IN THE STORES : Duking It Out on Rodeo?

They claim it’s just coincidence. But their neighbors on Rodeo Drive are wondering what ever made Ferragamo open a shop right next door to Gucci. One Italian, family-owned, luxury leather goods company butting up against its toughest competitor.

“We didn’t plan it, but the best location on the street became available,” explained Massimo Ferragamo, in town this week for the store opening.

“We welcome the change,” said Gucci store manager Stuart Lighton. “It used to be a garage.”

These days the new neighbors have even more in common. Each is overhauling its image, with new products and ad campaigns aimed at luring the same few, new, younger, moneyed customers.

For Gucci, the larger of the two with $300 million in worldwide sales last year, the first step was to clean house. After the widely publicized family disputes of the ‘80s, Maurizio Gucci emerged as president in 1989. He slashed wholesale distribution, pulled Gucci off department store shelves and dropped the poorly constructed canvas goods.

“We lost between $35 and $40 million in sales,” a company spokesman said. “It was drastic.”

Then Gucci hired Dawn Mello, then president of Bergdorf Goodman in New York. “My first thought was to change everything,” she said. Then she found in the archives the bamboo-handle handbag Liz Taylor carried in the ‘60s, the silver hand-shaped clasp on wallets from the ‘50s and other things she liked.

“We changed proportions and added color,” she said.

Prices on the new items are at least as steep as on the old. Suede moccasins in blazing yellow are $395; faded denim blue jeans are $175; a scarlet satin mini-version of the bamboo-handled purse is $495.

Meanwhile, the Ferragamo family business has existed in relative peace. The company, with just less than $200 million in sales worldwide last year, is run by the six children of its founder, Salvatore.

“We will never change drastically,” Massimo Ferragamo said. “We’ll just add some spice.”

New spices range from high-heeled sling-backs to a wide assortment of flats, priced from about $150. New accessories include vinyl tote bags, red crocodile handbags and black satin clutches priced from $120 to more than $6,000.

The women’s ready-to-wear collection, launched in 1989, offers subtle, ladylike shapes, soft colors and one wild--for Ferragamo--stretch unitard printed with bright shoes. Blouses and skirts start at $250, jackets at $550.