expects the company to return to operating profitability in 2018. Roberto Cavalli, like many other luxury brands, faces a challenging climate. In 2015, the global market for personal luxury goods grew to €253 billion (about $284 billion), up only 1 percent on the previous year in real growth terms, according to Bain & Company, a global consulting firm.

Articles in the Financial Times during November 5 – 8, 2003
Business of Fashion]