Versace’s Death Leaves Questions About Stock Offering Planned for ’98
As Italian fashion mourns the passing of one of its favorite sons, Gianni Versace, Milan’s financial circles are buzzing with scenarios on how to proceed with his ultimate show--a stock offering.
Although the slaying of Versace, 50, in front of his Miami Beach mansion Tuesday will certainly delay the IPO planned for next year, investment bankers and analysts said the designer’s siblings, Donatella and Santo, can take quick measures to assure the longevity of Italy’s No. 2 fashion house, behind Giorgio Armani.
The most important move will be to install a top designer to take over the high-end couture and atelier activities that gave the $500-million company its flamboyant reputation for clothes in unconventional materials, emblazoned with offbeat designs.
“The key to Versace’s success is whether they can call in an important and well-known fashion designer to oversee the core lines,” said Roberto Casoni, an equity analyst at Robert Fleming Securities. “It’s still quite risky, because the new guy would have to prove his skills are as good as Versace’s.”
That gamble, though, has worked for several other designers that lost their founders and creative geniuses. For example, the houses of Christian Dior and Chanel both continue as temples of Parisian fashion despite the passings of their namesakes.
Closer to home, Gucci Group remains at the forefront of fashion without a family member in control, and Moschino has survived the death of its namesake.
Versace’s status as a family company--one that shrewdly tapped Santo’s business savvy and Donatella’s design skills--also may help the transition. In recent years, Donatella has come into her own as a stylist, overseeing the lower-priced Istante and Versus lines, which last year accounted for 16% of the company’s sales.
At the same time, whereas Donatella was often mentioned as Gianni’s successor at the helm, bankers say her experience first as a model and later as a designer might not instill the confidence investors seek. Should she insist on taking her brother’s place, an IPO might be out of the question.
Already, shoppers are voting with their wallets. A banker close to the company said Versace products are selling out at the company’s stores worldwide. At Milan’s La Rinascente department store, clerks said they can’t keep items bearing Versace’s trademark Medusa’s in stock.
Company executives have said nothing about their plans since Versace’s death. In a statement Thursday, Donatella and Santo said only that they are “completely committed to and most capable of continuing” the company in the spirit created by their brother.
Whether that will include proceeding with the IPO is something investment bankers would like to know. Four days before Versace’s slaying, the company signed Morgan Stanley & Co. as global coordinator for the IPO, with BZW Securities and Banca Commerciale Italiana as co-lead managers, bankers said.
Other top fashion houses have been able to retain their images after their founders passed from the scene. Dior initially hired Gianfranco Ferre to wear the mantle and most recently brought in John Galliano, a British designer with a reputation for flash and flair. Chanel’s top stylist is the German designer Karl Lagerfeld.
A more recent example is the house of Franco Moschino, the Italian designer who died last year. Rather than close the firm, his scissors were passed to a rising star in the field, Alberta Ferretti, and sales have continued to rise.
One of the keys to Versace’s continuing success will be whether the successors can change that name from one associated with the designer to one recognized as a brand.
Gucci succeeded in this, rising from the ashes of a family quarrel and the slaying of its heir apparent to become one of the hottest properties in fashion as well as on Wall Street, where its shares have more than doubled since the firm went on sale in 1995.
In 1995, Maurizio Gucci was gunned down outside his office in Milan. His slaying, which his wife was later accused of arranging, came as the maker of luxury leather goods and clothing was rebounding from years of losses.
Maurizio Gucci, grandson of founder Guccio Gucci, was still working at the company, though he had sold his half to Bahrain-based Investcorp in 1993. Investcorp earlier bought the other half from other descendants of the founder after a family squabble over the company’s future.
Gucci’s new management quickly hired a young Texas designer, Tom Ford, to revamp its leather line and revive its ready-to-wear clothing.
“Versace has to be thinking if there are any other Tom Fords out there somewhere,” said Flemings’ Casoni.
Transforming Versace from man to brand won’t be easy, bankers said, because the appeal of his clothing to clients--which included celebrities such as Elton John and Michael Jackson--has been the designer’s personal flamboyance.
“In fashion, the founder or creator of a line of products is its main attraction,” said Shelly Hale Young, an equity analyst at Hambrecht & Quist in San Francisco.
Versace was born Dec. 2, 1946, in Reggio Calabria, a poor southern Italian city, where his dressmaker mother taught him to make and design clothing. As a child, Versace traveled with his mother when she worked at some of Paris’ leading couture houses and worked as a buyer for her business.
He began working as a designer for Milan-based Genny in 1972 and had his first big break in 1978, when he started his first signature women’s wear collection. A year later, he opened his first boutique selling strictly Versace clothing.
Sales of Versace-brand merchandise, consisting of items made by his own Gruppo Versace clothing company and produced by others under licensing agreements, totaled about $1 billion last year. The Versace company raked in about $500 million last year, with 80% of its total coming from exports. Pretax profit rose 13% to $100 million, and net profit was about $34 million.
For 1997, the company expects sales to rise 20%. Gruppo Versace currently sells its Gianni Versace label clothing through 166 boutiques and 350 affiliated stores. The company also sells Istante, Versus, Versace Jeans Couture and Versace Classic V2 through 135 boutiques and 3,840 stores.
