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"I've always said that I would like to mix rock and simplicity because this is fashion, they're the extremes, chic and shock. That's why Lady Diana and Madonna--two of the most important women of the moment--wear Versace and I think I'm satisfied by this. Even if it took me twenty years, I've got to where I wanted to go." --Gianni Versace
Headquartered in a Milanese palazzo, Gianni Versace SpA is second only to rival house Giorgio Armani among Italy's fashion designers. The Versace name is estimated to generate US$2 billion at retail and US$1 billion wholesale. the company's diverse offerings enable people to swathe themselves in Versace from head to toe, including lingerie, umbrellas, makeup, hosiery, shoes, watches, jewelry, and fragrances. Clients can even surround themselves with furnishings from the Home Signature line of decor. Lines within the Versace group include Istante, Versus, Versace Jeans Couture, Versace Sport, Versatile, Versace Classic 2, Young Versace, and Home Signature. By the late 1990s, the fashion empire stretched from the design table to manufacturing sites to the sales counter. Its wares are distributed through more than 300 boutiques and 2,000 affiliated stores.
The privately held business was within months of going public when, on July 15, 1997, its founder and namesake, award-winning Italian fashion designer Gianni Versace, was gunned down in front of his Miami Beach mansion. The 50-year-old's untimely death threatened to unravel his company. But for virtually all of its 20 years in business, the apparel house has been a family affair. Gianni's older brother, Santo, managed the finances, while younger sister Donatella oversaw advertising, accessories, and her own line within the group. In the wake of the family tragedy, Donatella assumed the role of chief designer. Both were committed to taking the company public in 1998.
Late 1970s Foundation
Born in southern Italy in 1946, Gianni Versace was the son of an appliance salesman and a seamstress. His mother, Francesca, fashioned gowns for the region's elite. Gianni is said to have started down the road to high fashion when, as a boy, he made little dolls and puppets from the snippets of fabric that littered the floor of her studio. After studying architecture, Gianni stayed in his hometown of Reggio Calabria through the 1960s, first apprenticing with his mother and later running two separate boutiques showcasing his men's and women's fashions.
In 1972 Ezio Nicosia, owner of Florentine Flowers of Lucca, invited Gianni to move to Milan and design a knitwear collection for fall and winter. The 25-year-old's designs were so successful that he earned a Volkswagen convertible as a bonus to his regular fee. In the years to come, Versace contracted with De Parisini of Santa Margherita, Callaghan, Alma, and Genny Group's ready-to-wear lines. Versace created the Complice collection for Genny before striking out on his own in 1977 and presenting his first signature collection the following spring. His brightly colored, sexy styles for women generated sales of L20 billion (US$11 million) that first year. Versace opened his first Milanese boutique and brought out his first menswear collection in 1978.
Older brother Santo was with him from the beginning, having moved to Milan in 1976. An accountant, Santo put his business administration degree to good use as managing director and chairman of Gianni Versace SpA. Younger sister Donatella started out coordinating accessories with Gianni's designs, and quickly moved into advertising and promotion. Perhaps most importantly, she served as what Gianni called his "inspiring muse." The three siblings shared ownership of the apparel firm, albeit not evenly; Gianni held 45 percent, Santo 35 percent, and Donatella 20 percent.
Showmanship Drives Design House in 1980s
Versace cultivated symbiotic relationships with arts and artists, especially in the areas of theater, popular music, and dance. These ties would prove mutually beneficial; Versace fashioned the costumes and clothing that kept the famous looking chic, and his clients served as walking billboards for the designer's wares. Versace forged especially close ties to the Teatro alla Scala. This "sideline" was reflected in his fashion collections, which took on a theatricality of their own. His circle of celebrity friends/clients widened in step with his design prowess. Richard Avedon photographed his collections. Andy Warhol painted his portrait. Later, Sylvester Stallone and Madonna modeled for his advertisements.
Versace's own paradoxical tastes were reflected in his designs. As he told the New York Times's Amy M. Spindler in an interview just before his death, "contrasts [are] the key to all my creations." He designed costumes for Elton John's rock concerts as well as ballets produced by Maurice Bejart. His famous female fans ranged from punky, slutty Courtney Love to impeccably chic Diana, Princess of Wales. He was called a "rock 'n' rolling exhibitionist," "vividly committed to the hedonism of late 20th-century culture," but he was also known as a devoted brother and uncle. These disparities found expression in designs that always featured some element of "intentional imperfection": draped gowns of metal mesh, leopard-print babydoll dresses, asymmetrical necklines and hemlines, and lace/metal combinations. Other Versace trademarks would emerge over the course of the 1980s; colorful silk prints, high heels, baroque themes, leather, and overt sexuality.
The designer's Fall/Winter women's collection earned Versace his first major award, the first of four career L'Occhio d'Oros, in 1982. With his creative reputation firmly in place, Versace moved quickly to capitalize on his brand equity. Like fashion icons before him, Versace realized that while most women could not afford a $15,000 signature dress, many more could afford a distinctively printed silk scarf or a watch with his Medusa-head logo. The designer started his diversification with fragrances. Accessories--most produced from Versace designs by licensees--ran the gamut from socks to umbrellas, sunglasses, jewelry, and watches. Versace was also quick to make international forays, establishing company-owned and franchised boutiques in Europe and Asia in the early 1980s. By the mid-1990s, 25 percent of sales would come from Asia.
March 1985 saw the introduction of Versace's first Istante collection, a ready-to-wear line of "conservative-chic" clothing designed by Gianni with help from longtime companion Antonio D'Amico and sister Donatella. Istante was organized not only as a separate brand, but also a distinct subsidiary of the Versace group, Istante Vesa s.r.l. In 1989, Versace introduced Atelier Versace, a haute couture line featuring custom-made fashions costing tens of thousands of dollars. Also launched in 1989, the Versus line was Donatella's venue. Its ready-to-wear garments were targeted at a younger, trendier audience. By the mid-1990s, Versus would generate 10 percent of corporate sales.
By 1989, Gianni Versace SpA's annual revenues totaled L158 billion, with net income of L7.6 billion. At this time, the Versace brand was generating L520 billion at wholesale.
Rapid Diversification Paces 1990s Expansion
The family business stepped up the pace of growth through brand extension--known in fashion parlance as "product pyramiding"--in the 1990s. In 1991, the company introduced Versatile, a line of designer clothes for full-figured women that included leopard catsuits, pleated miniskirts, and bejeweled bustiers in bright colors. That same year, Versace brought out Versace Jeans Couture, a casual line of clothing headlined by $200 jeans. A line of Home Signature tableware, bath and bed linens, lamps, carpets, and more, was launched in 1993. The company diversified into the highly competitive realm of color cosmetics with the European introduction of Versace Make-up in 1997. It was a rapid, but well-considered expansion that was careful not to oversaturate and possibly diminish the brand's aura of exclusivity and cachet.
Analysts praised the company's managerial and manufacturing agility. John Roussant of Business Week noted that "The Versaces typically made decisions with lightning speed--a key competitive advantage in an industry where styles and fads change overnight." Over the years, Versace also accumulated controlling interests in 10 of its manufacturing licensees, a factor that enabled the company to seize the initiative when a product proved particularly popular. Weekly sales reports kept the family troika up-to-date on their company's hottest items.
Geographic as well as product diversification proved vital to Versace's expansion. In 1994, Europe was still the company's largest market, accounting for half of annual revenues. Though the company had established its initial U.S. boutique in Coconut Grove, Florida, in 1981, North America generated less than 20 percent of sales in 1994. That year, Gianni and Santo announced their intent to make the U.S. Versace's primary export market and a generator of at least 30 percent of annual sales. Santo told WWD's Sara Gay Forden that "The U.S. is our leading priority right now. It has to become our biggest export market." The strategy for achieving this goal included the establishment of an American distribution subsidiary and the launch of a nine-story boutique in a landmark New York City building on Fifth Avenue.
Sales more than doubled, from L221 billion in 1990 to L510 billion in 1994, while net income mushroomed from L14.2 billion to L39.7 billion. In 1994, the Versace brand generated nearly L1.2 trillion at wholesale.
Versace planned a mid-decade initial public offering to finance continued growth. In fact, preparations for this eventuality can be traced to 1986, when Versace opened his books to the public and hired an accounting firm to audit the records. In the spring of 1997 Gianni told Business Week's Rome bureau chief John Roussant, "I'd like people to be as crazy for my shares as they are for my clothes." Finance man Santo concurred, telling Sara Gay Forden of WWD that the siblings sought to "give this group a life that is autonomous from that of its founders. A company that goes public is like a company that automatically acquires a second and third generation. It is a commitment to carry Versace beyond its founders." Versace bypassed the Milan stock market, instead seeking a listing on the New York Stock Exchange. In May 1997, Gianni Versace SpA spun off L150 billion (US$86.9 million) worth of family property--including lavish homes and artwork&mdashø a private company known as Ordersystem.
However, the company had some troubling issues to overcome before winning the confidence of the investment community. In May 1997 Santo Versace was found guilty of bribing tax officials, a conviction that the Versace chairman predictably appealed. Then there were the persistent--and steadfastly renounced--rumors that the company had links to organized crime. Versace's European boutiques suffered six burglaries in just four months in 1996, losing L500 million (US$320,000) worth of merchandise. Though none of these issues--perceived or real--were devastating, the Versaces sought to remove any encumbrances to its initial stock valuation.
Founder's Murder Brings Unexpected Transition
All involved with Versace realized a public stock offering had the potential to serve as a turning point for the company, one that could shift its already-impressive growth into high gear. But no one could have predicted the transition forced by spree killer Andrew Cunanan, who shot Gianni Versace twice in the head at point blank range on the morning of July 15, 1997.
More than one critic noted that Versace "was killed at his peak, a time when his continual retooling of his inventions had produced his best work ever." Trade magazine Daily News Record asserted that "fashion has lost one of its brightest superstars at the height of his career." Time magazine's John Greenwald concurred that "at his death, the designer was at the height of his powers." Barely a month before he had introduced what the Daily News Record called "one of the strongest collections in years." News of Versace's death spurred a run on the more than 2,000 boutiques and department stores worldwide that carried his branded goods. But clients new and old soon found that the designer's demise would not necessarily doom his company.
Though many design houses have died along with their founders, fashion analysts cited several attributes that would help the Versace group outlive its namesake. Foremost were the well-known brand and Medusa-head logo, embodying a core identity from which new product lines could continue to evolve. And while Gianni Versace had been personally responsible for the creation of the signature lines that generated 45 percent of his company's profits, he had already assembled an international team of design assistants headed by sister Donatella. Furthermore, Donatella had taken on increased responsibilities for several years in the mid-1990s, when Gianni was diagnosed with cancer of the lymph nodes. His 1996 recovery made the murder all the more ironic. A statement released by the family shortly after Versace's death asserted that "the indomitable spirit, the amazing vitality and the faith in creativity that makes Gianni Versace so important to everyone is something that we are completely committed to and most capable of continuing."
Preparations for the 1998 initial public offering continued. Within days of his murder, Gianni had hired investment banking house Morgan Stanley to underwrite the $350 million stock offering. That September, his surviving siblings moved to consolidate three directly controlled subsidiaries--Istante Vesa SRL, manufacturing arm Alias SpA, and boutique chain Modifin SA--into Gianni Versace SpA.
Gianni Versace left de facto control of his global enterprise in the hands of sister Donatella by bequeathing his stake in the company to her 11-year-old daughter, Allegra Beck. Donatella presented her first emotion-charged signature collection in October 1997 to a crowd of very supportive designers, Hollywood celebrities, and rock stars. Trade magazine WWD cheered her designs of rubber, leather, silk, and beads with the headline, "Bravo, Donatella!"