Rev. May 10, 2001
Gucci Group N.V. (A)
Historically, fashion was viewed like movies. We made it a business.
-Domenico De Sole, CEO, Gucci Group
Domenico De Sole seated himself at the wenge-and-steel conference table in his London office, a few steps from Bond Street, home to the most glittering names in the luxury world. It was a springlike morning in February 2000, and several blocks away, eager shoppers were already streaming into Gucci’s newly renovated store. But De Sole had more than handbag sales on his mind. Over the past five years, De Sole, whose geniality cloaked a steely will, had led the effort to transform a moribund brand into a billion-dollar company whose goods were coveted by affluent, style- conscious customers around the world. (See Exhibit 1.) Now he sensed that Gucci might be pushing up against limits to further growth. ”If you really are an exclusive brand, you can’t grow beyond a certain point,” he explained. “Nobody knows where that point is, but there is a limit to the number of handbags you can sell for $1,000. That’s the bottom line.”
De Sole planned to burst these bounds by turning Gucci into a multi-brand group. In November 1999, Gucci took its first important steps toward that goal by acquiring Yves Saint Laurent (YSL), one of fashion’s leading names, and Sergio Rossi, an Italian maker of exquisitely expensive shoes. De Sole was confident that Gucci’s creative team, led by Tom Ford, a talented designer who had attained rock star celebrity status in the fashion world, would be able to recreate its magic at YSL. But a number of nagging questions remained. Would the synergies arising from the acquisitions justify the $1 billion that Gucci had paid for YSL? Did the future really lie with multibrand groups or with focused, single-brand companies—the highly successful model that Gucci was leaving behind?
A Brief History of Gucci
Guccio Gucci opened a small shop selling leather goods on the via del Parione in Florence in 1923. Initially, Gucci sold luggage imported from Germany and offered repair services on the side. As the business prospered, he opened a workshop to produce his own designs. Gucci flourished in the 1920s, as post-war prosperity brought new waves of tourists to Italy’s shores, and surmounted the challenges of the 1930s, when the sanctions imposed on Mussolini began to pinch. Facing a shortage of imported leather, Gucci innovated by turning to new materials, such as canvas, and by producing small leather goods, including wallets and belts.
Research Associate Mary Kwak prepared this case under the supervision of Professor David B. Yoffie as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. This is a rewrite of HBS case 700-068.
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701-037Gucci Group N.V. (A)
But it was after World War II that Gucci came into its own as an internationally known luxury name. In 1953, Gucci opened a shop in New York, its first outside Italy. Over the next two decades, as the U.S. economy boomed, Gucci stores...